FOOL SCHOOL
Online Banking

August 28, 2002

So why is banking online Foolish? Control, that's why. It's so much easier and cheaper to transfer money, pay bills, apply for a credit card or shift your savings into a higher interest account. No queues during your lunch hour, you see, no rushing to get to the bank before it closes and certainly no worries about dealing with pressing transactions at ten o'clock at night if you feel like it. You can do it all from the comfort of your PC.

Most of the services currently available let you monitor your account and conduct much of your business 24 hours a day, 365 days a year. (Actually, if we're going to split hairs, then this is a bit of a fib. Even some of the "open all hours" services close for an hour or two in the dead of night, so if you like to shuffle your money around when the rest of us are asleep, take care whose service you use).

However, the benefits of being able to track and manage your finances online are very real. And by making it easy for you to move money between accounts, you should be able to make it work harder for you by keeping more in higher-earning accounts. After all, you can now use the Internet to find the best rates on savings, cards and loans etc. any time you like.

The reason online banking is Foolish is that it costs banks less to run online services -- so you're more likely to benefit from much lower overdraft charges (as much as half the rate of ordinary banks), as well as earn impressive rates of interest on surplus funds in current accounts.

And the beauty of it is that it's comparatively easy to switch things around if charges go up or rates fall. It's usually very simple these days to open an account online. You just log on, answer the various questions, provide a password and print off the completed form for signing. If you can't print it off, they'll do it for you and fire it off to you in the post. (A real signature is a legal requirement so you will have to put pen to paper in the early stages).

Compare online banks in the Fool's Banking Centre