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A Quick Look at Internet Banks

Given the rapid evolution of the electronic economy, it's not surprising that Internet banks have been popping up recently. In some cases, these are logical extensions of services already offered by financial institutions with a strong online presence; but a few are Internet-only banks.

In other words, while they can offer you just about anything you can get from any other bank, they don't have brick-and-mortar facilities anywhere in the world. That's a good thing, because it means that all they have to pay for is a computer network.

Which Means...?

Ideally, an online bank will pass its savings on to you in the form of lower bank fees -- even no fees, in some cases. The ING Orange account, for example, is famous for just that: not only are there no fees or minimums, it offers a relatively high interest rate.

Even if an online bank charges fees, they tend to be minimal; and rest assured that as competition in the field grows, those fees are likely to shrink. After all, it's pretty easy to change banks when you can do it online -- and these businesses know it.

And Then There's This

The great thing about online banking is the convenience: you can access your account 24 hours a day, just by going to the right website and entering your password. Most even let you transfer money automatically between accounts within that bank, in case you ever need to beef up your savings.

All that plus unlimited checking, an ATM debit card, and not having to change banks when you move? Where do you sign up?

Of course, keep in mind that not everything is wine and roses here...

The Downside

Free checking is great, but remember how the Internet-only banks lack brick-and-mortar facilities? That can be a major drawback for a lot of folks. No branches means no ATMs, which means that you may have to pay "foreign" ATM fees when you need cash -- and those fees can be upward of $5 these days.

Aside from trying to hunt up free ATMs and using tricks like getting extra cash with your retail purchases, there's the issue of deposits. Electronic and direct deposits are easy, but otherwise you'll have to send your deposits through the mail.

Finally, let's talk stability. Being web-based enterprises, independent online banks tend to come and go. So if you're not 100% certain about an online bank, it might be better to stick with a traditional bank offering online services.

At the moment, the best of the purely Internet banks appears to be the aforementioned ING, based on ease of use and stability.