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3 Reasons Why You Should Open An Account At An Online Bank

If you do all your banking locally, you could be spending too much. The same goes for everyone keeping their money at national commercial banks that operate out of brick-and-mortar branches. If you haven't considered an online bank yet, and most people haven't, it's time to give the idea some thought. Especially since using an online bank could help you make money.

Before going any further, let's distinguish between online banking and an online bank. It's likely that most of you already do at least some of your banking online. Any local bank or large commercial bank offers an online bill payment system, online transfers, and the ability to check your balance with a mobile device. But that's not the same thing as an online bank.

Online banks are virtual institutions. They don't have branch offices. You do your banking through an online system. Not only do they offer all the online banking services provided by your local bank, but they also "exist" 100% online. Here are three reasons you should seriously consider using them:

Higher Interest Rates

While few banks are offering stellar interest rates, the rates offered by online banks are still much higher overall. That's because online banks can afford to pay their customers more. No branch offices means fewer employees and much lower overhead. Relatively low operating expenses allow online banks to offer rates that large commercial players can't even approach.

Ally Bank, for example, consistently offers savings rates among the best of any bank in the United States according to Bankaholic.com. Like other online banks, Ally even offers an "Interest Checking Account" that lets customers earn interest on money they keep in checking.

No ATM Fees Anywhere

Another feature consistently offered by online banks is the ability to use any ATM without paying a fee. And yes, that applies to literally any ATM - not just ATMs associated with your bank (online banks generally don't have their own ATMs anyway).

The way it usually works involves the bank reimbursing you each month for any fees you incur through ATM use. Not only does this feature make it cheaper than ever to get cash, but it's also more convenient than being confined to your own bank's ATM for free withdrawals. And the "no ATM fee" standard of online banks usually applies anywhere in the world, making travel costs much cheaper.

Overall Convenience

In addition to having full, cost-free use of any ATM on earth, online banks make it possible to do all of your banking without leaving the house. My Charles Schwab Investor Checking Account, for instance, sends me free, postage paid envelopes and deposit slips for mailing checks to the bank. Instead of driving to a branch to make a deposit, I just put the check in the mail and wait for it to show up in my account. While several brick-and-mortar banks may offer a similar service, it's a basic feature of how branch-less online banks operate.

Although there may be benefits to keeping the account at your local bank or credit union, it never hurts to put some money in an online bank account. If nothing else, you can use it to withdraw money from an ATM during an emergency without paying a fee. It could also come in handy when you're traveling abroad.

But if you haven't looked into online banks yet, now is the time. When interest rates finally do go back up, the consistently higher rates at online banks could provide you with a hefty reward.