The market for online checking accounts is rapidly expanding, as a growing number of virtual banks like ING Direct and E*Trade (ETFC) - Get E*TRADE Financial Corporation Report have started offering checking accounts. And while more choice is ultimately a good thing, it may make deciding where to park your cash all the more confusing. Here's some quick advice.
First, check out the account's annual percent yield (APY). Don't assume you'll get what your savings account earns; while some savings accounts can fetch as high as 5% or 6% percent annually, checking accounts earn relatively little interest. In fact, the average APY for checking accounts with balances of $5,000 or more is only 0.36%, according to Informa Research Services.
Next, don't assume you should open a Web checking account at the same place you have a savings account. Experts say that doesn't necessarily guarantee the best yield.
And beyond the yield, find out all you can about each account's requirements, for example, the minimum opening balance. Also, some banks may charge a fee or offer less interest when the monthly balance falls below the minimum requirement. If you're not careful, "any interest you earn is going to be completely gone," says Laura Bruce, senior reporter at Bankrate.com.
Finally, it may be worth checking out a brick-and-mortar bank's Web site. About 1,000 people are opening online accounts each day at
WashingtonMutual.com, according to spokesman Gary Kirshner. An added benefit for consumers, he says, is having access to a physical, local branch. "A lot of our customers find value in having both a robust online presence ... as well as a retail branch network
where they can interact with a teller."
To view Farnoosh Torabi's video take of today's segment, click here.
Farnoosh Torabi joined TheStreet.com TV in July 2006 as the site's first official video correspondent. Previously, Farnoosh was a business producer and on-air reporter for NY1 News, Time Warner's 24-hour news channel in New York City. Farnoosh is a regular columnist for AM New York and has written for Money, Time, New York Daily News and Newsday. Farnoosh is a graduate of Pennsylvania State University, with a degree in Finance and International Business and holds a M.A. from the Columbia School of Journalism.