Why Online Banking is So Tempting

I understand how online banking can make people nervous. It's all so...intangible, and when you hear a news report that an online bank was inaccessible for a few hours, it can conjure up mental images of panicked crowds making a run on the bank. Except in this case there's nowhere to run. Do you want to put your money in a bank that may need to reboot itself?

Well, yes. Especially if you explore some of the online-only savings accounts, including those offered by banks that have no branches or physical locations at all. Leading the way is ING Direct, which has been raising its rates steadily and as of this writing is offering 4.35 percent interest on savings with no minimum deposit. Setup is easy. You simply go online, connect your current checking account to your new online account, and transfer money back and forth as needed. The idea is to use the ING account as you would a CD, as longer-term savings that you pretty much leave alone, but with more flexibility than an a traditional one, two, or five-year CD offers.

ING Direct's success has inspired traditional "brick-and-mortar" banks to follow suit and offer their own online-only options. This can be an even better idea because your transfers between your accounts are instantaneous, and your bank's desire to attract your attention is leading to ever-higher rates. My bank is currently paying me five percent on my online savings account. It's free money, just for banking online  and it's not to be ignored. Find out today what your bank is offering.

If online banking still makes you nervous, maybe these tips will help ease your mind.
 

• If you really fear that some kind of massive Internet crash will separate you from your money for a while, keep some cash around. (A good idea in these days when ATMs may suffer electrical crashes anyhow.) Don't carry it with you at all times, but maybe a few hundred well hidden dollars will give you peace of mind.
  
• Remember that FDIC rules are in effect. Online accounts are protected up to $100,000. Visit the FDIC  to learn more.
  
• Be smart about passwords. I know that the more financial chores you do online, the more passwords you'll have, and it's hard to keep track. But Dory Devlin has some good advice for storing passwords and Becky Worley has a strategy for a password makeover.
  
• Keep track of the best rates. I shifted much of my online money to another bank when I found a rate a full half-percent higher than my previous rate. Bankrate.com is your best source for information on current rates.
  
• But don't futz with your high-interest account too much. Add to it, of course, but try to leave it alone to grow.