Do Internet banks work?

I’m shopping around for good CD rates in my area. 4 out of 5 best rates are internet banks. (State Farm is the only “regular” institution in the top 5). My questions are:

Can internet banks be trusted? Are they insured like most “building” banks? How can you tell you are not giving information to Joe Blow so he can add to his PayPal account?

Why are internet bank interest rates consistently higher than “building” banks?

Oh come on. You probably could hve figured this out yourself in two seconds or less if you had just thought about it.

Unlike most other web-based business models, web-banking is actually a pretty good idea for some uses. Yes, the vast majority of them are legit and FDIC insured. Just go to one of the larger one such as NetBank (where I have an account) and you will find that information right away. This means that you won’t lose your money for insured accounts even if the web bank folds.

The reason that they are able to offer higher rates is simply because they don’t have to operate physical branches in fancy locations or anywhere else. This means that they can split the difference in savings with you and still come out ahead.

Pretty simple huh?

Because they have to be. Are you going to switch to an online bank just to be cool? I would think that only a few people would do that not enough to make the bank a going concern. I know I switched to American Express online banking because of the higher rates.

Firstly, let me thank Mr. Nasty on the graceful and gracious manner in which he answered my question. The condesending tone gives the answer the air of authority that it would have lacked otherwise.

Secondly, how do you know an internet bank is insured? Because the website said so? I trust what people put on websites as far as I trust 8 day old milk. There are probably federal sites that will list insured banks. If they exist, I don’t know where they are.

Thirdly, I believe you are exactly right gazpacho. The thought of opening an internet bank account never entered my mind until I saw the rates.

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Why would you trust a sign on a door of a bank that said FDIC insured any more than you would trust a nicely designed website. People were being conned out of their money long before the internet came around. All of these questions could be asked about a small bank with a building.

From netbanks FAQ.

Actually, I don’t trust little signs on a small bank buildings since I had the experience of finding out that my savings account was insured, but my checking wasn’t in one of those little banks.

So, one just googles FDIC and find their website with a list of insured banks?


You can use the website to confirm that the bank in question is in fact FDIC insured. I would also recommend running a search at You can search/sort CD’s by duration, yield, and bank location, and they are all rated for safety based upon the institutions’ capitalization, asset quality, earnings and liquidity.

Cite? I’ve got a CD with E-Trade bank and it works quite nicely. Big fat interest, FDIC insured (I checked) and very convenient.

I had an account with what became wingspan (IIRC it started as netbank?) - Worked fine but since I’m self employed it took too long for my deposits to be mailed and processed - direct deposit would be a better choice for a net bank.

I was being sarcastic.

Yes, Biggirl, internet banks do work.

A couple years ago, a had a large sum of money sitting in my credit union getting about 2 percent interest. I then switched over to an internet bank headquartered in Kentucky, Republic Bank, opened a money mart account, and got about 6 percent for my money.
Since then, I’ve moved my money to where I keep my IRAs and mutual funds, but I wouldn’t hesitate at all to try another bank that advertises on the internet. By the way, have you ever looked at They have all kinds of rates for whatever investment or loan you’r looking for!


This page might help you get started in your research.

Here is a direct link to the FDIC search page.

Good luck to you. is where I found that the internet banks have the highest interest. I wasn’t sure I could trust Bankrate, I mean who watches these guys.

Thanks everybody. I’ve got some researching to do.