Internet Banks Come of Age

Physician's Money Digest, March15 2004, Volume 11, Issue 5

New York Times

If you're tired of getting only 0.7% or 1% a year ona money market fund, you might want to check theInternet—Internet banks, that is. According to a recentarticle in the , the emergence of theInternet has led to the rise of branchless banks, whichbenefit from low overhead to offer better rates ondeposits, which are also backed by the FDIC.

In fact, Bankrate.com reports that the three bankscurrently advertising the best rates are all Internetbanks. They are the Bank of Internet USA (www.bankofinternet.com), Virtual Bank (www.virtualbank.com), and National InterBank (www.nationalinterbank.com). In addition, the article notes thatInternet banks tend not to lower their rates as abruptlyas standard commercial banks do.

Times

What rates are Internet banks offering? According tothe article, it could be 2.2% a year. Consider thatif you have $100,000 invested in a money market fundearning 0.75% a year, you'll get $750. However, if thatsame $100,000 were earning 2.2% annually, you'd bemaking $2200, or $1450 more before income tax.

So, rather than being resigned to low rates,resolve to find a better deal.