The Newest Features of Online Checking Accounts

If you haven't considered switching to an online checking account, take another look.

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When online savings accounts first appeared, they were the cat's meow. You had stunningly high interest rates on savings accounts and certificates of deposit, great features that made many transactions faster and easier, and they were FDIC-insured, just like your local brick-and-mortar.

Personal finance aficionados like myself jumped all over them. Gone were the days you had to drive to the bank to open a CD, as well as the weaker interest rates. You could do all of it online and get better rates.

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It wasn't long before online checking appeared as well. Again, higher rates than your local brick-and-mortar, but there was one downside: location. There was no location. The bank had no ATMs you could go to. They had no branches you could visit to deposit checks. If you wanted to get your money, you had to pay a fee at another bank's ATM. If you wanted to deposit a check, you had to mail it in.

Back then, these things killed the idea of online checking accounts for me. The rates may have been better, but there's no way I'm mailing even the infrequent checks that I have. If you haven't looked at online checking in the last few years, take another look. Banks have introduced a lot of new features that address all of those problems, and it prompted me to open my first online checking account.

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ATM fee reimbursement. Many banks now offer ATM fee reimbursement, up to a certain amount during each statement period. Brick-and-mortar banks are the stingiest because they have the most ATMs, but many online banks offer unlimited ATM fee reimbursement. Ally Bank, for example, refunds all ATM fees at any ATM nationwide with no limit. If they don't offer reimbursement, chances are they partnered with an ATM network that has a wide enough reach. For example, ING Direct has partnered with Allpoint and uses their ATM network. Allpoint has more than 40,000 ATMs and ING Direct customers can use them for free. PerkStreet partners with STARsf, which has 37,000 ATMs across the nation. This is a common strategy for local banks and credit unions that lack the geographic presence of larger national banks.

Online check deposit. This is a fairly new feature, also known as remote deposit, that USAA Bank customers have had the luxury of enjoying for quite some time. At USAA, their Deposit@Home feature lets you scan your checks and deposit them online. Ally Bank rolled out a similar feature in which you can deposit checks online without having to mail them in a postage-paid envelope. Once the Check 21 Act passed and paper checks were no longer legally required, online banks have been moving to offer this feature.

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Debit card rewards. Credit cards have been offering rewards for what seems like decades. They're able to do this because they charge much higher processing fees compared with debit cards. Some online banks are fighting back, offering debit card rewards on par with some of the credit cards. They're able to do this because they have lower overhead, which helps explain higher interest rates on their savings accounts, and because sometimes debit-card transactions are processed as credit transactions (which is why merchants ask you if you'd like to pay with credit or debit).

This is just a taste of what I think will be a boon in online banking. At first, it was just higher rates. Now, they'll throw in conveniences like ATM reimbursement and check deposit; conveniences that will lead many to dump their brick-and-mortar bank and go online.

Jim Wang writes about personal finance at Bargaineering.com. When he's not tackling money issues, he's usually looking forward to his next vacation and writing about it at Wanderlust Journey.