The Best Online Banking


I recall the first time I tried online banking. I still just barely knew how to use the internet, but 4.5% interest on a savings account was a lot better than the 2% local banks were offering, so I learned.

Then as now, the best online banking setups link your account(s) to your checking or savings account at your local bank. That's generally the easiest way to move your money in an out of your online account. It also means that it can take a few days to get your money--something to keep in mind if you think you'll need fast access.

ING Direct is as good example of a well-established online bank that pays higher interest rates than most local physical-location banks. At the moment (2011) the differences are not very motivating, but if and when they return to a 2% spread, that will give you an extra $300 annually on a $15,000 account.

The best online banking includes many options for savings accounts, checking accounts, CDs and more. In that respect, I like Everbank, and have used them in the past. They are one of the few banks where you can not only get decent interest rates on your dollar accounts, but where you can also open foreign currency accounts. At the moment they offer them in the following currencies: Australian dollar, British pound, Canadian dollar, Chinese renminbi, Czech koruna, Danish krone, Euro, Hong Kong dollar, Japanese yen, Mexican peso, New Zealand dollar, Norwegian krone, Singapore dollar, South African rand, Swedish krona, and Swiss franc.

Most of these only pay interest if you meet a certain minimum, but the interest earned is not the primary reason people use such accounts. They provide a way to diversify out of the dollar and even to profit from changes in exchange rates. If you have $20,000 in a Danish krone savings account, for example, you might make only $200, or 1% on the money in a year. But if the dollar has slid 10% against the krone, you'll have a gain of $2,000 in addition to your interest. Of course you could lose money on the exchange rate as well, so you might want to monitor these accounts more than the usual savings account.

How Much Can You Make?

At the moment, all interest rates are low, and so the differences between traditional and online banking are not pronounced. An exception is the "teaser" rates offered regularly by online banks. You might make as much as 1.5% more than local rates if you're willing to watch for the deals and move your money every six months or so. At that, with savings of $40,000, you would make an extra $600 annually--perhaps worth a few hours each year shuffling your money around.

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Watch for special offerings at the more creative online banks. For example, Everbank has (at the moment, but offerings change) a account based on a basket of currencies from countries known for their commodities, which makes it a play on the strengthening of commodity prices by way of those currencies (which usually rise in value with commodity prices).

Move money in and out of savings accounts a couple times, just to be sure that the banks system works well and you know how to use it.

Qualifications / Requirements

Most online banking can be done with low or no minimums, although special accounts and CDs have minimums.

First Steps

Find the highest rates at the moment (if that's what you are looking for), and then search "review" plus the name of the bank to find reviews online. You will normally send a check from your local bank to initially fund the account, and after that just move money back and forth online.

Resources - Lists banks and current offerings. - Offers foreign currency CDs and money market accounts.

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