This guest post is from Dean, who is perfecting The Art of Stinginess.
In running my blog, The Art of Stinginess, I often sit back and ponder the world of frugality and personal finance in general. One thing that really grinds my gears (mostly because many of us can do very little about it) is how banks takes a few bucks each time we receive my payments.
I’m not going to rant and rave about that, it happens to us all, what I will rant and rave about is the often overlooked alternative. Online banking.
The public perception of a bank is a tall granite building where you entrust the good people who work there with your hard earned cash. I guess the ‘Bricks and Mortar’ image of a bank brings with it some peace of mind. However, since I started using an online bank (Rabo Direct) for my business and regular domestic expenses, my perception has been turned upside down.
As I said above, the first and most obvious tollgate for your money in the banking system is when it reaches you bank account. Say I complete an article and I’m transferred the money by the publisher. Just like that they’ve shaved off a couple of Euro. You’d think during a recession the bank would be happy with my money as it is.
Well online banks (most anyway) don’t charge you a cent for receiving money. It just flies right in there and the number on your screen goes up by the right amount. No ‘processing fees’ or ‘International transaction charges’.
The second toll booth where we have to unwillingly fork out in the traditional banking system is when we start moving our money around. Paying bills, transferring to savings accounts, direct debits and paying your own employees should you be lucky enough to outsource, all requires you give the bank a cut.
Well, I’m pleased to say that when I’m using my online bank account to pay my bills and transfer money I don’t get charged a dime. And once again, most online banks are the same.
The only plus with ‘Bricks and Mortar’ banks is that you can stroll in and withdraw your money, either from an ATM or at the cash desk. However, chances are you’re being charged for this too in your quarterly banking charges. I recently got mine and for just three months I was charged EUR23 for lodging a few checks and withdrawing money from an ATM once a week.
How to Use Online Banks Properly
The main tip you can be given concerning how to use you online bank account is to route your money appropriately. Send any money you’re going to need to spend in the real world (i.e. on food, clothing etc..) to your day-to-day bank account directly from the course (ex. PayPal or Checks). Direct the rest to your online account and use it to pay bills, invoices, direct debits and the likes. Thus you’re avoiding the bulk of the bank charges.
I guess there’s one final argument to be made against having an online bank account; the bother of it all. This argument is normally made by people who are unfamiliar with it and may not be to keen on the idea. But online banking is now so much easier and convenient than doing it all in person and it really does save you money.
Oh and I almost forgot, with interest rates 1-2% higher than normal bank accounts they can earn you money too.
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{ 4 comments }
After years of paying ridiculous bank fees and interest charges, I have made it my life’s challenge to never give banks another cent of my money. So I do all my banking online in various accounts with a couple of banks. Even my bricks and mortar bank – if you have a certain amount in your chequing account the monthly fee is waived – so I make sure I never have a balance lower than that amount. Yes it doesn’t earn interest but it saves me $13 a month by doing so. The only thing with internet banks (ones that don’t have bricks and mortar) is you have to patiently wait for your money to be cleared and the holds removed. But it’s a whole lot faster than my own bank, who can sometimes hold deposits for up to 5 days without releasing the funds to my account to use….in the meantime they’re using that money to play the spreads on currency to make money for the bank.
I have been using ING as my online bank for the last 5 years and now I wonder how I ever managed in the past with simply the brick and mortar.
I rarely use cash so I only have a Chase account for those few times I need to go and get cash from a real bank.
I love that ING sends out my checks to pay bills without charging me for postage and I love that I can log in and see my balances and do transfers at any hour of the day or night. Online banks rock!!!!!
.-= Lulu´s last blog ..testing schedule 5/1/09 =-.
I have yet to join an online bank regardless of how much people praise them. The rates are almost the same with my money market account with my bank and all my accounts are together and makes it easier for me.
.-= Craig´s last blog ..Huge Giveaway at Money Crashers with $4367+ in Prizes =-.
One of the good things that an online bank can give is convenience. In today’s world where anyone is in a hurry, saving some time with your banking is very important. And another thing is the speed of processing. Online banking almost always take effect real time, balances reflects in your account right away.