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 MoneyRates.com 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.