Questions to Ask before Banking Online

Online banking can be a great service, but that doesn't mean all banks are alike. Your present bank may have an online service, or you may want to try an Internet-only bank. But make sure you know what you are getting before signing up. Of course, you can use the Internet to do some comparison shopping. Just search the keywords "online banks."

1. What services does the bank offer?
You will want the bank to offer online bill payment, the ability to transfer money among different accounts and the ability to consolidate information from multiple accounts (home loans, credit cards, checking accounts and so on) into one online account. Make sure those key services are available before you look at anything else.

2. Can you access account information from anywhere?
Most online banks let you access account information through secure Websites, allowing you to view your account anywhere you can dig up a Web browser to use.

3. How does online bill paying work?
Generally, the service works as follows. You tell the bank whom to pay, when to pay and how much to pay each month. If your creditor is submitting electronic bills to your bank it will already have this information. If your creditor accepts electronic payments, the bank will transfer money out of the account you've chosen, put it into its own account, then zap off the payment electronically.

But if the payee does not accept electronic payments, the process slows to a turtle's pace. The bank will debit your account and pay the creditor with a printed check, allowing the good old post office to take over. Or the bank will transfer money from your account, put it into its own, then write a bank check to the payee.

Whatever process the bank uses ...

Whatever process the bank uses, find out how long it takes for the creditor to actually get the money. Don't accept vague answers. The bank darn well knows how long it has been taking to pay the bills of its present customers. Some banks are much faster than others, and you need to be aware of the bank's process. You may have to start the bill-paying process two weeks ahead of time in order to be sure that your payments arrive on time. And remember that you'll actually be out that money the minute the bank whips it into its account.

4. Can you download your account info into your money management software?
Most banks that offer Web-based access will also let you download your day-to-day transaction history into software such as Microsoft Money or Quicken. You can then reconcile your checkbook with a few simple clicks whenever the urge strikes.

5. What about bank fees?
Find out what the bank charges for automatic bill paying, non-network ATM use and checking accounts. Almost half the online banks recently surveyed had no minimum balance requirements for free basic checking. (That's a godsend compared with traditional banks, which charge as much as $10 a month for accounts that don't meet balance requirements as high as $2,500.)

6. What interest rates does the bank pay?
High interest rates are a big selling point for Web-only banks -- those that have no connection to a traditional brick-and-mortar bank. Recently Web-only banks paid an average of 3.4 percent on interest checking, which is five times better than the 0.7 percent average at traditional banks. Rates on CDs and money market accounts are also higher online.

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