Online Banking Reviews

According to banking experts, online banks have many compelling advantages over brick-and-mortar banks. It costs companies only one-sixth as much to operate online banking compared to a fully staffed brick-and-mortar bank. That saving is passed onto account holders in the form of higher bank rates, especially for online savings accounts. A slew of online banks such as ING Direct are also now sweetening the pot by offering checking accounts that pay higher interest rates as well. The big banks like Citibank have unveiled mobile banking options too this year, where you can pay bills, transfer funds or get alerts on your mobile device. There are also far fewer -- or no -- fees and service charges at web banks.

Security experts say that online banking is very safe, and fully protected and insured by the same FDIC safeguards that exist for regular banks -- this means that your deposits are guaranteed by the government up to $100,000. Thousands of NetBank customers were caught off guard last October when the online bank went under. Accountholders were quickly shuttled to ING Direct, which agreed to take over NetBank's accounts. Those with NetBank assets under $100,000 saw little disruption in service. However, NetBank had $109 million in deposits that exceeded the FDIC-insured limit of $100,000 per account, according to a story in MSNBC. Those people became creditors and are now stuck waiting for liquidation of NetBank's assets; as of February 2008, 30 percent of those accountholders had not yet been reimbursed, according to an article in MarketWatch.com. NetBank was an online-only bank. Incidentally, Miami Valley Bank of Ohio, a brick-and-mortar bank, also failed in October of last year.

As for vetting specific institutions, the most thorough online banking reviews appear in Money and Kiplinger's Personal Finance magazines. These two publications rank online banks based on their strengths in different niches, such as online checking, savings, website navigation, features and access to funds. Since Internet banks tend to excel at different tasks, this process makes sense to us. A lengthy research report by San Mateo-based Keynote Competitive Research ranks 27 online banks for overall customer satisfaction, functionality, transaction handling and reliability by analysts who test accounts they open at each bank. In all three of these major reviews, clear winners emerge.

According to banking and security experts, online banking can actually be safer than regular banking, in part because analysts say you are more likely to experience fraud or identity theft if you receive paper bank statements. Despite what we see in the movies about cyber identity theft, criminals are more likely to gain access to your financial information in a far more low-tech way -- by stealing your mail or rummaging through your trash. Furthermore, among those who have been victims of bank fraud, those who use online banking suffer far less because those with online bank accounts monitor their accounts more closely than those who wait for paper bank statements each month. That means victims notice the fraud earlier. According to a study by Javelin Research and Strategy, identity theft victims who monitored their online bank accounts lost only $551 compared to the $4,543 lost when theft was detected from paper statements.  ... Continued

Our Consensus Report shows how many times products are top-ranked by reviewers included in our
All The Reviews Reviewed chart.

In comparative reviews, Citibank scores a bit better overall than other online banks. However, E*Trade, EverBank and Bank of America aren't far behind, and each has its strengths. HSBC Direct gets a little less recognition, but good grades for its online savings accounts. Wells Fargo has solid products and services, but failure to meet certain requirements and/or minimums can lead to high fees.