Friday, February 28, 2014

My Switch to an Online-Only Bank

This is part 5 of 14 of my series on the 14 ways I am changing my financial life in 2014.

Since I am making so many changes, I figured I would try out an online-only bank too. Read on for my logic, which one(s) I selected, and how my experience has been so far.

I am a big fan of innovating business models. Banking is an old industry that, in some respects, is still stuck in an old, archaic model. The rise of online-only banks, meaning they have no brick-and-mortar retail locations, is disrupting the industry for the better. All banks and credit unions have been working hard to keep up with online services, but they are still stuck in the old model. 

As I thought through the banking model, I asked myself this question: If I never set foot in a retail bank again, will I be better or worse for it. I had to answer that question with "better". I haven't been in my bank or credit union for years, except when I have had to set up a new account. And that process takes forever. My experience with setting up an account at online-only banks is not only several times faster, but I can do it from the comfort of my home.

Oh, and perhaps one of the best parts of online-only banks is that their business model is profitable enough that they have interest-bearing and no fee checking accounts along with the highest yielding savings accounts available.

I won't go into all of the details of the pros and cons of the different online-only banks, but here are a couple of websites that helped me do a lot of my research: 2014 Best Online Bank Reviews & Comparisons and Best Online BanksI couldn't limit myself to one, so I chose two.

The Capital One 360 checking account is the one I ended up liking the best. There are plenty of no-fee ATM options, one of the highest interest rates for checking and savings, and the best overall user interface. Without the ability to physically walk into the bank, I appreciate that they have spent a lot of time and effort in designing a very intuitive and value-added online experience.  

My experience with this new bank account has been near flawless. I have transferred all of our transactions to this checking account, I use this debit card almost exclusively for transactions, and I have set-up a couple of savings accounts as well.

If you decide you want to sign up for an account, use this link and it should get you a $50 bonus for signing up: $50 bonus Capital One 360 Checking (Full Disclosure: this link is a promotion for current customers to refer their friends. The friends get a $50 bonus, the referrer gets $20).

This was a close second, so I decided to set up a second checking account with a debit card here. The interest rates are slightly better, but the user-interface is not as good as Capital One 360. In addition, Ally Bank's overdraft fees are a little more onerous. Ultimately overdraft fees will likely never be an issue for me, but when I did my initial analysis that was probably more of a concern than it is now. As I mentioned in an earlier post about my emergency fund, I use this checking account and debit card for reimbursable expenses incurred while traveling for my employer. I will be setting up at least one savings account here as well.

I have not been disappointed in any way with using online-only banks. I am glad I made the switch, and I cannot see myself going back to a traditional bank for the regular, day-to-day transactions. I am now an advocate for online-only banks.