Internet Banks - Not Always the Best Deals
Article Submitted By: Riki Meier
Just because a bank is online-only doesn't mean it offers the best APY or that its accounts are without maintenance fees, as this example from CalFirst shows.
Internet banks have, on average, offered better rates than many brick-and-mortar banks because they are able to keep their overhead costs low. Generally, lower overhead costs means that they can offer customers a better rate of return on their money. Not only do many Internet banks offer higher APYs, many accounts also come without any monthly maintenance fees and some even offer additional free perks.
However, when you find an Internet bank offer that has a higher APY than your local bank, you should always check the fine print because that higher APY still could come with balance requirements, monthly account maintenance fees, and other stipulations that could end up eating all of the money you earn on that higher interest rate, and then some.
Take, for example, California First National Bank, otherwise known as CalFirst. Just based on the name of the bank, you would assume this entity has physical branch locations in California. The fact that this bank only has a virtual presence isn't a bad thing in itself, but minimum balance requirement and fees that come with this bank’s money market account would make you think that you're dealing with a brick-and-mortar bank with higher overhead costs. CalFirst’s Money Market account pays 1.08% APY, which isn't bad in this economy. However, interest does not compound on this account. According to the bank's Terms and Conditions page, interest is credited to your account monthly. If you close your account before interest is credited, you will not receive interest.
Additionally, you’re allowed only six withdrawals per month and each withdrawal after that will cost you $10 per withdrawal, and if your balance falls below $5,000 you'll be stuck with a $20 monthly maintenance fee ($5,000 is also the minimum amount required to open the account). This doesn't mean that you shouldn't open an account with CalFirst, it just means that you should always read the fine print and the terms and condition so that you fully know what you're getting into. Just because a bank is an Internet-only bank doesn't mean their accounts offer the best deal for your banking needs.
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