Online Banking

To me, it’s a no-brainer to utilize online banking account services.  It’s just so easy and convenient.  I don’t quite understand why everyone doesn’t take advantage.  My parents, for instance, still walk into a bank to deposit checks and withdraw cash from their account.  Meanwhile, I keep trying to encourage them that online banking is the way to go (I hope they are reading this..).

 

The last time I walked into a bank was almost ten years ago.  At that time, I needed to get a certified check to buy my beautiful used metallic blue Honda Prelude during a private-party sale.  If you’re a regular reader of the blog, you know what happened with the Prelude. 🙁

 

Bill Pay

goldInstead of writing dozens of checks and spending extra money on postage, I can thank technology for allowing me to automate almost every single bill.  I try to use my credit card (yay cash back!) to pay for as many bills as possible, and for the remainder, I utilize my checking account.

 

Online Bank Account

The current yield on the average checking account at a physical bank is 0.05%.  Ally bank offers an online checking account yielding 1.00%.  The difference between these two accounts is astronomical.  For instance if there is $10,000 sitting in the checking account at a local bank, the annual yield is $5.  In comparison, the yield at Ally bank would be $100.  Where else can you get twenty times the return on your money by making a simple change in where your money is held?

 

In terms of the emergency savings account, Dave Ramsey highly recommends a money market account.  Make sure you check the interest rate that the brokerage firm is offering.  It can vary wildly compared to online banks and even some brick and mortar banks.  I typically highly discourage these types of money market accounts.

 

I took the plunge into an online bank account around five years ago.  I know I was a little late to the party.  I didn’t really have extra funds to put into an online account at that point.  At that point, I was intently paying off my mortgage.  Anyways, my first online bank account was through ING Direct.  However, when they were sold to Capital One 360, disappointingly they lowered in the interest rate from 1.00% to 0.75%.  To me, this was a big deal.  If I have $10,000 in my account, the difference between $75 and $100 is 33%.  You might have expected the difference to be 25%, but it’s not.  When your account goes down by 25%, in order to make it go back up, it has to increase by 33%.

 

So with that said, I’m sure Capital One 360 thought that most people wouldn’t care enough to switch bank accounts.  But for me, I had some time to spare one day and decided for $25, that it was worth my time.  However, depending on the amount of cash in your account, it may not make sense.  With the rise of online bank accounts, I encourage you to look around to see if it makes sense for you.

 

Do you have an online bank account?  Have you experienced any problems compared to a traditional brick and mortar bank?  Share your thoughts below.

Mustard Seed Money

Welcome to the website. A mustard seed is a very small seed but astonishingly grows very large over time. My hope is that through your financial journey that your small investment in time, money and faith will grow beyond anything that you could ever imagine.

54 Comments

  1. Until recently I still entered a bank branch to deposit checks (didn’t quite trust the ATM for that). Now I can do that by taking pictures on my smartphone. But: Just because I don’t use a brick and mortar bank anymore doesn’t mean I would go fully online. I still like the option to walk into the branch and talk to someone even if I don’t use that option very often. Maybe I’m just old-fashioned?! 🙂
    earlyretirementnow recently posted…Five Fishy Finance Phrases Deserving Diabolical DeathsMy Profile

  2. I don’t even know what I would do if I walked into an actual bank. I have no idea how to actually cash a check, nor do I have any idea what actual happens inside those branches. I’ve used online banking for as long as I can remember and have never needed to set foot inside a bank!

    In my experience the rates are better, the fees are lower, and I’m not missing out on anything. It honestly baffles me that people still don’t have online accounts!

  3. I do online banking & Bill Pay. We live in a small town (15,000) & I go by the bank for work so I go in to make deposits at our local credit union. Plus, being self-employed, we get paid weekly with several personal checks.

    Mailing them off, means we cannot access the money for about a week sometimes once you factor in delivery times & our banks holding policies.

    I have been a satisfied Capital One 360 (formerly ING Direct) user since 2007 and it’s where my wife & store our savings that we want to earn interest. Even if it’s only .75%.
    Josh recently posted…Money Buffalo Blogging Weigh-In #13My Profile

  4. We have an online savings account but haven’t yet dabbled in online checking. I think the two main reasons are potential check deposit difficulties and the benefit of withdrawing cash anywhere in the world without a fee (a feature of my current brick and mortar bank.). That being said I gather online banks have improved on both fronts so thanks for the reminder, I’ll take another look.
    Full Time Finance recently posted…Technological Progress, your Career, and Karl MarxMy Profile

  5. I like using online features such as Bill Pay and depositing checks with my phone, but for other reasons like obtaining a certified funds check or obtaining foreign currency before a trip, I head to the bank. Luckily, I have a credit union on site at my place of work. The current yields on those accounts though are nearly nonexistent though so from that perspective, the online checking accounts certainly are more attractive.
    OB @ Out of State Investor recently posted…Invest Where People Move: A Free Population Research ToolMy Profile

    • Thanks for stopping by OB. A certified check is a great reason to keep a local bank.

      I haven’t had to use a certified check in a long time that I forgot this feature.

      Thanks for sharing!!!

  6. I have gone back and forth on opening an online account for the high interest rate. On the one hand: free money. I have money in a savings account earning 0.27% interest. I could move it to an account earning 1% interest. Free money.

    On the other hand, I don’t keep a very large emergency fund. I have a secure government job, a wife earning a paycheck in a different field, and a number of ways to make income quickly if necessary, so I don’t need to keep much in my emergency fund. This means that the extra 0.73% that I would be earning each year is not a very large amount of money. Is it worth losing the convenience of having all of my accounts under one roof and being able to easily and instantly transfer back and forth?

    I haven’t closed the door on moving it at some point, but I haven’t done so yet.
    Matt @ Optimize Your Life recently posted…Why You Should Be Watching More SportsMy Profile

    • Thanks for sharing your thought process.

      The convenience factor is definitely something to think about when making the decision.

      Especially in light of this ultra low interest rate environment.

  7. I’ve been using Simple for years, and I love it. Not only is the customer support spectacular, but the website and mobile app are far and away the best banking experience I’ve had. They have an ATM network that lets me withdraw charge-free from a lot of random ATMs, and I can deposit checks by picture (though that is more common now).
    Mr Rustic Walks recently posted…Fixed Costs Matter More Than Everyday SpendingMy Profile

    • I’m not as familiar with Simple. Thanks for sharing I will definitely need to check it out.

      BTW…taking a picture to deposit a check is AMAZING. This is one of my favorite bank features!!!

  8. Hey Mustard Seed Money,
    Now that you mention it I don’t even remember the last time I stepped in a brick & mortar banking location. I do as much of my banking online as possible and it saves a ton of time. I moved my investment portfolio from RBC to Questrade as well which has saved me a ton in quarterly maintenance fees and commissions. I think everyone should be banking online though. Thanks for sharing 🙂
    Graham @ Reverse The Crush recently posted…Blogging To Achieve The Ideal LifestyleMy Profile

    • Oh man I hated going brick and mortar locations when I can get the same products online.

      I remember when I was buying my house and I needed to sell some shares for a downpayment.

      I was using Charles Schwab at the time and they made me walk in to the brick and mortar facility to get the check.

      I closed down the account shortly after that. That was such a hassle.

  9. I use a combination of a traditional B&M bank (with a great online platform) and an online high-yield savings account. I’ve been able to easily transfer money between the two to take advantage of the high interest rate and also a lot of the benefits of a B&M. What I really like about the B&M lately is the ATMs they have that allow you to deposit cash directly. It images the cash and credits your account instantly. Pretty fancy, maybe it has been a round for a while but I just realized it in the last year or so.
    The Green Swan recently posted…Time to Sell Investments and Hoard Cash?My Profile

    • That’s really neat about the cash. I am definitely not familiar with that.

      Although honestly I can’t remember the last time that I actually carried cash.

      My credit card is used for virtually every purchase I make now.

      But that’s really great to know if I need to deposit cash it’s available.

  10. I have been an exclusive online user of banking services from 2001 and even before that, signed up for direct deposit back in early 90’s. Once you get used to the convenience and learn to set difficult passwords and follow good digital hygiene, you will never go back to physical banking. In my view, Banking is necessary, banks are not!
    Ten Factorial Rocks recently posted…Book Review: It Is Only MoneyMy Profile

  11. I still can’t seem to feel comfortable putting my emergency fund in an online only bank. My main concern has to do with accessibility of the funds in case of a bank failure during major economic downturn/recession. it doesn’t seem these online-only banks have that good of a stability rating than some of the major US banks.

    I understand that deposits are FDIC insured; however, when the banks fail (many of them did during last recession), it could takes days to access your money as FDIC sorts through the books and may even require depositors to submit supplemental documents such as bank statements etc.

    It’s a hassle not worth 1% interest yield, especially when it comes to accessing your emergency funds. Therefore, I keep my emergency funds spread across two major US banks that have local branches in all major US cities. I still use their online banking platforms to do most of my banking, but having an option to go and talk to a branch manager in case of any issue is comforting to me.

    • I can definitely understand that point of view. The one thing that makes me feel comfortable is the online banks that I have didn’t crash during the recession and are pretty well run.

      So I’m comfortable how they are but definitely can understand your point of view.

  12. The bank we use is a traditional bank, but has a online platform which we use. We never stop by to the brick and mortar bank anymore. The only time we did was for advice and set up a mortgage on our house 2 years ago.

    I never checked at interest rates, don’t even know how much we currently get. The most important reason is because we don’t hold a lot of savings and don’t see it as a reason to switch banks. we hold on to a small stash of savings and the rest we invest.

    • Thanks for sharing. Grocery stores banks are super convenient. Although when my bank allowed me to take a picture of the physical check with a phone. That was a game changer for me.

  13. I can’t say I’ve tried a purely online bank. I like the convenience of having both online and bricks and mortar to be honest. It’s still nice to actually talk to someone (in person) when you aren’t sure what products would best suit your needs, or when you have a problem, etc. I just checked out Tangerine (in Canada) and their interest rates are actually worse than what I’m currently getting. So I don’t really see the advantage in my case. Thanks for sharing though. 🙂

    • Thanks for sharing!!!

      I can definitely understand your point of view. I use to love the convenience but I found myself not using their services so eventually switched.

      However if I need to utilize these services again the future I would definitely consider again.

  14. We only have online bank accounts, have not actually seen the inside of a Dutch bank in about 15 years (maybe more). We were however forced to use the traditional branches when living in Canada. We thought it was hopelessly outdated, but few to none options existed to do everything online unfortunately. That being said, customer service is 100% better with Canadian banks compared to Dutch. So as long as every goes well (which it generally does), online banking is great!
    Team CF recently posted…September 2016 Cheesy IndexMy Profile

  15. I haven’t had to use a branch in years. The convenience of check deposit by phone has just about eliminated the need for visiting.

    I would agree with others above that keeping your accounts simple is worth its weight in gold. There just isn’t enough of a difference in the interest rates to make opening a bunch of accounts worth it.

    We had to purge our excess checking and savings accounts a year ago. We were up to 5 different checking accounts and 4 different savings accounts across different institutions. KISS.

    • You are right when it comes to KISS. For me it didn’t take that much work but I definitely understand that it makes sense for others not to mess around. Thanks for sharing!!!

  16. I’m from Canada, and I’ve had similar experiences to TeamCF. I’m not sure you can find a purely online banking account, only accounts that are available from both online and physical locations. Beyond needing to be there physically to sign some papers to open accounts though, don’t know what the difference is. I do almost everything online at this point.
    MrSLM recently posted…Thoughts on Timing the MarketMy Profile

  17. Thanks for the suggestion about Ally! They were all over the place at FinCon but I havne’t done any homework on them yet.

    I had an ING Direct account a million years ago, but closed it for reasons I can’t remember. Maybe I used the spare cash to buy my house when I moved out of my condo. Anyway, I looked into them recently and saw they were gone, like you mentioned. Capital One 360 just doesn’t seem as good. I’ll have to check into Ally. I do miss getting a good (well, better) return on my cash.

    I still like having my B&M bank for occasional cashier’s checks (property purchase or refi, things like that), and for depositing the quarters from my rental property’s laundry machines. Also, I like the convenience of having my mortgage and bank accounts at the same bank, so I can do a quick online transfer from my checking to my mortgage instead of online bill pay which prints a physical check and takes a week or so to be mailed. It’s all minor stuff, but somehow it adds up to just make it less of a mental exercise for me.

    I’d probably go back to having both a B&M account and an online account, just for the convenience.

    • Thanks for stopping by Yetisaurus. Ally has been fantastic and I’ve really enjoyed working with them. Very simple interface and incredibly easy to transfer things in and out.

      I totally get the convenience of having a brick and mortar bank and online. Personally I found myself using the online bank more often but I totally understand what you’re saying.

  18. I actually went to my credit union today to deposit a couple of checks. In fact, I actually like to go inside and transact with the teller instead of using the drive-through or ATM machine. Guess I’m old school as far as that goes.

    However, for our savings accounts and bill pay it’s all online for us. We have numerous ‘sub accounts’ on Capital One Savings (used to be ING Direct as you mentioned) that we use for different savings buckets. For some reason we also opened an American Express Savings account for near term college savings.

    • After I found the ability to take a picture of a check. I knew there was no reason for me to step inside a bank. It may have been also because my bank was on the other side of town and not super convenient but I digress.

  19. Those online banks are onto something, aren’t they?! Depending on the service performed, I think it’s like one-half to one-tenth the transaction cost incurred by a bank for doing online transactions versus teller transactions. And ATM transactional costs are quite a bit higher than the online stuff as well. I don’t mean costs to consumers here – I mean operational costs to the banks… So those online banks that provide an incrementally higher interest rate than the bricks-and-sticks ones are doing so at a much, much higher profit rate. Not bad stuff when you consider all the added convenience for lazy people like me! At some point all this cool technology stuff’s really gonna catch on…!
    FinanciaLibre recently posted…4 Rules For Greatness & The Early Retirement ParadoxMy Profile

    • It’s basically the same theory of what Amazon is doing. Cheaper goods, higher profit margins and more importantly lazy people don’t have to leave the couch 🙂

  20. Online banking is the way to go for sure! Its hard to remember what life was like when I had to go into the bank. My one beef with my online banking is that I have a limit on how much I can mobile deposit each month. Most of the money I earn is direct deposited anyway, but occasionally I still have to walk a check in to the actual bank to deposit 🙂

  21. I have both online and brick and mortar bank accounts. The online account is for the very reasons you mentioned. The brick and mortar bank in for access to free notary service, free ATMs nationwide, converting coins to cash etc.
    Michael recently posted…5 Ways to Save on GroceriesMy Profile

  22. I have online and brick & mortar accounts. By coincidence, the brick & mortar bank has a branch on the street level of my office building so I use it quite often.

    Brick & mortar checking account – paycheck is direct deposited into this account. I use this account primarily for a) ATM withdrawals, b) face-to-face transactions such as notary services, medallion signature guarantees, cashiers check’s, etc. and c) a temporary holding account for my salary. This account does not earn interest.

    On-line checking account – I transfer a varying amount from the brick & mortar checking account to the on-line checking account every month. Most EFT/ACH transactions (mostly bill pay) is performed out of this account because they actually give a reward for each transaction. When I move money into/out of a mutual fund or my brokerage account, it transacts from this account. This account does not earn interest.

    On-line savings account (same bank as on-line checking account) – this is where I keep my emergency savings and cash that I want to invest somewhere but not yet sure where. I’m only allowed six withdrawals per calendar month so this account doesn’t get much action. It pays 0.95%.

    If a 0.25% reduction in interest is going to move you to action, you should look at some of those pre-paid debit cards with a linked savings account. Those savings accounts pay 5% but are typically limited to $1000 to $5000 in deposits. You apply for the debit card, receive it in the mail, activate it, transfer the money to the linked savings account and then don’t use the debit card. Transfer the money in and the interest out via an ACH push and pull. Depending on your salary/net worth, $1000 to $5000 may not be worth your time but once you set it up, it is low maintenance.
    https://www.insightcards.com/card-features/

      • At one point, I had 7 cards with $35,000 deposited in linked savings accounts. The blended interest rate was 5.16%. Since then, they have made them less attractive by reducing the max from $5000 to $1000 and on one card adding a service fee & making you jump through hoops to get the rate. I now have $15,000 deposited on those 7 cards earning about 5%. In dollar terms, my interest payments have been cut by more than 50%.

        I’m not sure if I would apply for all 7 cards today given the restrictions and hassles but the Insight Visa is the only one I would definitely apply for today if I had to do it all over again. I’m single but you are married so your wife can apply for one under her SSN so you can double the amount I quote.

        • Thanks Dan for pointing that out. I started to explore the Insight Visa last night and I plan to start getting things lined up for this weekend for Insight Visa 🙂 Thanks for sharing!!!

          • Let me know if you have questions. I have some experience in this area. The process I go through to earn 6% on $5,000 is amusing or pathetic depending on your perspective.

    • Thanks for sharing Andi!!! That makes sense that branches are a marketing tool at this point.

      You sound like me in that it’s been years since you’ve been inside. I don’t know of too many people that still go in at this point.

      Thanks for stopping by and sharing!!!

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