I actually started online banking back in 1998/1999 when I first read an article on online banking in BusinessWeek. The article was comparing two internet banks, and I chose to give NetBank a try. NetBank was one of the highest yielding banks in the nation at that time according to www.bankrate.com, and has been so until recent last 2 to 3 years. I made sure that NetBank was listed at FDIC http://www2.fdic.gov/idasp/main_bankfind.asp database, and then I started my online banking.
In the beginning, I didn’t have a lot of trust. So I started by depositing some small amount of money, and tried to withdraw money from my account by checks & ATMs. After everything seemed to work fine without any problems, I started to move majority of my cash holdings to NetBank.
Because of the inconvenience of online banking, mainly due to very few free ATMs, I keep accounts at two local banks. In one local bank, I only have saving account to reduce the amount of money that I need to keep for minimum balance to avoid fee, since checking account usually has a higher minimum balance. In another local bank, I have both checking and saving accounts, so that I have at least a checking account locally. And my rationale to have two local banks is to simply increase the total number of free ATMs that I could use in a short distance from wherever I was. Of course, if you don’t have enough cash reserve, you probably want to limit the number of banks you have.
This strategy of having an online bank and two local banks have served me well. I can easily access my small cash need, while I can keep the majority of my cash in a higher yielding online account. Depending on your comfort level for accessible cash, you can put that amount in local banks, and put the rest in online accounts. Since I conduct most of my purchases through credit cards, my need for cash is low. I usually only keep about one thousand dollar in local banks, but it could vary from a few hundreds to just less than two thousands. And to avoid all kinds of ATM & bank fees, I define my accessible cash as any amount over the minimum balance that is required to avoid monthly fee. And I always use the ATMs of my banks.
I also take full advantages of (free) online payment offered by NetBank. Every month or quarterly, depending on the bill frequency, I pay my electricity, gas, water, trash, home owner association dues, and two of my credit cards automatically. My phone bill and auto-insurance is paid automatically through credit card instead of NetBank, since I can get the 1% cash rebate on credit card charges. Having all the bill paying arrangements, I spend probably less than 10 minutes for viewing or paying all of my bills, excluding credit card bills. And I make sure that there is sufficient amount of money for payments by setting up an automatic transfer of an upper estimate of the total bill from my major high-yielding money market account to the checking account that allows unlimited withdrawals.
In summary, I try to achieve the followings for my banking needs:
- Easily accessible cash by having two local banks.
- Higher yields for most cash in accounts at my online banks.
- Avoid any bank or ATM fees by using ATMs of my banks.
- Take full advantage for online bill payments to save time & stamps.
By the way, I opened accounts at INGdirect a few years ago, and now I’m still debating whether it is worth my time and trouble to move my INGdirect accounts to EmigrantDirect for their exceptionally high yields currently at 4.50% 4.65%.
