As consumers grow increasingly frustrated by the checking account options offered by traditional banks, more are seeking out the best online checking accounts for better interest rates and service. Large banks like Wells Fargo and Bank of America are continuing to add fees, such as debit card fees, and are not concerned with scaring the less profitable customers away. This is part of a larger plan to increase profitability, which includes firing the customers who don’t have large balances and sending them to online banks, small banks, and credit unions. If these customers remain unprofitable at their new institutions, those organizations may be forced to enact fees, as well.
Regardless of the larger situation, including industry-directed changes and regulations, the best thing a customer can do is find the best checking account that meets his or her needs at that particular time, with the information that is currently available. Here are my picks for stable, convenient online checking accounts.
Ally Bank. Ally Bank (formerly GMAC Bank) offers a checking account with no monthly fees and no minimum balance. The no-fee, no-minimum accounts are becoming increasingly rare, and even those banks that have held out with these accounts, very few offer interest on the accounts, as Ally Bank does.
PerkStreet. PerkStreet takes a unique approach to checking, offering cash back for using an associated debit card. Cash back in a world where other banks are charging to use their debit card is a novel idea. For now, customers with a PerkStreet account earn 2% cash back on all debit purchases and an additional 3% cash back, for a total of 5% cash back, on rotating categories throughout the year.
There are some limitations to this cash back; the 2% cash back is effective for the first 90 days or for accounts with at least a $5,000 balance. Otherwise, the cash back rate is 1%. The 5% offered on rotating categories expires after a customer ha earned $250 in cash back from that tier.
Perkstreet’s checking account is a finalist in its category for the 2nd Annual Plutus Awards.
ING Direct. The ING Direct “Electric Orange” online checking account has been my primary online checking account for almost as long as the account has been offered by the bank. To catch up with other online offerings, ING Direct recently began offering paper checks. Like Ally, this account charges no fees, requires no minimum balance, and offers interest to account holders. Rather than overdraft coverage from a linked savings account, the Electric Orange account takes advantage of a line of credit offered to approved customers.
FNBO Direct. FNBO Direct offers a savings account with a competitive interest rate, and the Online BillPay Account is a competitive offer as well. FNBO offers a high interest rate on their BillPay Account and integrates PopMoney, a system that allows you to easily transfer money to and from your friends (or anyone else who uses PopMoney).
I’ve had an FNBO Direct savings account for a long time, and it has consistently offered high rates.
USAA. USAA is taking advantage of banks charging $5 debit card fees, heavily advertising that their debit card is free to use. The USAA checking account is certainly a favorite among experts, earning its place as a finalist at the 2nd Annual Plutus Awards. USAA was also named one of CNN Money’s least evil banks.
The bank serves primarily members of the military, but membership is open to the public. The checking account has no fees and does not charge for up to the first 10 AM withdrawals each month. USAA also reimburses customers for up to $15 in ATM transactions each month, making any convenient location an “in-network” ATM. USAA also offers remote deposit, a convenient way to deposit checks into the account by scanning or taking a photograph of both sides of the check.
With the largest banks finding ways to eliminate the least profitable customers through the addition of fees, as of today, there are still plenty of options available for people who are interested in sticking with an institution that generates revenue in another manner. If the above options don’t work for you, there are credit unions that would be happy for an influx of customers. Every financial institution is a business, however, and if new customers end up being unprofitable in the future, free checking will become extinct.
Updated February 3, 2012 and originally published October 10, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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{ 11 comments… read them below or add one }
But can you transfer money into these online accounts without having a local checking account to deposit the money into first? This has been the problem for me with some of the accounts I’ve looked at.
Having a local checking account makes everything a lot easier, but it’s not necessary. You can send in a check when opening any of these accounts, which slows down the opening process. If you have paper checks for deposit, you can send them to the bank or use an ATM that accepts deposits.
Most offer deposit through mail or online deposit with a scanner or sometimes your smartphone. I’ve had USAA for over a decade, and have depended on deposit through the mail (and now with my smartphone), and have never had an issue.
If you take PerkStreet as an example, new accounts can fund via their current checking account, or up to $500 via credit card. Once you have a checking account, you can go to any UPS Store and deposit your checks via UPS Overnight for free. The cut off for Overnight is around 5pm for most UPS Stores.
I’ve been a loyal and satisfied USAA customer for over thirty years and plan on many more.
Apart from the above banks, is there any other online bank i can link my local bank account with??
Recently, I changed from Wells Fargo Bank to a local credit union; which I am delighted with. My credit union treats me like family. After banking with Wells Fargo for several years; their attitude changed. They became very unhelpful; when I needed to see a banker they would keep me waiting for no reason 45 minutes to an hour before they would acknowledge that I was there. I spoke to the manager several times and nothing changed. A few months ago I changed to my current credit union before the banks started charging all these fees; and I would not go back to any commercial bank again.
thanks for the reply, i dont mean local credit union, i mean other online financial institutions that could be opened online, like usaa, perkstreet, where u just pay and they send u an atm, no need to go into the bank…can i get any help??…
Thanks. Great timing. Between this article and the Plutus Awards it looks like i might be moving to ING Direct. I just hope they get the remote deposit setup soon.
Am I just an old fogie because I want to see my money and access it when I want to???? I get the creepies when people talk about online banks.
St Martin Bank checking is the best of them all. 3.51% APR up to 10K.