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Sick of High Bank Fees? A Solution Could Be Right In Your Pocket

Online checking accounts are nothing new, and became very well-known in the early 2000s for their high interest rates compared with bricks-and-mortar banks. In fact, there were online accounts with interest rates well above 5% to be found up until 2007! While rates like these may be gone for good, the concept of online accounts is still alive and well. Even though the astronomical interest rates are long-gone, there are still some good reasons to move your money online and away from branch banks like Wells Fargo (NYSE: WFC  ) and Bank of America (NYSE: BAC  ) .

Online accounts are cheaper
According to a report by WalletHub, online checking accounts are 19% cheaper than branch-based accounts, and you can see how much less you're likely to pay for certain fees in the chart below.

Additionally, some of the big national banks charge much more than the national average. For example, Wells Fargo's "Everyday Checking Account" comes with a $10 monthly fee, although customers can get out of it by using their debit card 10 times during the month, or by having a $1,500 minimum balance. The account also charges a $35 fee for overdrafting and a $2.50 fee for using a non-Wells Fargo ATM.

Bank of America's basic checking account carries an even higher fee of $12 per month, with the same minimum balance requirement to avoid it and the same ATM and overdraft fees as Wells. Even though they charge high monthly fees, neither of these two checking accounts pay interest. If you want that, you need to upgrade to an interest checking account, which comes with a higher $25 monthly fee at B of A.

A good list of the various checking accounts available with little or no fees can be found here, and the vast majority of them are online-based.

More features
Despite the lower fees, it seems like you actually get more for your money with online-based accounts. Branch-based banks are much more likely to charge for features like paper statement delivery and online bill pay.

Another feature you can find is no overdraft or NSF (non-sufficient fund) fees. This one is still pretty uncommon, offered by about 8% of all online accounts, but it can be found if you do your homework. A good example of this is Capital One's 360 Checking Account, which has no overdraft charges, monthly fees, or ATM surcharges.

Interest is very low, but better than the alternative
Now, earning interest isn't the biggest priority when opening a checking account, but the difference here is definitely big enough to mention. The average personal checking account from a traditional bank pays 0.21% interest, while an online account pays more than double this amount at 0.47%. And, as mentioned above, if you want interest from a branch checking account, it's likely that you'll need to upgrade to one of the more feature-packed (expensive) accounts like Wells Fargo's Preferred Package checking account.

While we're not talking about a ton of money, it can make a difference if you tend to keep more than a few thousand dollars in your account. On a $10,000 balance, for example, it means an extra $26 per year, which could cover whatever little fees and charges you have to pay (if any). Between interest and the lack of fees, an online account could easily save you a few hundred dollars per year.

So, why would you keep your current bank?
All of these benefits come at a cost. There are a few conveniences you give up by choosing an online bank account, and it isn't for everyone.

For instance, customer service is an issue for some people. With a lot of online banks, your only recourse for solving a problem with your account is to deal with a call center, which could be mostly automated and tough to talk to a living, breathing human being. The Internet does make a lot of things easier, but the reality of the matter is some things are just easier to do in person.

Along with the higher fees with branch accounts, you do get the convenience of simply walking into your nearest branch. And, if you choose one of the national banks, odds are there is a branch wherever you decide to go. Wells Fargo has about 6,200 physical branches and 12,000 ATMs, and Bank of America has a network of about 5,600 branches and more than 16,000 ATMs, including locations in 40 foreign countries.

The bottom line is online banking can save you a lot of money and be well worth the trouble, as long as you can deal with the inconveniences. If you tend to be more of a "high maintenance" customer (and you know who you are), you might be better off with a traditional bank. On the other hand, if you don't visit your bank often and rarely have issues with your account, an online checking account may be worth a look!

Are branch-based banks soon to be extinct?
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. To learn about about this company, click here to access our new special free report.

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Matthew Frankel

Matt brought his love of teaching and investing to the Fool in order to help people invest better, after several years as a math teacher. Matt specializes in writing about the best opportunities in bank stocks, real estate, and personal finance, but loves any investment at the right price. Follow me on Twitter to keep up with all of the best financial coverage!

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