Where You'll Find the Best Rates

Handling your finances online opens up a world of opportunity for investors. As customers have moved to the Internet for financial solutions, banks have paid attention.

Traditionally, the cost savings for banks that focus on online customers has allowed banks to offer extremely attractive interest rates, both on savings products and on loans. Online-only banks like ING (NYSE: ING) Direct and E*Trade (Nasdaq: ETFC) have long touted how much they beat the average rates on savings accounts and CDs.

But now, the trend is moving to brick-and-mortar banks as well. As a recent study from Bankrate showed, even the largest banks are giving better deals to their online customers than you can get by walking into their branches.

Same account, better rate
The surprising thing about the survey is how dramatic the differences in rates are. Traditionally, many large banks have argued that their improved customer service is what differentiates them from their smaller online-only competitors. Brick-and-mortar banks have focused on letting their customers get what they need either remotely on the Internet or by visiting a local branch.

However, realizing the cost savings available from shifting low-margin business online, some of these same banks are now giving customers a huge incentive to go high-tech with their savings. As you can see below, the rates that banks offer on savings accounts and CDs are much higher when you get them online than for branch customers.

Bank	Product	Online Rate	Branch Rate
Citibank (NYSE: C)	Savings account	3.25%	0.70%
Washington Mutual (NYSE: WM)	Savings account	4.25%	0.25%
Washington Mutual	6-month CD	3.51%	1.75%

Source: Bankrate.com.

Yet other large banks have resisted the trend. Bank of America (NYSE: BAC), for instance, has the same rates for online and branch customers, citing the desire not to compete with itself for its own customers.

Nothing new
Online investors are used to this sort of price discrimination. After all, brokerage firms have been giving price breaks for some time to those who trade online. For example, Schwab (Nasdaq: SCHW) charges customers $25 extra for a broker's help in executing a trade. TD AMERITRADE (Nasdaq: AMTD) adds a $35 fee for live assistance. Having invested so much capital into online trading systems that make serving customers simpler and more efficient, financial firms have every incentive to urge their clients to use those systems.

The brokerage experience also answers the objections that some have about online banking. Just as some were uncomfortable with ATMs when they first appeared, some customers will resist the push to move banking and other financial services to the computer. Eventually, however, most people will get used to service levels they get online and be happy to take advantage of better pricing.

The lesson for customers is to check both online and in-branch product offerings before making a decision on a deposit account or loan. A little extra effort can result in big rewards.