As a young professional who came of age during the Internet boom, I was among the first wave of consumers to adopt the Internet banking meme. At that time, it was no where near mainstream and was generally considered to be another dot com fad.

Fairly quickly, the Internet banks began gobbling up market share from brick and mortar banks due to the high interest rates they paid for cash deposits. Back then, it was rare (if not impossible) for a medium income consumer to find a 3% to 5% interest rate on your savings account, much less a checking account. Not to mention, you didn’t have to pay the pseudo-punitive “account servicing fee” just to have your bank store your money in the electronic ether (like my Bank of America account at that time).

These days, getting 5% interest on your checking account is nothing but a fond memory.

Most, if not all, of the Internet banking pioneers are currently paying second tier savings rates. I understand that short term interest rates set by Federal Reserve impact the interest rates banks can pay, but still, that doesn’t mean I should roll over and stick with my favorite online banks just because I’ve had an account with them for a decade. I’m loyal, but not loyal settle for second best.

To prove my case, take a look at what some of the more popular Internet banks are currently paying on deposits:

Checking / Savings Account Rates at Popular Online Banks.

E*Trade:  0.5%

ING Direct:  1.3%

Emigrant Bank:  1.3%

Everbank:  1.7%

– listed interest rates as of 11Nov09

Pretty unimpressive, dare I say flaccid, returns in my humble opinion.

Most of these banks are top notch (e.g. ING Direct’s low mortgage default rate) and manage their deposits fairly well, but if you want my business, you have to put the 3% in the 3-6-3 banking rule. Otherwise, demanding customers who aren’t afraid to shop around are going to jump ship.

High Interest Checking Accounts are Still Available

One of my best money hacks of 2008 was signing up for my rewards debit card that I located via CheckingFinder.com. These high interest checking accounts pay double, triple and occasionally more (depending on your bank’s interest rates) than the standard online bank.

Like most things, they come with a catch: you are required to swipe your debit card 10 to 15 times per month (like most people do anyway), and setup a few online transactions in your online account (who doesn’t use online bill pay?).

Considering the ROI you can get on your short term savings or your emergency fund, the small amount of inconvenience you might incur by using your debit card more than your credit card is worth it. If you have a substantial amount of savings, say $10,000, the amount of interest earned per year can be in the hundreds of dollars range.

Photo by Sweet One