Dave's Thoughts on Online Banks
Jared wants to know what Dave thinks about using online banks for your emergency fund. Dave warns Jared to check them out first, but he generally doesn't see a problem with them.
QUESTION: Jared in New York City wants to know what Dave thinks about using online banks for your emergency fund. Dave warns Jared to check them out first, but he generally doesn’t see a problem with them.
ANSWER: I don't have a problem with that, as long as you check out exactly who you’re dealing with and know they’ve got some strength. A bank that is known as click and mortar, with a physical location as well as online, is my preference. But there are plenty of strong online banks out there. Just do your due diligence, and make sure you don’t fall into some kind of a scam.
You can get money market rates with a local bank or credit union and some online banks as well. My money is actually sitting in a money market. I’ve got one at my local bank that pays me a money market rate and I have one with a mutual fund company, so I actually do both. I have check-writing privileges on them, so if I want to write a check out of one of them for something, I can.
A money market account with a mutual fund company often has check-writing privileges. You wouldn’t use it as a checking account because it’s too cumbersome. But if you had an emergency and needed to pay $5,000 to fix your car, you could just write a check out of there.