First Internet Bank Review – Full Service Online-Only Banking

First Internet Bank (previously known as First Internet Bank of Indiana, and commonly referred to as, simply, “First IB”) has a legitimate claim to its boastful name – it has been offering a full suite of online-only banking services since the days of dial-up. Founded in the late 1990s, this publicly traded (NASDAQ: INBK), Indianapolis-based company features consumer checking, savings, money market, CD, and IRA CD accounts, as well as credit cards, personal loans, student loans, mortgages, and home equity lines of credit.

First IB also has a business banking arm that features checking, savings, money market, CD, and commercial deposit accounts, plus a variety of business loans. All deposit accounts here come with FDIC insurance up to the statutory limit of $250,000 per account.

First IB offers a more complete lineup of accounts and credit products than many of its peers. In fact, it’s no stretch to say that First IB has something for nearly everyone – a legitimate 1-stop online banking shop. With above-average yields on many deposit accounts, plus competitive interest rates on mortgage loans and home equity lines of credit, prospective customers can expect good deals no matter what accounts or loans they choose.

However, First IB isn’t perfect. Many accounts come with moderate monthly maintenance fees, and to avoid them you generally need minimum balances between $1,000 and $4,000. Though it does offer a wide range of business loans, they’re only available in 2 states. Plus, some First IB accounts charge for services that many other online banks offer for free, such as online bill pay.

Overall, though, it’s definitely worth a closer look for consumers and business owners in the market for a new online bank.

Key Features

Free Checking

This basic checking account doesn’t pay interest or demand a monthly maintenance fee, and it comes with a free book of checks. Though there’s no ongoing minimum balance requirement, you do need to deposit at least $25 to open it.

Free Savings

First IB’s Free Savings account doesn’t require a monthly maintenance fee or minimum daily balance, but it does require an opening deposit of at least $25. The yield is 0.40% APY on all balances. You get a free ATM card with this account too, though you’re limited to 6 withdrawals per statement cycle. This limit applies to all First IB savings and money market accounts. There’s a $5 fee for each withdrawal in excess of the limit.

Interest Checking

This account requires a minimum opening deposit of $100 and comes with an order of free checks. If you maintain a minimum daily balance of at least $500, it yields 0.55% APY on all balances, and a $10 monthly maintenance fee is waived. Online bill pay is free, and First IB reimburses out-of-network ATM charges up to $10 per month.

Regular Savings

First IB’s Regular Savings account requires a $100 opening deposit and yields 0.60% APY on all balances. You need to maintain a minimum balance of at least $1,000 to avoid the $2 monthly maintenance fee. The account comes with a free ATM card and reimburses out-of-network surcharges up to $10 per month. Mind the limit of 6 withdrawals per statement cycle.

Money Market Account

This account requires a $100 opening deposit. It yields 1.36% APY on balances under $250,000 and 1.66% APY on balances above $250,000. Bear in mind that FDIC insurance only applies to the first $250,000.

You can avoid the $5 monthly maintenance fee with a $4,000 minimum daily balance. Like the regular savings account, First IB’s Money Market comes with a free ATM card and reimburses up to $10 in out-of-network charges. You can’t make more than 6 withdrawals per statement cycle.

CDs

First IB has 8 CDs. Term lengths range from 3 months (1.56% APY) to 60 months (3.04% APY). All require a minimum opening deposit of $1,000. Early withdrawal penalties are as follows: 90 days’ interest for the 3-month CD, 180 days’ interest for terms between 6 and 18 months, and 360 days’ interest for terms of 24 months and greater. Note that for the 3- and 6-month CDs, these penalties are equivalent to all the interest the CD would earn during its term, meaning any early withdrawal involves the loss of some principal.

Health Savings Account

First IB’s health savings account has no minimum opening deposit and no monthly maintenance fee. All balances earn 0.15% APY and come with a free debit card. Tax-free contributions can be used to pay for eligible medical and dental expenses (see IRS Publication 502 for a complete list) and are portable, meaning the entire account balance remains yours even if you switch to a new job (whether it offers health insurance benefits or not).

IRA Options

You can structure First IB’s money market account and any CD with a term of 12 months or greater as a traditional or Roth IRA. Balance requirements, interest rates, and early withdrawal penalties are the same as the corresponding non-IRA products.

Credit Cards

First IB offers 2 proprietary credit cards: CONNECT Classic and the Cashback Card. Classic carries a regular APR of 16.99% and has reasonable underwriting standards, making it ideal for consumers looking to build credit. The Cashback Card carries a regular APR of 12.99% and has a 2-tiered cash back rewards program: 3% cash back on eligible gas purchases and 1% cash back on all other eligible purchases, making this one of the more attractive gas credit cards on the market. Neither card has an annual fee.

Personal Loans

First IB offers unsecured personal loans (rates starting at 10.99% APR), auto loans (rates starting at 3.50% APR), and loans for special vehicles such as RVs, boats, and motorcycles (starting rates begin at about 5% APR and rise from there, depending on the vehicle type and whether it’s new or used).

Student Loans

First IB is an authorized issuer of the Smart Option Student Loan®, a popular private education loan from Sallie Mae. Versions of it can be used to finance undergraduate and graduate tuition and other school expenses, such as supplies and room and board. APRs vary depending on the borrower’s credit profile, borrowing amount, school, and location.

Mortgage Loans

First IB offers fixed-rate and adjustable-rate mortgages for purchase and refinance at competitive rates (which vary based on credit profile, income, and other factors). The bank also offers FHA and VA loans, which allow for low down payments, to customers who qualify on the basis of income and veteran status.

Home Equity Loans and Lines of Credit

First IB’s home equity credit products come in 2 varieties: loans and lines of credit. Home equity loans come with 5-, 10-, or 15-year terms and carry competitive interest rates.

Small Business Accounts

First IB offers several different types of small business deposit accounts.

• Small Business Checking:This account requires a minimum opening deposit of $100 and no minimum balance thereafter. It does come with an unavoidable monthly maintenance fee of $100 and an unusual per-transaction fee of $0.20. The account doesn’t come with online bill pay, but you can sign up for $10.95 per month.
• Commercial Analysis Checking: This account requires a minimum opening deposit of $1,000 and no minimum balance thereafter. Though it doesn’t pay interest, it also doesn’t come with a maintenance fee or transaction limits. Holders get a free ATM card and up to $10 in out-of-network fee reimbursements per month.
• Commercial Premium Checking: This account also requires a minimum opening deposit of $1,000 and no minimum balance thereafter. However, holders need to maintain a minimum balance of $25,000 to avoid a $12 monthly maintenance fee. There’s also a 300-per-month transaction limit – excess transactions cost $0.20 apiece. As with Analysis Checking, holders get a free ATM card and $10 in monthly fee reimbursements.
• Other Business Accounts: First IB has a few other business deposit accounts that are basically identical to their consumer analogues. These include a regular savings account, money market account, and various CDs.

Commercial Financing

If you operate a business in Indiana or Arizona, you may qualify for First IB’s business financing options. These include short-term lines of credit (known as working capital), fixed- and variable-rate term loans, commercial real estate loans (including purchase, renovation, and refinancing loans), and commercial credit cards. Loan amounts, rates, and terms vary depending on the borrower’s credit profile, revenue, and utilization.

Overdraft Protection

First IB’s opt-in overdraft protection plan, which applies to all personal and business deposit accounts. You can choose from 2 options:

• Overdraft Transfer: This option automatically executes a transfer from your linked savings account when you attempt a checking transaction that would normally result in an overdraft. There’s no transfer fee, but excessive savings withdrawal fees may apply. Transfers are made in $50 increments.
• Overdraft Line of Credit: You can also opt into an overdraft line of credit, subject to credit approval. Each draw accrues interest at 15.99% APR. There’s no transfer fee or ongoing maintenance fee. Draws are made in $50 increments.

Mobile App

First IB has Android and iOS mobile apps that support all the major functions of the bank’s desktop system, as well as a mobile check deposit feature that lets you make deposits on the go by snapping a photo of the front and back of your check.

Customer Service

First IB’s customer service apparatus includes a general phone hotline that’s available from 7am to 9pm weekdays, and from 9am to 3pm Saturdays (all times Eastern). There’s also a separate hotline for mortgage-related questions, available from 8am to 8pm weekdays. And First IB has an onsite chat feature that’s available during regular Eastern Standard Time business hours. This feature feels a bit more personal than most banks’ online chat tools because it includes a head shot (not video), direct phone number, and email address for each staff member, so you know exactly who you’re talking to and how to get in touch later if you need more help.

Advantages

1. Full Lineup of Deposit Accounts and Loans
For an online-only bank, First IB has an unusually comprehensive selection of deposit accounts and credit products. There’s checking, savings, money market, and CD accounts on the deposit side, and credit cards, auto loans, personal loans, special-vehicle loans, real estate loans and lines of credit, and commercial financing on the credit side.

Even other established online banking players don’t offer such a diversity. For instance, Ally Bank offers auto loans but no mortgages, while Capital One 360 offers mortgages and credit cards but no auto loans.

2. Above-Average CD Yields
First IB’s CD yields compare favorably to those of many other online banks, making First IB a strong choice for short- and long-term savers alike. Yields range as high as 3% APY, a sight better than products from competitors like FNBO Direct.

3. Excellent IRA Rates Compared to Other Online Banks
First IB’s IRA money market account and CDs carry the same yields as their non-IRA counterparts, which already have above-average yields. Surprisingly, this isn’t always the case at other online banks. BankDirect’s IRA CDs yield significantly less than its regular CDs – the difference is as much as 1.20% for the 36-month CD.

4. Modest Excessive Withdrawal Fees on Savings and Money Market Accounts
All U.S. bank accounts are required by law to limit their customers to 6 savings and money market withdrawals per account, per month. Virtually all do so by imposing an excessive withdrawal fee for each transaction above the monthly limit.

At $5 per transaction, First IB’s is relatively modest. Synchrony Bank and Discover Bank are heavier-handed at $20 and $15 per transaction, respectively.

5. Personalized Live Chat Is a Nice Touch
First IB takes the unusual (but welcome) step of providing real names, photos, and direct phone numbers for each staff member authorized to conduct live chat sessions with its customers. Other banks typically identify representatives with a first name and generic chat icon, if that.

This highly personalized approach to live chat humanizes First IB’s employees, making respectful or even pleasant interactions more likely. More importantly, it implies that the bank is confident enough in their knowledge and competence to identify them directly. In other words, when you use First IB’s live chat feature, you can be confident of speaking with people who actually know what they’re doing and can help solve your problem.

Disadvantages

1. Small Business Checking Isn’t a Good Deal
With an opening deposit requirement of just $100 and no minimum balance, First IB’s small business checking account seems like a good deal. However, the devil is in the details.

There’s a $10 monthly maintenance fee no matter what you do, and every single transaction comes with a $0.20 fee. It’s simply not clear why anyone would want this account – and if there’s an online bank with a more draconian per-transaction fee, I’m not aware of it.

2. Some Monthly Maintenance Fees May Be Hard to Avoid
Many of First IB’s accounts come with monthly maintenance fees that are only waived if you maintain a 4-figure minimum balance (not including the small business checking account, whose fee can’t be waived). In particular, the $4,000 minimum on the personal money market account and the $1,000 minimum on the personal savings account could be troublesome to folks. By comparison, Ally Bank doesn’t require minimum balances or charge monthly maintenance fees for its money market and savings accounts.

3. Overdraft Protection Can Be Pricey
First IB’s overdraft protection plan can be costly if utilized frequently. The bank charges $30 per overdraft transaction, with no limits on the number of individual overdraft transaction that can occur in a given day. This compares unfavorably with Ally Bank, which charges just $9 per overdraft transaction, and Salem Five Direct, which charges a 1-time fee of $25 to opt into overdraft protection and just $3 for each subsequent overdraft transaction. If you qualify for First IB’s overdraft line of credit, it may be a better deal to use it and pay off any draws quickly.

4. Commercial Financing Isn’t Available Everywhere
First IB offers a nice range of commercial financing options, including working capital, real estate financing, term loans, and credit cards. However, these products are only available to businesses in Arizona and Indiana, cutting out the vast majority of the country’s incorporated businesses. If you’re not a Hoosier or a Wildcat, Capital One’s commercial financing options, which are available to businesses from coast to coast, is a better option.

5. Savings Yield Could Be Better
Though First IB’s 0.60% savings account yield isn’t abysmal next to legacy brick-and-mortar banks, it’s also not great. Most online banks offer savings yields north of 1% APY.

6. No P2P Transfer Option
First IB has no P2P transfer app. P2P transfers are increasingly common in the online and legacy banking spaces, so this is a pretty glaring omission. If you’re looking for a way to split bills or settle private debts without using paper money, look to another online bank – most offer free P2P transfers at this point.

Final Word

First Internet Bank may or may not have been the first online-only bank, but it has certainly been around for longer than the majority of Internet businesses. During its 2-decade existence, it has morphed into a true 1-stop-shop for banking that offers something for nearly everyone. And it has plenty of nice features, such as personalized customer service, that may just be borne of hard-won experience.

The flip side of that coin is that First Internet Bank has also been around the block. As a publicly traded company with a fiduciary obligation to its shareholders, it also appears willing to trade goodwill for profitability – hence the monthly maintenance fees, service charges, and high overdraft levies common to many accounts. At least First IB is still around though – that’s more than we can say for some of its contemporaries.

Do you have a First Internet Bank account? Are you planning to apply for one?