Many online banks offer free checking or low-fee services because they don't have the overhead costs of maintaining branch locations. But, many consumers shy away from these institutions because "the Internet doesn't evoke that tangible, brick-and-mortar feeling you want to have, considering that's where your money is held," says Robert Schmansky, a CFP with Northern Financial Advisors in Franklin, Mich.
"In reality, all banks are online and processing transactions electronically," Schmansky says. "The only real difference is most online banks do not have the retail distribution outlets. Brick-and-mortar banks are as much online as any online bank."
Schmansky often refers his clients to the online banks ING Direct, Charles Schwab Bank and EverBank, which "offer banking services without the high fees," he says. He recommends that customers "test-drive" a few banks to get a rundown of their services before settling on one, to make sure it's a good fit.
Finally, "when your method of doing your banking is entirely on the Web or over the phone, customer service is crucial," Schmansky says. "Call customer service a few times to judge its responsiveness."