Online banking

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This is a mini-rant, a short essay refuting a common misconception among users of an Internet forum. If you think this essay is FUD, feel free to explain why on the essay's talk page.

Sometimes you're so fed up with your bank that you want to switch to another bank, but no other bank has branches near you. Or sometimes you are stationed far from home, such as living at school for nine months out of the year, and your bank has no branches near you. Online banking can offer better rates and better terms and conditions than those banks in your town, but the checking accounts offered by several online banks might not be as convenient.

Getting money in

The primary ways to get money into an online bank are

  • direct deposit of one's paycheck,
  • wiring money from another bank over the Automated Clearing House (ACH) system or foreign counterparts,
  • mailing checks to the bank's payment department,[1] and
  • buying postal money orders with cash and mailing those to the bank's payment department.

But not all employers offer payroll direct deposit. Among employees of surveyed small businesses, 44 percent work for firms that do not offer direct deposit, especially those that do not outsource their payroll.[2] If you regularly receive cash (such as birthday money or garage sale revenue), mailing a money order every couple weeks (as deapbluesea recommends) can be a hassle, and the fees for the money order or cashier's check and the Certified Mail postage can become substantial. An article at eHow.com recommends keeping a checking account at a bank in every town in which you live or do business so that you can deposit cash at a local branch or ATM and then wire the money,[3][4] but some banks with little local competition take advantage of this by tying up customers' money in a minimum deposit. For example, as of the fourth quarter of 2011, Chase's basic checking account requires a $1,500 minimum deposit to avoid a $144 annual fee if your employer happens not to offer payroll direct deposit.[5]

Getting money out

Checks are still useful in the 2010s because as Captain Hook pointed out, you can pay an individual or church that doesn't accept credit cards, without a credit card swipe fee or wire transfer fee. But a lot of restaurants, garage sales, neighbors who mow your lawn, etc. accept only cash, not checks or debit cards. So there needs to be a way to get cash out of the account without paying fees that other banks' ATMs charge. Some online banks refund these fees, but watch the terms and conditions closely. Perhaps the easiest way to get cash out is to buy something at a grocery store with a debit card and choose to get cash back.

Also watch out for online banks that don't offer checking accounts, only savings accounts. In the United States, these allow only six withdrawals a month per Regulation D.

See also

References

  1. Amazon Askville: Mail checks to the bank for deposit
  2. Ian Macoy, NACHA, and Paul McAdam, FIS. Small Business Adoption of Payroll Direct Deposit. 2011. Accessed 2012-01-03.
  3. Lea Winters. How to Deposit Money Into an Online Bank Account. eHow. Accessed 2012-01-03.
  4. Slashdot discussion with LordKronos, 2011-12-29
  5. Chase checking accounts. Accessed 2012-01-03.