A few months back, I opened an account at HSBC Direct and moved nearly all my money over to this online bank. This was after quite a lot of deliberation on trying to balance the advantages I would receive from online banking compared to what I would be losing from local banking.
So what have I learned in six months of online banking?
- It is extremely difficult to survive without paper checks. Nearly all major online banks do not offer paper checks. They instead tout their online, free bill pay systems, which for the most part work very well. I have a few checks that go out each month automatically for utilities, loans, and rent. Yet I still find myself writing a paper check about once a month. For instance, this month I had to pay the DMV for registration on my new car, and I couldn’t possibly have mailed them a check through bill-pay instead. This Sunday I need a check for my new apartment deposit.
I keep $300 in my local checking account for these situations, but often times the check is more than $300, which means I need to transfer funds from my online bank. The problem is that it takes a full four business days to complete this transaction. So if I ever need to write a check for more than $300 without four days notice, I am in a bit of trouble! The only solution I see is to keep more money in my local checking account, but that reduces the benefit I get from interest. Speaking of which …
- Making interest on all banking accounts really adds up! A major reason many people use online banking is for their high interest rates, on both savings as well as checking accounts. While I had been using the online bank Emigrant Direct for my savings account, I had never seen it worth the hassle to setup an interest bearing checking account at a local bank that would earn me 0.25%. Now that all my accounts earn interest automatically though, I find all those dollars really adding up. Also, being able to transfer money from checking to savings instantly earns me more interest in the end, instead of my previous method of having to wait a week for the funds to move over.
- Not having any ATM fees, ever, is just as good as it sounds. A few days after setting up my account, I went to my favorite local sub place – and forgot that they only accepted cash. The cashier pointed to the ATM machine in the corner, and I told him thanks but I’d rather avoid the $3 machine fee and $2 fee from my bank for not using an in-network machine. And then it dawned on me that my new online bank didn’t charge any fees and reimbursed any machine fees! I have to say that this has been my favorite aspect of online banking. Whether it’s visiting my family in Ohio, withdrawing some money at a casino, or just needing some quick cash for a turkey sub, not having to worry about ATM charges is fantastic. The ATM fees still initially go through, but are reimbursed in one to two weeks.
- Depositing is a slight inconvenience. I know, depositing by mailing my check should be just as easy, in theory, as depositing at the ATM. But it isn’t. Normally, I would deposit any checks I had at the time I was making a withdrawal, which was easy enough. Now, I have to find an envelope, write out the address, find a stamp, and make a trip to a mailbox (which for some reason is a mile away from where I live). Besides that, I am more hesitant to put checks in the mail. I like depositing into an ATM because I can see the result immediately online. Not to mention mailing cash for a deposit is impossible. So instead I’ve met halfway by depositing in my local account and then transferring to my online account. Still this isn’t ideal as it now takes seven business days to get that money.
- Consolidating accounts into one bank makes organizing my finances much easier. Before, when my checking account was at a local bank, my only option to earn decent interest on my savings was to have it in an online bank. Besides the delay in transferring money between the accounts (as mentioned above), it also meant multiple logins to see my account status, multiple statements, etc. Now my account, my wife’s account, our savings and our business accounts are all at the same place. As long as we don’t surpass the $100,000 FDIC limit, I see this being a good thing.
Overall, I am very happy with my decision to move online. The slight inconveniences are far outweighed by the advantages. I didn’t go into too many details on my specific bank, HSBC Direct, but suffice it to say I am very happy with them. They were one of the online banks that offered complete ATM fee reimbursements (something the popular ING Direct does not), no other fees to speak of, competitive interest rates, and a great online interface.
They do not, however, offer referral bonuses, which may be why you don’t see it mentioned as often as ING Direct on other personal finance sites.
I kid, I kid!
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