We all know to what extent our day to day financial life is dependent on a checking account. Most local banks offer miserable interest rates on consumer deposits. In some cases, they do not even give any interest on your deposits. On top of that, there may be fees associated with account maintenance, check writing, check ordering etc. With the advent of the internet came online banks. Many of these banks operate exclusively online. But they have a customer service number in case you need to talk to a human at the other end. These banks offer a lot more for your deposits. This section highlights some of the key benefits of online banks. It also makes you aware of some of their limitations.
Online banks address many of the challenges that we face from our traditional brick and mortar banks. They offer significantly higher interest rates. Many of them don't charge fees for account maintenance etc. They also offer a great convenience. Whether it is transferring money from one account to another at the same bank or a different bank, paying your bills, and doing all this at any time, any place, and anywhere in the world that suits you. Paying bills for free is also a very important benefit.
With any bank account, protection and safety are important issues. In this topic, protection refers to protecting your deposit should the bank go under. Security, on the other hand, relates to security of personal information. With respect to protection, most online banks carry the same FDIC insurance as your traditional bank. The protection limits are also same, currently $250,000 per account owner. In case of joint accounts, each owner is protected up to $250,000. This limit was increased in 2008 from $100,000 to manage the financial industry crisis. Starting January 1, 2014 this limit will revert back to $100,000.
