Released: June 07, 2007

Online checking: pros and cons

Source: Aleksandra Todorova, SmartMoney.com

How would you like a checking account that earns 3% or more?

It the latest trend in banking. From online banks like ING Direct, to the online arms of traditional banks like HSBC and even brick-and-mortar banks like Jacksonville, Fla.-based EverBank, yield-chasing consumers now have a choice of interest-earning checking products. Even brokerages, like Schwab, are jumping into the game.

The catch: These accounts are typically available only online. This means, among other things, that you have to be comfortable not having a checkbook and a local bank branch to deposit a check or make a withdrawal.

By now, many consumers have become used to the idea of online banks, at least for certain functions. High-yield online savings accounts currently offer yields of 5% or more, and roughly 8% of U.S. households are taking advantage of them, according to market research firm Forrester Research. Many more enjoy the conveniences of accessing their brick-and-mortar bank’s web site to pay bills and monitor accounts.

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