Pros and Cons of Online Banks: It's About the Yield

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Pros and Cons of Online Banks: It's About the Yield

Posted On : Oct-11-2011 | seen (496) times | Article Word Count : 690 |

There are numerous advantages and disadvantages to having your money at an online bank rather than a traditional bank.

There are numerous advantages and disadvantages to having your money at an online bank rather than a traditional bank. However, when you examine the entire scenario, you'll find that online banks offer the best mix of convenience and interest on your money. Specifically, money market accounts at online banks have enough of an edge over any other accounts at both online and traditional banks.

Yields
Think about a traditional bank. It must have a huge footprint in order to be competitive. That means lots of branches. If a bank has a lot of branches, then it is either paying a lot of rent and/or a lot of money in mortgages payments if it owns the land its branches sit on. Then there's the actual overhead of running each branch, including labor, utilities, security, ATM machines, and so on.

Now think about an online bank. No branches. No branch overhead. No vaults. No security. It's a much cheaper operation to run than a traditional bank. All the money they save means they have more money to offer their customers, and they do it in the form of interest rates offered on their products -- rates that are almost always higher than their traditional bank competitors.

Money Market Accounts
When you compare all the different types of accounts where you can keep your cash, money market accounts tend to offer the best solutions. Savings and checking accounts pay little interest. However, money market accounts give you almost all the same conveniences such as checkwriting and electronic transfers that you find with checking accounts, you have access to your money at any time, and they pay higher interest rates. Certificates of deposit have the drawback of requiring you to tie up your money for a long period of time. Money market accounts are the happy medium.

Other Pros
Online banks have just as many features at their internet sites as traditional banks do, and sometimes even more. You can fill out just about any paperwork the bank requires online and submit it online. You can zap around the website, pay bills, make withdrawals, and even transfer money to and from other accounts without leaving your seat. You can eliminate the tons of paperwork a traditional bank sends you every month, in the form of account statements, regulatory change announcements, credit card applications, and all their other product solicitations. The less paper you get, the less you have to throw out, the greener a life you lead, and the less material for identity thieves have to steal from.

Cons
Online banks aren't perfect. You have to be committed to making deposits by mail or electronically. Then again, some people consider it an advantage not to have to wait in line at a bank. You won't get that personalized customer service that can come with having a friendly local banker. In the highly unlikely event that the bank's website crashes, you could find yourself in a pickle if you need cash. Likewise, some online banks don't have ATMs, which could put a crimp in your plans if they involve quick cash.

Some Final Advice

If you want to find the highest yield money market account, the internet will prove to be invaluable. Not only can you search for the best yields across many websites, but you will find tons of reviews about nearly every online bank. Customers are eager to share their thoughts with others, and you will benefit from that.

Pay attention to customer reviews, but ignore small sampling sizes. 1000 people reviewing an online bank means more than 10 people.

After you narrow down your online bank candidates, thoroughly scour the websites of each one, seeking out all hidden fees. Call your top three choices and see what customer service is like at each one. Pretend to be totally unaware of how online banking works. See which bank is the most patient and helpful. That kind of attention may help break a tie.

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<h1>Pros and Cons of Online Banks: It's About the Yield</h1> Author: <a href='http://www.articleseen.com/profile_Jess Hall.aspx'>Jess Hall</a> There are numerous advantages and disadvantages to having your money at an online bank rather than a traditional bank. However, when you examine the entire scenario, you'll find that online banks offer the best mix of convenience and interest on your money. Specifically, money market accounts at online banks have enough of an edge over any other accounts at both online and traditional banks.

Yields
Think about a traditional bank.  It must have a huge footprint in order to be competitive.  That means lots of branches.   If a bank has a lot of branches, then it is either paying a lot of rent and/or a lot of money in mortgages payments if it owns the land its branches sit on.  Then there's the actual overhead of running each branch, including labor, utilities, security, ATM machines, and so on.

Now think about an online bank.  No branches. No branch overhead. No vaults. No security. It's a much cheaper operation to run than a traditional bank. All the money they save means they have more money to offer their customers, and they do it in the form of interest rates offered on their products -- rates that are almost always higher than their traditional bank competitors.

Money Market Accounts
When you compare all the different types of accounts where you can keep your cash, money market accounts tend to offer the best solutions.  Savings and checking accounts pay little interest.  However, money market accounts give you almost all the same conveniences such as checkwriting and electronic transfers that you find with checking accounts, you have access to your money at any time, and they pay higher interest rates. Certificates of deposit have the drawback of requiring you to tie up your money for a long period of time. Money market accounts are the happy medium.

Other Pros
Online banks have just as many features at their internet sites as traditional banks do, and sometimes even more. You can fill out just about any paperwork the bank requires online and submit it online. You can zap around the website, pay bills, make withdrawals, and even transfer money to and from other accounts without leaving your seat. You can eliminate the tons of paperwork a traditional bank sends you every month, in the form of account statements, regulatory change announcements, credit card applications, and all their other product solicitations. The less paper you get, the less you have to throw out, the greener a life you lead, and the less material for identity thieves have to steal from.

Cons
Online banks aren't perfect.  You have to be committed to making deposits by mail or electronically. Then again, some people consider it an advantage not to have to wait in line at a bank. You won't get that personalized customer service that can come with having a friendly local banker. In the highly unlikely event that the bank's website crashes, you could find yourself in a pickle if you need cash.  Likewise, some online banks don't have ATMs, which could put a crimp in your plans if they involve quick cash.

Some Final Advice

If you want to find the highest yield money market account, the internet will prove to be invaluable.  Not only can you search for the best yields across many websites, but you will find tons of reviews about nearly every online bank.  Customers are eager to share their thoughts with others, and you will benefit from that.

Pay attention to customer reviews, but ignore small sampling sizes.  1000 people reviewing an online bank means more than 10 people.

After you narrow down your online bank candidates, thoroughly scour the websites of each one, seeking out all hidden fees. Call your top three choices and see what customer service is like at each one. Pretend to be totally unaware of how online banking works. See which bank is the most patient and helpful. That kind of attention may help break a tie.About the Author: Jess Hall writes out of Jersey City about ways to diversify your personal finance portfolio. She gives tips on how to find the <a rel="nofollow" href="http://www.work.com/how-to-get-the-highest-yield-money-market-account-72615/">highest yield money market account</a> and other short-term investments. In order to stay up to date with financial news, Jess often reads articles such as <a rel="nofollow" href="http://www.work.com/how-to-get-the-highest-yield-money-market-account-72615/">http://www.work.com/how-to-get-the-highest- Article Source: <a href='http://www.articleseen.com/Article_Pros-and-Cons-of-Online-Banks-Its-About-the-Yield_90462.aspx'> http://www.articleseen.com/Article_Pros and Cons of Online Banks: It's About the Yield_90462.aspx</a>

Article Source : http://www.articleseen.com/Article_Pros and Cons of Online Banks: It's About the Yield_90462.aspx

Author Resource :
Jess Hall writes out of Jersey City about ways to diversify your personal finance portfolio. She gives tips on how to find the highest yield money market account and other short-term investments. In order to stay up to date with financial news, Jess often reads articles such as http://www.work.com/how-to-get-the-highest-

Keywords : highest yield money market account,

Category : Finance : Investing

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