Table of Contents

• Virtual banks can save you money, give you better rates
• Are online banks secure?
• Checking up on your bank
• CA Online Banking Survey - Checking Accounts
• CA Online Banking Survey - Savings
• The pros and cons of online bill payment
• Checking out overdraft protection
• Making deposits at online banks

PLEASE NOTE: This survey is not current, and should be used only as a guide. For up-to-date rate information, we suggest that you contact banks directly.

Virtual banks can save you money, give you better rates

If you are comfortable on the Internet and like the idea of accessing your bank account and paying bills any time, online banking is worth looking into. In its new Online Banking Survey, Consumer Action discovered that many virtual banks can save you money in fees and give you a much better interest rate, not only on savings accounts, but on checking and money market accounts and certificates of deposit (CDs).

CA compared online banking services at 19 "virtual"-or Internet-only -institutions and 10 of the largest "brick-and-mortar" banks in the country. All surveyed banks are FDIC-insured. The non-profit consumer organization concluded that online banking has some enticing features -- despite a few drawbacks.

On the plus side, CA's Online Banking Survey found that virtual banks offer:

• Better interest rates. Online-only banks pay up to five times as much interest for checking and savings accounts as regular banks. At traditional banks, surveyors found that interest-bearing checking accounts are a pretty bad deal overall, with rates ranging from 0.40% (Bank of America and Wells Fargo) to the 1.24% that First Union Bank pays on deposits of less than $2,500. (Higher balances earn more interest at First Union.)
  On the other hand, the interest paid by online banks on checking accounts ranges from the 0.50% that WingSpan Bank pays on checking accounts with a balance of less than $2,500 to the 6.06% that American Bank pays on balances up to $10,000. In a new twist on tiered interest rates, American Bank pays lower interest rates on balances over $10,000 (3.93%).
• Competitive CD rates, some with no or very low minimum deposit requirements. X.com, an online bank, offers 5.84% on a six-month CD with no minimum. Three Internet banks surveyed require a minimum deposit of $500: American Bank (6.06%), USABancShares (6.13%) and USAccess Internet Bank (6.22%). (Only six-month rates are surveyed.) The 10 traditional banks surveyed require deposits of $1,000 to $5,000 and six-month CD rates range from 5.00% (U.S. Bank) to 5.83% (Bank One).
• Free accounts. Many accounts have no or low minimum balance requirements and no monthly fees. American Bank, USABankShares and X.Com offer interest-bearing checking accounts with no monthly fees, whatever the balance.
• ATM fee credits. Because virtual banks do not have ATMs, many will reimburse customers for other banks' ATM surcharges a few times each month. All but four of the 19 Internet banks offer monthly credits for other banks' ATM fees. (Security First National Bank, NetBank, Millennium Bank and USAccess Bank do not.)
• Free online bill payment. Sixteen of the Internet banks offer free online bill payment, with 13 including unlimited payments in the deal. When the number of monthly payments is limited, the charge for each additional payment ranges from 32¢ at nBank to 75¢ at Millennium Bank. Only one of the Internet banks surveyed (X.Com) does not offer online bill payment.
• Convenience. You don't have to stand in line and you can check your balances, pay bills and make transfers between accounts 24 hours a day. Withdrawals and purchases can be made with ATM cards, debit cards or personal checks.
• Direct deposit. Like traditional banks, virtual banks let you set up direct deposit of paychecks and benefits checks and automatic withdrawals from your accounts at other banks and financial institutions. (Otherwise, you must make deposits through the mail.)
• Easy sign-up. Signing up for online banking is easy if you already have an account with a traditional bank. In most cases, online access can be provided immediately via the web site or while you are on the phone with a representative.

Virtual bank drawbacks

On the negative side, CA surveyors found that:

• It is not always easy to get basic account information at web sites or by phone. Representatives typically are trained in one area and callers frequently are told to call another number when asking multiple questions about bank accounts, loans or investments. Most Internet banks offer customer service by e-mail, but surveyors found that option to be the most inconvenient, because of the time it took the banks to reply and their frequent misinterpretation of questions.
• Virtual banks cannot accept ATM deposits. (See "Making deposits at online banks," below.)
• Customers of virtual banks probably cannot avoid some other banks' ATM charges unless they have an account at a brick-and-mortar bank. (Some banks, such as Citibank and American Express, have extensive networks of ATMs and offer reimbursement credits for foreign bank ATM surcharges for online bank accounts.) After using up their allotted ATM fee reimbursements, virtual bank customers probably will have to pay a surcharge to withdraw money from another bank's ATMs.
• Some banks, such as nBank and Everbank, require customers to send ATM receipts as proof they have paid an ATM surcharge before they will credit customers' accounts. Look for a bank that credits your account automatically.
• You can't go to a local branch to make deposits and withdrawals or to straighten out problems in person.
• Not all virtual banks accept applications online-some require that you print and mail the application.

Are online banks secure?

Faced with the concept of online banking, many people wonder about security. After all, you don't face a bank officer or teller when you are opening an account. How does the bank know who you are? And how do you know they won't give access to your money to a crook?

If you are just setting up online access to an existing brick-and-mortar bank, the transaction usually is done over the phone. You are given a temporary password to use the first time you access your account online. At that point, you should change the password. Usually, you are asked for your account number, or your Social Security number, along with the password.

As with any personal identification number (PIN), memorize your online bank password and don't write it anywhere that could easily be connected with the bank account.

When setting up a new account with an Internet bank, you may be asked to submit an online application or to download an application, print it, fill it out and mail it to the bank. Most banks will check the information you provide with one of the major credit reporting agencies, in order to verify that it agrees with information in your credit file. The banks also will verify that you are employed and check your banking history with a check screening agency such as ChexSystems.

Before you begin banking online, you may receive a message from the bank that your browser needs to be updated in order to conform to the highest security standards. Online banks have information available on their web sites about security, including firewalls and encryption systems meant to deter hackers. Look for:

• "128-bit encryption," the standard in the industry.
• A written guarantee to protect account holders from losses due to online fraud.
• Automatic lock out if you enter your password wrong more than three or four times.
• Automatic log out if you are not active at the site for a certain amount of time.

When accessing your bank, it is safer to "bookmark" the bank's address in your browser than to type in the address each time you want to visit. Slight mistakes in entering the address may take you to a "spoofer" site designed by criminals to trick you into entering your account number and password so that they can be used to access your online account.

Spoofers set up copycat web sites at addresses that are very close to that of the real bank. The crooks set up a home page that looks exactly like your bank's. Internet banks have taken precautions to buy up similar domain names so that this does not happen. But it pays to be vigilant.

Many online banks use a verification system called Verisign SiteSecure. When you click on the Verisign icon it should give you information about the web site you are visiting. If you are taken to the Verisign home page instead, you will be given a warning that something might be wrong and that the icon you clicked on is not official.

Before you do business with an Internet bank-or any bank-make sure that your money will be insured by the Federal Deposit Insurance Corporation (FDIC), a federal government agency. You can check a bank's FDIC status by visiting that agency's web site (www.fdic.gov).

Checking up on your bank

Internet banks are in most cases owned by traditional banks. The parent banks may be a small regional bank with few branches, such as Bank Direct owned by Texas Capital Bank, or a large national or multinational corporation, such as CitiCorp, owner of Citibank Financial Interactive Network (Citifi).

Any bank doing business in the U.S. must have the proper regulatory authority. But with any financial transaction, it pays to be cautious and protect yourself against fraud.

The Internet banks surveyed by Consumer Action all provide deposit insurance coverage through the Federal Deposit Insurance Corporation (FDIC). The FDIC is a U.S. government agency established by Congress in 1933 to insure bank deposits, maintain a sound banking system and protect the nation's money supply. FDIC-insured deposits are backed by the full faith and credit of the U.S. government.

Securities, mutual funds and other investments are not covered by deposit insurance. When investing money in a money market account, make sure to verify that it is FDIC-insured. (Some money market accounts are FDIC-insured; others are not.)

The FDIC has alerted consumers to watch for Internet web sites that misrepresent themselves as legitimately-chartered or federally-insured depository institutions or are masquerading as legitimate banks by using the name of a real institution ("spoofers").

Before depositing money in any bank, you can use the FDIC institutions search engine (www.fdic.gov) to determine whether the bank is a chartered, FDIC-insured depository institution. If you can't find information about the bank, call the FDIC at (800) 934-3342.

Be suspicious if an online bank offers extraordinarily high interest rates on deposits or abnormally low rates on loans. Tell the FDIC the bank's name, Internet web site address, date(s) you accessed its web site, the mailing address and the name of any representative you've spoken with.

To check the soundness of a bank, you can use the services of a company called Veribanc. For $10, the company provides instant ratings by phone for any commercial bank, savings bank, savings and loan or credit union. Each additional institution requested during the same phone call costs $5. Visit the veribanc.com web site or call (800) 837-4226.

CA Online Survey: Checking Accounts

Key to Consumer Action's Online Banking Survey

This Consumer Action (CA) survey was conducted during March and April 2000 by Gabriela Castelán, Janice Kohn and Linda Sherry. Use this survey as a guide only; rates and account terms change frequently. CA prohibits the use of its surveys or survey findings for any commercial purpose. This survey can be found on CA's web site. All banks surveyed are members of the Federal Deposit Insurance Corporation (FDIC).

Virtual (Internet) Banks: A bank that provides most consumer transactions via the Internet. (Note that most deposits to Internet banks are still done by mail.)

Traditional (Brick-and-Mortar) Banks: A bank with branches, tellers and ATMs. Many traditional banks now offer online banking and online bill payment services.

Rate ranges and varied terms. One asterisk (*) indicates that interest rates are applied on a sliding scale, according to the available balance. Two asterisks (**) indicate that terms may vary according to the type of account and that the institution has more than one such account.

Institution

• Bank. The name that the bank uses on the Internet. In some cases, Internet banks are owned by traditional banks. To avoid confusion, the parent company is shown in parentheses only if its toll-free number identifies it as such. (Direct-Banking, which answers its phone with its parent bank's name, Salem 5¢ Savings Bank, is an example.)
• Web Site Address Hotlink. Hotlinks are enbedded in the names of each bank. Click on the hotlink to go to the bank's home page on the Internet.
• Phone Number. Many Internet banks prefer customers to do all their banking business on the web, but surveyors found that not all information needed to make an informed decision about selecting a bank is available on the banks' web sites.
• Areas Served with Branches and ATMs. This information is supplied only for traditional banks, to indicate the part of the country they do business in.

Interest-Bearing Checking Accounts

• Minimum Deposit. The minimum amount needed to open the account or earn interest.
• Interest Rate. The annual percentage rate paid on checking account balances. If a range is shown, it means that the interest rate varies according to the amount of money on deposit.
• Monthly Fee. A fee charged each month to maintain the account. Balance to Avoid Fee. If the monthly fee can be waived by maintaining a certain minimum balance, that amount is noted here.
• "Not applicable" means there is no monthly fee.

ATM Fees

• Credits for Other Banks' ATMs. When a customer uses another bank's ATM, this institution will credit or reimburse that person for the other bank's ATM charges. Some banks credit a certain number of ATM withdrawals at other banks each month, while others credit fees up to a certain amount.

Online Bill Payment

• Cost. A monthly charge for online bill payment services. Many banks offer this as a free service to account holders.
• Number of Monthly Payments. How many electronic payments and bill payment checks the bank will process at no additional charge.
• Cost for Extras. The cost for each additional payment, if any.

Chart comparing Interest-Bearing Checking, ATM Fees and Online Bill Payment at 29 Banks.

PLEASE NOTE: This survey is not current, and should be used only as a guide. For up-to-date rate information, we suggest that you contact banks directly.

Consumer Action Online Banking Survey: Checking

Virtual (Internet) Banks

Institution	Interest-Bearing Checking			ATM Fees	Online Bill Payment
Bank (Phone #)	Minimum Deposit / Interest Rate	Monthly Fee	Balance to Avoid Fee	Credits for Other Banks' ATM Fees	Cost / Number of Monthly Payments / Cost For Extras
American Bank (888-366-6622)	No minimum / 3.92%-6.06%*	No fee	Not applicable	5 per month	Free / Unlimited payments
American Express (888-356-1006)	$100 / 1.98%	$8.00	$1,000	4 per month ($1.50 maximum each)	Free / Unlimited payments
Bank Direct (877-839-2737)	$100 / 3.20%-4.64%*	No fee	Not applicable	4 per month	Free / Unlimited payments
Citibank Financial Interactive Network (Citifi) (800-224-8434)	No interest paid	$5.00	$1,000	4 per month	Free / Unlimited payments
CompuBank (888-479-9292)	$1,000 / 3.00%	$10.00	$1,000	4 per month	Free / Unlimited payments
DirectBanking (Salem 5¢ Savings Bank) (888-662-5500)	$100 / 2.00%-4.50%*	$15.00	$2,500	No credits	Free / 20 payments / 50¢
EverBank (888-882-3837)	$1,500 / 5.84%	$4.95	$1,500	Up to $4 per month	Free / Unlimited payments
First Internet Bank (888-873-3424)	$100 / 3.00%	$3.50	$1,500	Up to $6 per month	Free / Unlimited payments
G&L Bank (888-226-5429)	$100 / 1.98%	No fee	Not applicable	4 per month	Free / 15 payments / $3 for 10 more monthly payments
Millennium Bank (703-464-0100)	$1,000 / 4.00%	$5.00	$500	No credits	$5 / 15 payments / 75¢
National InterBank (877-468-7265)	$100 / 2.97%	No fee	Not applicable	Up to $6 per month	Free / Unlimited payments
nBank (800-322-8231)	$100 / 5.32%	$15.00	$2,500	Up to $6 per month	$4.50 / 5 payments / 32¢
NetB@ank (888-256-6932)	$50 / 3.00%-3.93%*	0-$4.40**	Not applicable	No credits	Free / Unlimited payments
Security First Network Bank (800-736-2321)	$100 / 4.00%	$3.95	$1,000	No credits	Free / 35 payments / 50¢
Telebank (800-835-3226)	$1,000 / 3.10%-4.35%*	$5.00	$1,000	4 per month	Free / Unlimited payments
USA BancShares (877-482-2650)	No minimum / 4.89%	No fee	Not applicable	5 per month ($10 maximum)	Free / Unlimited payments
USAccess Internet Bank (877-369-2265)	$500 / 3.93%	No fee	Not applicable	5 per month	Free / Unlimited payments
WingSpan (888-736-8611)	$100 / 0.50%-4.50%*	No fee	Not applicable	Up to $5 per month	Free/Unlimited payments
X.Com (888-447-8999)	No minimum / 0.99%-4.42%*	No fee	Not applicable	Up to $6 per month	Not offered

Traditional (Brick-and-Mortar) Banks

Institution	Interest-Bearing Checking			ATM Fees	Online Bill Payment
Bank (Phone #)	Minimum Deposit / Interest Rate	Monthly Fee	Balance to Avoid Fee	Credits for Other Banks' ATM Fees	Cost / Number of Monthly Payments / Cost For Extras
Bank of America (800-900-9000) West, Southwest, Midwest, South Atlantic Coast	$100 / 0.40%	$10.00	$2,000	No credits	$5.95 / Unlimited payments
Bank One (800-482-3675) Central Rockies, Southwest, Great Lakes, Midwest, Gulf Coast	$25 / No interest paid on Internet account	$5.00	$500	No credits	$4.95 / Unlimited payments
Chase Manhattan Bank (877-242-7372) New York, Texas	$100 / 1.00% (TX) (Varies by state.)	$5.95	$1,500	No credits	Free / Unlimited payments
First Union (800-275-3862) East Coast	$50 / 1.24%-2.71%*	$10.00	$4,000	No credits	$6.95 / 20 payments / $1.00
Fleet Bank (800-225-5353) Northeast	$50 / 0.50%	$10.00	$2,000	No credits	$4.50 / Unlimited payments
Mellon Bank (800-635-5662) Mid-Atlantic	No interest paid	$8.00	Can't be waived	No credits	Free with checking / Unlimited payments
PNC Bank (888-762-2265) Mid-Atlantic	$2,000 / 0.75% (IN) (Varies by state.)	$10.00	$3,000	No credits	$6.95 / 20 payments / 50¢
U.S. Bank (800-444-1244) MidWest & West	$1,000 / 1.26%	$3.50	$300	No credits	$5.95 / 15 payments / 40¢
Washington Mutual Bank (800-756-8000) West Coast	$1,500 / 1.00%	$12.00	$1,500	No credits	$5 / Unlimited payments
Wells Fargo Bank (800-956-4442) CA, CO, CT, DE, DC, FL, GA, HI, ID, IL, IN	$100 / 0.40% (CA) (Varies by state.)	$11.00	$2,000	No credits	$5 / 25 payments / 40¢

CA Online Banking Survey: Savings

Key to Consumer Action's Online Banking Survey

Savings Accounts

• Minimum to Earn Interest. If the bank will not pay interest unless a sufficient balance is maintained, that balance is noted here.
• Rate. The annual percentage rate. The yield may be slightly higher. Note: Many savings accounts, by federal regulation, are allowed no more than six preauthorized withdrawals or transfers per month, including no more than three checks. When opening a savings account, ask about any restrictions.

Money Market Accounts

• Minimum to Earn Interest or Avoid a Fee. Many banks have a minimum balance requirement before they will pay interest. Others charge a monthly maintenance fee when a certain balance level is not maintained.
• Rate. This is the annual percentage rate that was paid on deposits during the survey. In many money market accounts, interest accrues weekly. In some cases, the banks surveyed would not mention a specific rate, but said that the interest rate was variable.

CDs (Certificates of Deposit)

• Minimum Deposit. The minimum amount required to open a certificate of deposit (CD) account.
• Six-Month Rate. The annual percentage rate paid on six-month CDs. Unless otherwise noted, all rates are for six-month CDs. The yield may be slightly higher than the rate as a result of compounding.

Chart comparing Savings, Money Market and CDs rates at 29 banks.

Consumer Action Online Banking Survey: Savings

Virtual (Internet) Banks

Institution	Savings	Money Market	CDs
Bank (Phone #)	Minimum to Earn Interest / Interest Rate	Minimum to Earn Interest or Avoid a Fee / Rate	Minimum Deposit / Six-month Rate
American Bank (888-366-6622)	$100 / 2.00%-2.25%*	$750 / 0-5.12%*	$500 / 6.06%
American Express (888-356-1006)	$500 / 2.00%	$5,000 (to avoid a fee of $5) / 5.50%	$2,500 / 5.92%
Bank Direct (877-839-2737)	$100 / 3.20%-4.64%*	$500 / 5.83%	$2,000 / 6.50%
Citibank Financial Interactive Network (Citifi) (800-224-8434)	$100 / 3.00%	$1,000 / 5.65%	$1,000 / 5.59%
CompuBank (888-479-9292)	No minimum / 3.5%	$2,000 / 4.0%	$2,500 / 5.00%
DirectBanking (Salem 5¢ Savings Bank) (888-662-5500)	No minimum / 2%	$2,500 / 0.5% - 5.37%*	$2,500 / 6.16%
EverBank (888-882-3837)	No savings account offered	$1,500 / 5.84%	$1,500 / 6.30%
First Internet Bank (888-873-3424)	No minimum / 3.10%	$100 / 5.50%	$1,000 / 6.25%
G&L Bank (888-226-5429)	$100 / 3.92%	$1,000 / 2.96%-3.92%*	$1,000 / 5.59%
Millennium Bank (703-464-0100)	$200 / 2.25%	$2,500 / 5.14%	$1,000 / 4.20%
National InterBank (877-468-7265)	No savings account offered	$100 / 4.90%	$2,000 / 5.86%
nBank (800-322-8231)	No savings account offered	Not offered	$7,000 (waived with direct deposit) / 7.00% (one year)
NetB@ank (888-256-6932)	No savings account offered	$100 / 5.12%	$1,000 / 6.20%
Security First Network Bank (800-736-2321)	$100 / 2.57%	$1,000 / 2.96%-4.41%*	$1,500 / 5.53%
Telebank (800-835-3226)	$1,000 / 2.52%-4.95%*	$1,000 / 2.47%-4.78%*	$1,000 / 6.18%
USA BancShares (877-482-2650)	No minimum / 2.96%-4.89%*	$500 / 5.50%	$500 / 6.13%
USAccess Internet Bank (877-369-2265)	$200 / 3.20%	$1,000 / 4.17%-5.75%*	$500 / 6.22%
WingSpan (888-736-8611)	No savings account offered	Not offered	$2,500 / 5.50%
X.Com (888-447-8999)	No savings account offered	Not offered	No mininmum / 5.84%

Traditional (Brick-and-Mortar) Banks

Institution	Savings	Money Market	CDs
Bank (Phone #) Areas Served with Branches and ATMs	Minimum to Earn Interest / Interest Rate	Minimum to Earn Interest or Avoid a Fee / Rate	Minimum Deposit / Six-month Rate
Bank of America (800-900-9000) West, Southwest, Midwest, South Atlantic Coast	$300 (to avoid fee of $3) / 1.00%	$2,500 / 1.50%-4.55%*	$1,000 / 5.35%
Bank One (800-482-3675) Central Rockies, Southwest, Great Lakes, Midwest, Gulf Coast	$250 (to avoid fee of $4) / 1.49%	$2,000 / 1.49%-5.03%*	$2,000 / 5.83%
Chase Manhattan Bank (877-242-7372) New York, Texas	$2,500 (to avoid fee of $7) / 2.27%-4.69%*	$2,500 (to avoid fee of $7) / 2.23%-4.69%*	$1,000 / 5.02%
First Union (800-275-3862) East Coast	$300 (to avoid fee of $4) / Rate varies by state	$1,000 (to avoid fee of $10) / Rate varies by state	$1,000 / 5.12%
Fleet Bank (800-225-5353) Northeast	$50 ($5 fee) / 1.10%	$2,500 / 2.50%-4.93%*	$1,000 / 6.77% (2 years)
Mellon Bank (800-635-5662) Mid-Atlantic	$1,000 ($7 fee) / 0.75%	$10,000 (to avoid $15 monthly fee) / Variable	$5,000 / 6.15% (ten months)
PNC Bank (888-762-2265) Mid-Atlantic	$25 / 1.61%	$1,500 / 2.35%	$1,000 / 3.65%
U.S. Bank (800-444-1244) Midwest & West	$300 ($5 fee) / 1.61%-2.95%*	$5,000 / 4.66%*	$1,000 / 5.00%
Washington Mutual Bank (800-756-8000) West Coast	$300 ($5 fee) / 1.49%	$2,500 (to avoid fee of $12) / 2%-2.23%*	$1,000 / 5.37%
Wells Fargo Bank (800-956-4442) CA, CO, CT, DE, DC, FL, GA, HI, ID, IL, IN	$2,500 (to avoid a fee of $5) / 0.40%	$15,000 (to avoid fee of $15) / 4.39%	$1,000 / 5.10%

The pros and cons of online bill payments

Enter the account numbers for all your bills once, and month after month they are paid automatically. You never have to write a check, lick an envelope or buy a stamp. Sound like a dream come true?

Well, almost. Online bill payment can be very convenient, but there are drawbacks. A major drawback is that although the payment takes anywhere from two to 10 days to reach the company you owe money to, it is deducted immediately from your bank account. In contrast, when you write a check, you benefit from "float" on your funds until your payment is cashed.

The wide window of time between withdrawals and payments comes about because not all businesses are able to accept electronic payments. In such cases, your bank cuts its own check and mails it to the business. So, while electronic payments make it there in 2-4 days, checks are subject to delays in the mail and in processing payments at the receiving end.

Bill due dates vary, so it can be a complicated process to coordinate payments with your income, making online bill payment a hardship for people who live paycheck to paycheck. If a company you owe money to does not accept electronic payments (and there are a lot of companies that don't, from your landlord to the state DMV), it may be better to write a check yourself than wait up to 10 days without the use of your funds.

But if managing your cash flow is not a problem, online bill payment is convenient. After the first couple of months, you will have a good idea of how long it takes each of your payments to arrive and you can adjust your bill-paying schedule to reflect that.

If you have payments that always have the same due date and fixed amount, they can go out automatically on the same day each month. For others with varying due dates and amounts, you will have to enter an amount and schedule each payment.

Although you make your payments electronically, you will still receive your bills in the mail, allowing you to check when the payment was posted or if a payment did not arrive on time.

Many banks offer to pick up the late payment fee if you allowed at least 10 days before the due date for your payment to be processed.

Online bill-paying tips

• When you visit your bank's web site to pay bills, enter all account numbers and company names exactly as they appear on your billing statements.
• Plan your payments well in advance.
• Recurring bills of the same amount can be scheduled to be sent automatically. For bills that vary each month, enter the amounts in time to avoid a late payment.
• Not all companies can accept electronic payments. Your bank must send those businesses a check. This can take up to 10 days.
• Electronic payments can take as little as two days.
• The funds are withdrawn from your account on the day the bill payment is due to be sent. Update your checkbook register to reflect any payments you have scheduled so that you do not overdraw your account.

Checking out overdraft protection

Since it can take a few days to mail a check to your account, you could be more likely to bounce a check at a virtual bank. Consumer Action surveyors found that bounced check fees are on a par at Internet and traditional banks ($10-$25), but overdraft protection terms vary quite a bit, with fairness and cost advantage landing squarely in the court of Internet banks.

Overdraft protection is a banking service that automatically advances funds from another account, such as your savings or money market account, or from a line of credit or credit card, into your checking account to cover overdrafts. Account holders with overdraft protection avoid paying bounced check fees. (Credit-based overdraft protection is granted based on your credit history.)

Overdraft protection is not free, however. The best programs offer to transfer funds free-with no transfer, transaction or cash-advance fees-and have interest rates on borrowed funds below 15%. Every traditional bank surveyed by CA that offers overdraft protection charges a transfer fee, ranging from $3 at Fleet Bank to $7.50 at Wells Fargo, and/or an annual fee to have the service, such as the $25 charged by Chase Manhattan Bank.

Of the Internet banks surveyed, Wingspan Bank has the most generous overdraft protection plan, charging no transaction fee and giving account holders a five-day grace period before interest (19.99%) is charged. Netbank has no transaction fee and a 12.00% interest rate. X.com Bank has no transaction fee and a 9.99% interest rate. First Internet and Millennium banks offer free transfers from savings or money market accounts to cover overdrafts.

Making deposits at online banks

One of the first questions people ask about online banking is, "How do you make a deposit?" There are several ways to put money into an Internet bank account, but the most convenient way of making deposits these days, through an ATM, isn't one of them.

Unless you choose to bank online with a bank that has a brick-and-mortar presence and ATMs nearby, you will have to live with these alternatives for depositing funds:

• Mail a check. Or, if you are in a hurry, send it by overnight courier.
• Direct deposit your paycheck or benefits check.
• Have two bank accounts, one at a brick-and-mortar bank convenient to where you live and an Internet account that probably pays more interest than your traditional bank does. Then you can just schedule electronic payment from your brick-and-mortar bank into your Internet account.
• Ask your Internet bank to set up electronic transfers from another bank account using the Automated Clearinghouse System. To do this you will have to provide the bank with a written request and both bank accounts will have to be in the same name.
• Make online transfers between your savings and checking accounts at the same Internet Bank. Transfer by phone. In some cases, banks will allow you to use a touch-tone phone to set up transfers between accounts at two banks.
• Make a wire transfer. While many Internet banks charge nothing for incoming wire transfers, the bank that originates the transfer will most certainly charge you-up to $40 per wire.
• Charge it to a credit card. However, this is the least advisable way to make deposits, as you will pay a cash advance fee and interest on the cash advance balance until you pay it off.