Comparison of Online Checking Accounts

by Niek on February 6, 2012

In a follow up to yesterdays post on deciding between online and brick and mortar banks, here is a comparison of online banks you might consider.

To choose the right online bank you need to find out what is important to you. Things you can take into consideration:

- How do I cash checks? (By mail or smartphone)

The main reason I prefer smartphone is that I don’t trust the postal service. A check lost by USPS is no problem if it was my friend’s contribution to yesterdays lunch, but the problem gets a lot bigger when you have to ask tenants to write you a second check for last months rent. That would not fly. Especially since some banks will actually take their rent money out of their account when they use bill pay to pay me. It takes 90 days of not cashing the check before their bank will refund the money. And even if they did trust me, I doubt most tenants have the ability to pay the rent “twice” while they wait for the refund.

An important thing to ask your future bank is what their smartphone deposit limits are. They are often very low to start with, which is a pain for checks the size of rent checks,  but they will let you upgrade them if your account is in good standing for a while. So take that into account and don’t expect “switching banks” is going to be a 1 week process.

- What is the interest rate?

Often landlords keep a substantial amount of working capital in an account.

– Do I get free ATM use?

It is not often I have to pay someone in cash, but I hate paying those 3 dollar fees to pull out 40 dollars.

– When can I contact the customer service department?

This is actually a perk for an online bank. Where most brick and mortar banks close both their buildings and their phone lines after business hours, some online banks are available 24/7.

Comparison

To make life easier for you I have omitted any banks with monthly “maintenance fees” or “account minimums” (I’m looking at you HSBC!). So any of these choices will be free to open and maintain. All provide a free debit card, free bill pay and free transfers between them and your account at other banks.

Keep in mind the USAA accounts are only available to (former) members of the armed forces.

  USAA Ally Bank ING Direct Charles Schwab
Writing_checks Free Free $5 for 50 checks Free
Depositing_checks* Smart-phone and at UPS stores Free postage paid envelopes and by scanner.  Not Available Free postage paid envelopes and by smart-phone.
Interest_Rate**  Up to 0.45% 0.84% 0.80% 0.20%
Free_ATM Any ATM in US Any ATM in US 35,000 ATM’s Any ATM in the world
Customer_Service Regular Business Hours Mon-Sat 24/7 Business hours 7 days a week Business Hours 7 days per week

 

* Depositing checks by smart-phone can come with deposit limits. I.e. Schwab limited it to 1000 dollars for the first three months. This was both per check and per day. It took one phone call to raise it to 2500 dollars. If certain requirements are met, Schwab says they will go up all the way to 25,000 dollars.

** All interest rates are based on the available savings (not checking) accounts. It is safe to assume the rates on all checking accounts are near zero. Besides, if you have a sizable amount of money, it shouldn’t be hanging out in your checking account anyways. If you have 50,000 dollars I would recommend to put 40,000 of that in savings to benefit from the higher interest rates. Transferring it back into checking is free and immediate.

My favorites are Ally Bank and Charles Schwab. We have a personal checking account with Ally and enjoy their easy to use website. We considered opening a second checking account for our rentals with Ally but decided that we prefer not to have all of our eggs in one basket and wanted to be able to deposit checks by iPhone. More on our personal finances in a later post.
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