Virtual Banking

"We pay 3% interest on our checking accounts, while the national average is under 1%," says Grimes. "We have no service charges for our checking accounts, while the national average is more than $9 a month. With Net.B@nk, you get unlimited online access, an ATM or debit card, a Visa card and we buy your checks."

But some computer users are still wary of online banking. James Harney, a Brooklyn-based writer, says he worries that some mistake will happen in cyberspace and there won't be a flesh-and-blood teller around to fix it. "I hate not being able to actually see the money move around. What if I make a deposit at 10 p.m.? How do I know when it will actually be there?" says Harney. "If there's a problem, and I've deposited my money at the branch, at least there's someone I can look in the eye and ask, 'Where's my money?'"

But such worst-case scenarios aren't likely, according to Paul Glenn, special counsel with the Office of Thrift Supervision in Washington, D.C. Glenn says the OTS, which regulates all savings and loan institutions, requires Internet banks--and others offering electronic banking options--to prove to regulators that customers are safe from computer glitches.

For example, before the OTS will approve any electronic banking activity, it requires institutions to hire an independent third party to try to hack into the bank's computer system and analyze its vulnerabilities. The bank must then correct any faults that might put customers at risk. Glenn adds that customers should make sure banks are following OTS regulations and are insured by the Federal Deposit Insurance Corp. by visiting www.fdic.gov, which lists all banks approved by federal regulators.

Then there is the Y2K issue. Some people are worried that access to their money might be restricted at the dawn of the millennium. But experts say most banks have already taken steps to correct possible problems.

LendingTree, for example, says it tested all systems in March 1999, and doesn't expect the year 2000 to pose significant operating problems--though the firm does intend to replace its current accounting software before then. Tom Cable, chief technology officer for Net.B@nk, says his company has been preparing for Y2K since 1998.

"We have followed the guidelines laid out by the [OTS] and other regulatory agencies like FFIEC [Federal Financial Institutions Examinations Council], and we have taken all the steps we know to investigate, repair and replace anything we find to be noncompliant," Cable says. "But even with precautions, you still have to plan in case things don't work for a few days."

Online banking may be a special boon for African Americans and Hispanics, who may wish to consider it as a way to avoid the possibility of lenders turning away business the minute a person of color walks in the door, says Net.B@nk's Grimes.

Even retail outlets and other financial service companies are jumping on to the online banking bandwagon. Nordstrom, the Seattle-based department store chain with 99 outlets, already owns a financial subsidiary--Nordstrom Credit Bank--which offers various products, including credit cards. The company has applied for a thrift bank charter, and is considering offering traditional banking products such as business credit card accounts, home equity lines of credit, money market checking accounts, as well as private-label debit cards and some limited mortgage lending.