8 Questions to Ask Before Opening an Online Bank Account

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online banking nAre you frustrated with the low yields that your local bank is giving you on your account balances? Many Americans are. They are tired of earning 0.1 percent interest rates and constantly dealing with new fees that banks seem to invent overnight. That is causing many to turn to online banks who offer higher yields and lower fees.

If you are one of the many people considering opening an online savings or checking account here are 8 questions you should ask first.

Is it FDIC insured?
Regardless of how attractive the interest rates may be, if the "bank" is not FDIC insured you should run not walk away. FDIC insurance covers you (up to $250,000) in the event that your bank defaults or goes out of business. All legitimate online banks will display "FDIC insured" very prominently on their website.

Are there any fees?
One of the advantages of online banks is that they typically have a very low fee structure. However, you shouldn't just assume that is the case. Check out fee's for ATM withdrawals, minimum balances, transfers, number of transactions, etc.

How safe is the bank?
Most online banks are actually affiliated with huge multi-national banks. Sometimes this is very obvious by the name, but not in all cases. For example, Ally Bank is part of GMAC Financial. Some online banks try to come up with names that sound like they are part of a much bigger bank, but check them out to make sure they are not just projecting themselves to be bigger than they really are.

How easy is it to deposit money?
Setting up direct deposits are usually pretty painless, but what about other situations? How easy is it to deposit a check into your online checking account? Are there time delays or fees involved? And if you want to deposit a wad of $100 bills, you are probably out of luck.

How easy is it to withdraw money?
Most banks make it as easy as possible to put money into them, but what you are really interested in is how easy is it to withdraw that money? How many ATM's do they have? Are there fees for withdrawing money? Are there limits on how many withdrawals you make each month?

What level of personal service will you receive?
One of the frustrations that people have with online businesses is that they can never get in touch with a live person. Certainly with an online bank you will not have the option to interact face-to face with a bank manager, personal banker or even a teller. The best online banks will have a customer service phone number displayed prominently on their website.

Is the higher interest rate worth it?
In most cases, online banks will be able to offer significantly higher interest rates. Not having the expense of a brick-and-mortar operation enables them to offer more competitive rates than your local bank. However, there are trade-offs that you will need to be prepared to deal with.

Does it meet your needs?
Really it all comes down to whether an online bank will meet your needs. For many people it will be a great move. They will earn higher interest rates and typically have fewer fees to deal with. However, others need the reassurance of a local bank that they can visit each week.

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