From Justin Pritchard,
Your Guide to Banking / Loans.
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Online bank accounts are great. They typically offer high rates for web-savvy saver. However, the high returns come at a cost. You need to know what the tradeoffs are to avoid unpleasant surprises. Here are a few reasons NOT to use online bank accounts.

1. Customer Service With Online Bank Accounts

One reason to avoid online banks is that you may run into bad customer service. With a brick-and-mortar bank, you’ll likely have some familiarity with the staff. At a small credit union, the staff might know you well.

Why does this matter? It’s easier to get good service if you know the staff and they know you. You can pick and choose who you deal with. However, if your online bank account offers any phone service, you have to take your chances with the “1-800 Lottery”. You might get somebody helpful and knowledgeable, or you might not.

2. Online Bank Accounts and Speed of Clearing

The internet is supposed to make things faster. However, you might have to wait a long time for checks to clear. You certainly can’t ask for a cashier’s check if you’re in the middle of a crisis and you need settled money yesterday.

Likewise, deposits to your online bank account can be really slow. If you get a big check and want to start earning interest, you can expect to wait. Now, the higher APY you earn may still make it worth your while, but it’s just no fun to wait.

3. You Can’t Spend It From Your Online Bank Account

You can’t take it with you when you go, so why not use some of that money? Online bank accounts make it hard to spend your money. You really have to plan on keeping your money in the account.

To mitigate the problem, you can use accounts that offer online bill pay or debit cards.

• Debit Cards: Should You Choose Debit or Credit?
• CapitalOne High Yield Money Market Account (pays interest)
• ING Direct Electric Orange Checking (pays interest)
• GMAC Bank Money Market Savings (pays interest)

More Reasons to Avoid Online Bank Accounts

Technical difficulties. Sometimes online banking Websites go down. When this happens, there's no backup branch that you can go to -- and the phone lines will be clogged. To protect yourself, always keep a local bank or credit union account open with some emergency cash so you won't be penniless while they fix the problem.

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