Every few months, I like to take a look at our financial network map  to update it and see if there are ways I can optimize what we are doing. The last few years, most of the focus was on reducing the number of accounts we had. It had bloated tremendously, as the proliferation of online banks  (and my application and review of all of them) led to a ton of accounts, and optimization meant culling the herd.
Now that our map is leaner, one area I haven’t spent a lot of time on was the checking account portion. Until the last few years, checking accounts were pretty standard. You earned no interest, you had to kept a daily balance to avoid a fee, and the accounts were as utilitarian as you could get.
Here’s what I look for in a checking account (in priority order):
- Accessibility: I want that bank to have ATMs and branches in the places I’m most likely to go. Or, in the absence of that, I want to be able to use widely available ATMs without paying a fee.
- Rates: Checking accounts usually don’t bear interest, but I’m more likely to choose a checking account if the bank’s CD and savings rates are competitive.
- Fees: None. I don’t want any fees, no minimum balance requirements, or any of those games.
Online checking accounts are winning the battle against the brick and mortar banks. Online checking accounts win in all the factors I just listed because they give you access to any bank’s ATM without fees (accessibility), they often do bear interest (rates), their savings accounts and CDs offer higher yields (rates), and they don’t charge you fees! It’s a win win.
Best High Interest Checking Accounts
The two checking accounts I now have are Ally Bank and ING Direct, in part because I have online savings accounts there. There’s nothing particular mind blowing what about they’re offering. I make deposits by putting signed checks in a prepaid envelope. I make withdrawals at any ATM and I get marginal interest income from the accounts.
As of May 29th, 2012, here are some rates of popular online checking accounts:
- Ally Bank gives 0.75% APY on balances of $15k+ and 0.40% APY on <$15k.
- ING Direct gives you 0.20% APY on balances below $50k, 0.85% APY on balances on $50k-$100k, and 0.90% APY on balances $100k+.
- Everbank’s Interest Checking offers a 1st year APY of 0.83% for balances $25k-$49.9k.
- Perkstreet Financial doesn’t offer interest on your checking account but they do offer 2% cash back on their debit card, which is better than what you’d get elsewhere.
These aren’t incredible rates but they’re is better than zero. And they charge no fees and require no minimum balance.
Brick & Mortar Can’t Compete
Bank of America’s MyAccess Checking requires an average balance of $1500/mo (or one direct deposit of $250+ each statement period) or you pay $12 each month. And it gives you 0.00% in interest. Almost any online bank that offers a checking account will have a better offer than Bank of America.
Online checking accounts are not perfect though – there’s no way for you to deposit cash. You can’t, and you shouldn’t, put cash in one of those deposit envelopes and drop it in the mail. The only way to do it is if you find a friend willing to write you a check, which you can deposit. It’s a minor headache, and I rarely deposit cash anyway, but it’s one worth being aware of.
Do you use an online checking account exclusively? If so, which one? If you have any lessons learned, we’d love to hear it!
(Photo: peasap )