You might have been hearing about the advantages of online checking accounts. Those are completely managed in cyberspace, not the brick-and-mortar financial institution in your neighborhood or downtown where you work.
Depending on the financial institution, those advantages could include no or low monthly fees, interest paid on the account, reimbursement for using other banks’ ATMs, not incurring foreign transaction fees when traveling abroad and bonuses such as higher interest for combining or “bundling” services. Since the accounts are FDIC insured, there’s no worry about security. And if you are relatively tech savvy you are comfortable with transacting your business totally on the Internet through your personal computer, smartphone, tablet, mobile app or some other gadget.
When you decide, okay I will open an online checking account, the next step is to decide where. That has two parts. One is what financial institution you choose to have the account. It could be a bank or credit union. The other where piece also has two parts if the financial institution you select for online banking has a brick-and-mortar presence. More traditional banks are setting up this line of service which is so cost-efficient to them. If there is no physical presence, then the where is your personal computer, smartphone, tablet or other gadget. Not everyone owns or leases these devices. Public libraries provide free access to the Internet. Frequently librarians will instruct on the basics of “getting online” or refer you to a simple reference book on how to do that.
Given the popularity of online checking, financial institutions are competing with one another for your business. Therefore, to get the best deal for your needs, it is smart to shop around, comparing promotions or teaser offers as well as what seem like permanent features such as no monthly fee. Remember, though, there is no guarantee that any term or condition of the contract you agree to will endure for the long term. That’s why it’s imperative to read the fine print before you click the “agree” button.
Your first stop may be your own brick-and-mortar bank, if it offers online checking. That stop may not be in person but on the Internet. Just key in on a search engine such as Google or Yahoo “online checking accounts” and up will pop the advertisements of a long list of financial institutions, both banks and credit unions. More credit unions allow you to open an account if you have some indirect association with them, such as simply being a resident of the state. In addition, third parties or objective sources such as NerdWallet provide overviews about trends and actual descriptions of what some institutions are offering. Also on the web in that section will probably be articles from the financial media such as The Wall Street Journal which add to your understanding of online checking.
What you should be looking for includes:
- The reputation of the financial institution for integrity and no bait-and-switches. For example, no fees are advertised, then there are fees two months later. To avoid this possibility, you might stick with the bank or credit union you know or which are given high ratings by organizations like NerdWallet or consumers.
- Fee structure. Ideally, you want as much free as possible. More and more, a monthly maintenance fee is waived if you agree to use direct deposit and transact business with the debit card a certain number of times monthly. Compare the different rates for items like stop-payments.
- Penalties. Compare these.
- Interest rate. Depending on the institution, that could range from 20 percent to 65 percent. Also there could be premium rates for maintaining a high balance and/or agreeing to direct deposit and frequent use of the debit card.
Choose carefully. You want a long-term relationship with this financial institution. Ending it is inconvenient.
Now, for where to make the actual application. Those not at-home yet on the Internet might want to choose a financial institution which also has a physical presence. Then they can walk in and set up their online account in person. Others will simply access the financial institution’s website and that will be that.
You will have to provide:
- Full name
- Date of birth
- Social Security Number
- Email address (If you don’t have one you can get one free from services ranging from Google to AOL. Just key in on a search engine on the web “free email addresses.”)
- Form of government identification, such as a driver’s license
You will read the terms and conditions of the contract. If you have any concerns or questions, the website will have contact information, by email and phone. Eventually you will have to click “agree.” Otherwise the application won’t be reviewed.
Should you have a record of overdrafts or more serious problems, the institution might decline to give you an account. ChexSystem maintains a database of checking accounts, flagging for banks and credit unions about irresponsible or fraudulent use. Some online banks do offer, though, Second Chance checking. Although it has a higher fee structure than the regular accounts, it provides the services you need. Ask the bank if you could upgrade to a regular account in a year or two if you demonstrate financial responsibility.
The last step is the deposit. That must be made. How much depends on the institution’s policies. You could have funds transferred from another account. You can scan a check with a smartphone or mobile app. Or you could snail mail a check, money order or cash.
That’s all there is to the process of having your checking account online. Likely you will not only save on fees. You will likely have the opportunity to combine or “bundle” other services for higher interest rates and other perks.