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Candice Choi

Online checking accounts offer convenience, but beware of the drawbacks

By Candice Choi
Associated Press / October 9, 2010

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NEW YORK — Now that most routine bank transactions can be handled online or at ATMs, you may be weighing whether it’s worth making the leap to an exclusively online checking account.

Besides the convenience, these accounts typically bear interest or come with other perks. There are of course trade-offs to be wary of as well.

Bank of America —The country’s largest bank introduced its first online-only account in August. Since then, the eBanking option has made up more than 40 percent of the company’s new checking accounts. Customers have to opt for online statements and make routine deposits and withdrawals online or at ATMs to avoid a $9 monthly fee. There is no minimum balance requirement.

Although the accounts don’t bear any interest, customers have the security of knowing they can walk into one of the bank’s 5,900 US branches if they need to. But visits have to be limited to those rare situations that can’t be resolved remotely, such as depositing coins or complicated customer service matters. Otherwise, handling a routine transaction at a branch would result in a monthly fee.

Another factor that makes the account more attractive is that Bank of America last year finished rolling out new ATMs that make deposits easier.

As for customer service questions, Bank of America offers live online chats for those who prefer not to call and speak with a representative.

Ally Bank — Another option is going with an online institution such as Ally Bank. If you already have a supplemental savings account at an online bank, you may be wondering whether it would be inconvenient to move your primary checking account over, too. The main incentive is that the accounts bear interest to make up for the lack of branches.

At Ally, the interest rates on checking accounts are currently 0.5 percent for balances up to $14,999 and 1.05 percent for anything above. There’s no minimum balance requirement, and customers can get paper statements free of charge.

Since Ally doesn’t operate ATMs, the bank refunds any ATM fees customers incur. Customers are also given an unlimited number of prepaid envelopes to mail in check deposits.

The bank also puts a fine point on its customer service and posts the estimated wait time to speak with a representative on its website; the time is usually less than a minute.

ING Direct —The interest rates on checking accounts at the online bank range from 0.25 to 1.25 percent depending on the balance. There is no minimum balance requirement.

Unlike with Ally, ING customers have access to the bank’s partner network of about 35,000 ATMs. These ATMs, branded as Allpoint, are located primarily in convenience stores like 7-Eleven. Fees incurred at other ATMs aren’t reimbursed. The bank does not offer paper statements or a way to deposit cash. Checks can be deposited by mail; the bank doesn’t provide prepaid envelopes.

Candice Choi writes about personal finance for the Associated Press.