The number of web based banking choices can be intimidating but if you stick with well known names, the decision process can be fairly cut and dry.   While hundreds of local or regional banks offer online banking services, not all banks are designed to cater to only online customers.    If you want an experience that completely eliminates the need to go to a local branch, then you'll get that by going with one of the online only banking services.  You'll be able to use a Visa or Mastercard Debit card, pay your bills online, and use ATM's to withdrawal money just as at your local bank.   Well known names such as Chase, Citibank, and Wells Fargo have taken the lead in this market, along with more up and coming names such as Net Bank and HSBC.  But before you dig in to compare online banks, be sure to consider what you need out of the bank first.   Someone with $10,000 to put away isn't going to need the same type of account (or perhaps the same bank) as someone who is going to carry a $500 balance and pay their bills online every month.

legitimacy

We understand that there are many people who wouldn't even consider sending their money to a bank where they've never been or that they've never seen.   This is probably the number reason that restrains the ever growing online bank market.   But for those who have passed this hurdle in their minds, there are a few things you should do to screen your potential bank.    Most importantly, make sure that it's FDIC insured.  This means that your funds are insured by the federal government.   More importantly, it means the bank is legitimate.   Secondly, call the 1-800 number on the website.   You can get a very quick feel as to the level of professionalism of the bank simply based on their customer service.  Of course personal referrals are your best bet but often hard to come by in a growing market such as web based banking.   Sticking to a well known (like those we recommend) will likely make most customers feel a little more at ease.   The fact is, these banks will perform at or above the level you're used to with your local branch, so long as you're willing to deal with a few inconveniences.    Your Debit card will work the same.  Your checks will work the same.

drawbacks to banking with online only banks

The most obvious problem with online banks is that they are online and not down the street from  your house!  But beyond this obvious issue, there are a few notable things to consider that some may find unacceptable.   Again this all depends on your banking style.    With online banks, you can't stop at the bank on the way home from work to deposit your paper check.   It's got to either go in the mail or you'll need to deposit it through an ATM.    If you have $10.00 worth of pennies to deposit, mailing them to your virtual bank doesn't really seem like a good option (or even possible).  But if you're one of the millions of people who have their pay electronically deposited, or "direct deposited", this may not be a problem at all.    Probably the other concern many people have is the limitations on ATM withdrawals.   With your current bank,  you might be able to stop at the ATM every day to pull out $10 and pay no fees to do so.    With your online bank though, you're going to need to plan ahead to avoid heavy fees for using ATM's.    

benefits to online banks

The are several benefits to banking online; better interest rates, portability, 24 hour access, and usually no monthly fees for online bill pay and online banking.   Sites such as Chase, Citibank, and HSBC, have well tuned online interfaces that are easy to set up, easy to use, and easy to analyze payment history.   Online bill pay allows you essentially to pay all off your bills from the websites itself.  whether they be to your mom or to your credit card company.   Payments are generally guaranteed to arrive on time as long as you meet their deadlines.    Online bill pay offers a lot of features that we won't dig into here, but rest assured it is very easy to use and is a lot better than writing checks, spending money on stamps and envelopes, and walking out to the mailbox. These sites are secure and accessible 24 hours a day.  In order to get paid higher interest rates on your deposits (or any interest at all for that matter), you'll need to have a fairly sizable balance in most cases, though not all (NetBank).  Every bank offers different level of interest paid based on the type of account, and most we've seen are higher than that of traditional banks.    Of course, you'll need to check yourself as rates change constantly.    Portability is another benefit. if you move from Florida to California, you only need to update your address online and go.  

direct deposit

You'll notice the importance of direct deposit with most banks, including your traditional bank.   The banks save time and money by not having to manually process your pay check.   Because of this, you'll generally avoid monthly fees and get better rates by having direct deposit set up.   Alternatively, if you have a large balance, this won't be an issue for you as the banks will eliminate the direct deposit requirement.  

online banking and bill pay benefits

There are a lot of benefits to online bill pay, and most will be available at all banks.   

• View your account balances, transactions and track your purchases
• Pay bills or anyone else with on-time guarantees
• Check your account balances and pending transactions.
• Transfer funds between checking and saving or with other banks.
• Pull up and print copies of cancelled (paid) checks online.
• Get online statements.   You'll get an email telling you your most recent statement is ready to view.   They look the same as the one you'd normally get in the mail.
• Once you've set up a bill, let's say your electric bill, you're all set going forward.   You key in the address and account information one time.   Every month you pay this bill, it will take you just a couple clicks to send the payment.  Fast and easy.

what not tips  

• Use your debit card to get "cash back" from stores to avoid incurring fees for cash withdrawals at ATM's.
• You don't need to deposit your entire check into these accounts to qualify for "direct deposit".   So long as your employer will allow, split your paycheck up between your traditional bank and your new online bank until you're comfortable switching completely to your new online bank.   
• Use recurring or automatic payments from within Online Bill Pay.   Every major bank offers this option.   For example, set your credit card payment to go out by the 10th of every month automatically.   Set the payment for your minimum payment and then adjust it later if need be.   This is a great way to avoid late fees!
• Opening up a savings account at the same time might be a good idea not only to help meet minimum balances but also to set up overdraft protection.
• Bank of America is currently offering a free $50 deposit for opening an account! (see below)
  

compare TOP PICKS                                            (skip to side notes)
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Level of Competition:   5  [?]
WhatNot Latitude:        2   [?]

	Bank of America MyAccess Checking	HSBC Free Checking	Chase Chase Free Checking	Net Bank Net Value Checking
	Bank of America - Bank of America offers low fees and ease of use.  Highly recommended.	HSBC - HSBC is a proven personal banking solution.	Chase - Recognized name with very consistent positive feedback.	Net Bank - Positive feedback from customers.   Interest paying at lowest account levels.
bottom line	Great account if you don't want to worry about minimum balances and have your check deposited electronically.	Great account with multiple tiers of features.   This is the easiest and most inexpensive.  A phone call is all you need to upgrade.	Big player.  Has infrastructure to support state of the art security and online flow.	Cutting edge bank that appears to work hard to keep you connected.  Well reviewed.  Great rates on loans.
online bill pay monthly fee	No fee	No fee	No fee	No fee *
checking account monthly fee	$5.95 unless you direct deposit	No fee	$6.00 unless you direct deposit	No fee *
minimum to open	$25	$25	$25	$50
minimum balance	None	None	None	None
atm locations	16,700	NE & NW U.S.	7,300	5,000 +
atm fee monthly allowance	None	None	None	None *
savings available	Yes	Yes	Yes *	Yes
fdic insured	Yes	Yes	Yes	Yes
interest paying	(with upgraded account)	(with upgraded account)	(with upgraded account)	Yes
email alerts	Yes - can personalize	Only when monthly statement available	Yes - can personalize	Yes
visa debit card	Yes	No *	Yes	Yes
view cleared checks	Yes	Yes	Yes	Yes
other features or comments	* $50 bonus for new accounts promotion * "Keep the Change" program builds your savings account automatically * Extensive email "alerts" system	* Upgrade to "Smart Money" if you can direct deposit - you'll earn interest and also get a debit card (can also pay your monthly fee without direct deposit)	* Over 2,500 branches * No fee savings for a year with $25 monthly transfer from checking * Overnight payment feature (fee based) *Personalized email alerts	* Postage paid deposit envelopes can be ordered through NetBank site (free) * Overnight deposits in person at UPS Store locations * No NetBank fees for ATM use in Star, SUM systems (but still from ATM itself)
concerns	* High balances required for interest bearing account * Monthly account fees without direct deposit	* $3 transfer fee to move money to non-HSBC accounts * Must upgrade to Smart Money account to get Mastercard Debit card	* None apparent	* Monthly online bill pay fee is waived only with $3,000 minimum balance or as long as you use bill pay once every 3 months * 120 day waiting period to deposit via ATM