Clark Howard: Why you need to give online banks another look

Thinking about switching your bank?

You’re probably familiar with credit unions as a superior alternative to traditional big banks, but you’d be wise to give online-only banks some consideration, too.

That’s because the online banks now offer some of the highest rates across a variety of banking products.

RELATED: Lots of banks are offering free cash: Should you bite?

Internet banks give you the best bang for your buck

How many times have you gone to your local bank branch or credit union in the past year? If you’re like most people, the answer is “not many.”

The advent of Internet banking on your smartphone has reduced the need for physical branches. If you’re fully comfortable with digital banking, there are a few compelling reasons why money expert Clark Howard says you should look at moving your money to an online bank.

Advertisement

“Recently, I’ve had to rethink banking. It used to be a two-horse race between banks and credit unions,” Clark says. “But now online banks are the new low-cost place to bank.”

Clark notes the competition is really heating up in the online banking sector.

Ally and CIT deserve your attention

Ally Bank will give you a 1% bonus on any money you move over to their online banking services as part of its newly announced PayBack Promotion. You can earn up to $1,000 on a deposit of $100,000!

And if you’re somebody who likes to chase the highest interest rates, we’ve saved one of the best deals for last.

Advertisement

CIT Bank is offering 2.30% APY on its Savings Builder account. To qualify for that rate, you need to either have an account balance of $25,000 or more OR make at least one deposit of $100 or more faithfully each month that you don’t have $25K on deposit.

If you fail to make that monthly deposit, the interest rate drops down to 1.26% APY for the following month. But if you make a deposit of $100 or more before the next month is over, you’ll get back up to the higher rate.

“Online banks are where all the action is right now in banking,” Clark says. “But it’s not just savings accounts; it’s about great deals on checking, CDs and so much more, too.”