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5 Reasons To Consider An Online Bank

Since the Great Recession, banks and consumers have had an uneasy partnership. Tighter federal regulations have prompted many institutions to introduce new fees on checking accounts, and the Federal Reserve's low-interest-rate policies have helped keep the typical savings account yield below the rate of inflation. These conditions have not endeared banks to their customers.

But amid the discontent over rising fees and falling rates, online banks have sought to position themselves as an alternative. Online banks reject the traditional banking model, reaching customers through their websites instead of local branches. As a result of their lower overhead, they can offer perks that traditional banks may struggle to match.

While the online-bank concept can feel foreign to those who have only known brick-and-mortar banks, there are several reasons to consider switching to an online bank today. Here are five of the most compelling.

1. They offer higher rates

Many online banks today strive to offer top yields on savings and money market accounts, targeting savers who have grown weary of near-zero interest rates. The most recent America's Best Rates feature indicates that the average savings account rate at online banks was nearly three times the average rate at traditional banks.

In addition, the survey found that average online bank rates rose in the third quarter of 2012 as average rates at traditional banks fell, indicating that the divide between the two is growing. If your savings or money market account is only offering an average yield, finding an online bank that will double or triple that rate isn't likely to be difficult.

2. They charge less in fees

Checking account fees have become a flashpoint for consumers. Countless traditional banks have tested new fees in recent years, but the results haven't always been pretty -- witness Bank of America's jittery attempts to institute new fees on checking accounts.

The most recent Bank Fees Survey indicates that checking accounts at online banks are more than twice as likely to be free of monthly maintenance fees as the checking accounts at traditional banks. And when they do charge fees -- for things such as overdrafts -- online banks charge lower amounts on average, according to the survey figures.

3. New technology has made them more accessible

While online banks have long produced innovative websites, they haven't stopped developing new ways to make online banking simpler. Technologies that make it possible to deposit checks through your computer or smartphone are among the latest perks.

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