I have been using internet banks for more than eight years. The first internet bank that I remember I used was NetBank in 1999. At that time, there aren’t many banks that offered savings accounts with decent rates. My local bank, Summit Bank (then Fleet Bank, now Bank of America), had a rate that was close to zero. So I was quite happy with what I got from NetBank and have used it for a while until other banks started to offer similar products with better rates. In fact, when I look back my banking history, I found I have used most of the banks in the online banking business. In addition to NetBank, other banks that were part of my banking system include: E-Trade Bank, Citibank, AmericanBank.

The main reason for me to switch banks is the interest rate and that’s what I am going after. So if other banks offer better rates, there’s no reason to stick with the old bank. I want to get the best of my money, even it means I have to keep changing banks. A direct result, as you can imagine, is I had many closed account and still own half a dozen accounts as of now.

However, all these activities are limited to only online savings account. I have only one Bank of America checking account and no internet based checking account, though the BoA account doesn’t ear me any interest. When ING Direct introduced their interest checking account last year, I have once considered whether to switch, but eventually abandoned the idea for reasons I explained before.

I recently checked some online banks who provide high interest checking and savings accounts and put together a list to compare which bank offers the best deal. If you decide to let one bank host both your checking and savings accounts, then at this point the best choice is Presidential Bank. If you are looking for deals from big names, then ING Direct is still the one to beat.

In the following, I used the combined yield of both the checking and savings account (simply add the yields of checking and savings accounts). However, that doesn’t mean you will get the combined yield. Instead, what rate you will get depends on how you distribute your money between checking and savings account. If, for example, you have 50% of your money in checking and 50% in savings, your yield will be half of the combined yield, which is only for the purpose of illustration. My feeling is if the combined number isn’t high, it’s unlikely you will get a good deal.

Update: The original post was written on June 17, 2007. Since then, most of the banks have changed their rates significantly. For updated information, check out the Best Online Savings Account Deals page or the Best Interest Checking Accounts post. For rate history, go to Online Savings Account Interest Rate History page.

E-Trade Bank

I used E-Trade many years ago when it was probably the only choice for online stock trading. In recent years, E-Trade has changed a lot after the once crazy online trading activities, and the profits, vanished. Now, in addition to being a brokerage firm, E-Trade also offers a full line of banking products with attractive rates. The combined checking and savings yield of E-Trade Bank is 8.30% APY.

Max-Rate Checking Account

3.25% APY for balance above $5,000; 0.25% APY for balance less than $5,000;

Unlimited ATM fee refund (means no ATM fees whatsoever);

Free unlimited online billpay;

Minimum account balance $5,000 to avoid $15 monthly maintenance fee;

Minimum $100 to open an account;

Savings Account



5.05% APY;

No minimum;

No maintenance fee;

FDIC insured;

EverBank

EverBank is known for its promotional rates. At 6.01% APY (but lasts only for three months), not many players can beat that rate. EverBank’s combined checking and savings yield is 8.41% APY. One product offered by EverBank that’s quite unique is their WorldCurrency Access Deposit Account.

FreeNet Checking Account

6.01% three-month introductory APY;

3.41% APY for balance less than $10,000; 3.45% APY for balance less than $25,000 but greater than $10,000; 3.65% APY for balance less than $50,000 but greater than $25,000;

No fee online bill pay with minimum $1,500 balance (otherwise, $4.95 monthly fee);

$6 per month ATM fee reimbursement

Money Market account

6.01% three-month introductory APY;

5.01% APY;

$1,500 minimum to open an account;

$4.95 monthly fee for balance below $1,500;

FDIC insured;

ING Direct

ING Direct is probably the first major bank to offer high yield savings account. Though their rates have lagged quite significantly in recent years, they still control the largest share of online deposits (Time Magazine, June 25, 2007). The combined checking and savings yield of ING Direct is 8.50% APY.

Electric Orange Checking Account

4.00% APY for balance less than $50,000; 5.25% APY for balance below $100,000 but greater than $50,000; 5.30% for balance of $100,000 or more;

Free ATM access through AllPoint network;

Free online bill pay;

$1 minimum to open an account;

No maintenance fee;

Orange Savings Account

4.50% APY;

$1 minimum to open an account;

No maintenance fee;

FDIC insured;

HSBC Direct

With their newly launched Online Payment Account, HSBC also enters the interest checking market to compete with rivals such as ING Direct. However, one of the criteria I see as to be competitive is rate. At 5.05% APY, the savings account seems to be OK (I use HSBC savings account), but the 2.50% APY from the new checking account has nothing to be excited about. HSBC’s combined checking and savings yield is 7.55% APY.

Online Payment Account

2.50% APY;

$1 minimum to open an account;

No monthly fee;

Online Savings Account



5.05% APY;

$1 minimum to open an account;

No maintenance fee;

FDIC insured;

Bank of Internet

I never used this bank, but knew it for quite a while. Though the rate of their interest checking account seems to be quite decent, the savings account just offers a mediocre rate. The combined yield of checking and savings is 7.30% APY.

Freedom checking account

3.40% APY;

$100 minimum to open an account;

$4 monthly fee for balance less than $1,000;

Up to $7 ATM fee reimbursement;

No fee unlimited online billpay;

Debit check card available;

Bank of Internet also offers 3.75% APY Senior Checking account if you are ago 50 or older. Additional benefits include $8 monthly ATM reimbursement and no minimum and no monthly fee.



Money market savings account

$3.90% APY;

$100 minimum to open an account;

No minimum;

No maintenance fee;

ATM card available;

FDIC insured;



