It's supposed to be quick and easy — no long lines, no testy tellers. But banking online may be more trouble than it's worth. Here's why.

1. "Our free services won't be free for long..."
While plenty of Web-based industries are hurting for customers these days, online banking seems to be thriving. The number of computer owners who have banked on the Internet grew to 22% from 18% in the past year. The attractions are obvious: 24-hour banking from home, higher interest rates and lower fees. Too bad some banks don't live up to their promises. One of the biggest letdowns is no-fee checking. "It's been a popular strategy because it has brought in bodies," says Jim Bruene, editor of industry newsletter Online Banking Report, "but it's just a marketing tactic. A year or two later, there will usually be fees."

That was certainly the case for Andrea LaFaver, a Baton Rouge, La., housewife who opened an account with the now-defunct CompuBank for its no-fee checking. "For a month it was great, and then they decided to place a monthly service charge if you didn't have a certain balance," she says. "Then they charged for statements that they mailed. Then they were going to start charging for checks. So I canceled my account — and got a cancellation charge of $20."

2. "...but then, we could be gone by next year anyway."
when Internet-only banks first hit the scene around 1995, they seemed promising. Without the high overhead costs associated with bricks-and-mortar branches, e-banks could pay customers higher interest rates on deposits while still turning big profits. But aside from a few exceptions, profits haven't materialized, and the e-bank graveyard is now full of once highflying names, such as Security First Network Bank, Lighthousebank and WingspanBank.com.

Why are many e-banks in trouble? Robert DeYoung, an economic adviser at the Federal Reserve Bank of Chicago, says that to attract customers, e-banks have spent big bucks on advertising and technology. Plus, because they need more-sophisticated employees to man the technology, the independent, start-up Internet banks DeYoung studied (six in total) were paying an average of $7,000 more per head annually than bricks-and-mortar banks.

How can you tell if an Internet-only bank is worth considering? Check out Bankrate.com's "Safe & Sound" feature. It evaluates the financial condition of banks based on assessments of their profitability, asset quality, capital adequacy and liquidity, and rates them on a scale of one to five. Stick with banks that score three stars or higher.

3. "Our 'secure' server can't protect you."
Internet banks soothe consumer anxieties by claiming their Web sites and transaction connections are hacker-resistant. And that's true, experts say. But there are other ways online banking can leave you vulnerable.

Unless you've installed a firewall, your PC probably isn't secure. If you're targeted by a hacker, those account passwords you've programmed into your browser's automatic form-fill feature are ripe for the picking. To safeguard your PC, try Norton Internet Security 2001 or ZoneAlarm, a firewall for DSL and cable connections that you can download free at www.zonealarm.com/download/index.html.

Also, be on the lookout for copycat Web sites with URLs similar to your bank site's. Such sites collect account user names and passwords from unsuspecting customers who log on after mistyping their real bank's address. According to an alert issued by the Office of the Comptroller of the Currency, copycat sites have capitalized on common mistakes by altering a ".com" bank domain name with a ".net," or adding an extra "www" to a real bank's URL. To avoid these fake banks, the FDIC recommends bookmarking your bank's Web site.

4. "Our merger could leave you in the dust."
Traditional banks merge all the time, but such deals are even more likely among Internet banks, given their typically small size and often tenuous financial state. And if your e-bank does merge, the transition can be a huge headache.

Take the case of CompuBank, which was acquired by NetBank in April, leaving many CompuBank customers temporarily without access to their accounts. Among the hardest hit were Martin Lindhe and ShellyRae Norbeck of Washington state, who have filed suit against NetBank in the U.S. District Court for the Western District of Washington for denying them timely access to their deposits. The couple says that because they couldn't withdraw funds for more than a week or access bank statements, a mortgage application fell through. Their Portland, Ore., attorney, Keith Dubanevich, who is currently looking for other plaintiffs to mount a class-action suit, says the delay forced his clients to accept a new mortgage with a higher interest rate. (NetBank President Michael Fitzgerald says the large volume of new accounts brought on by the CompuBank merger resulted in some delays.)

If your online bank begins a merger, Bankrate senior reporter Holden Lewis advises that you print out your online statements and suspend direct deposits, automatic payments and online bill paying until the dust from the merger has settled.

5. "We'll nail you with esoteric fees..."
Some internet banks still deliver on their promise of free checking, but don't be fooled. In order to make up for lost revenue and encourage customers to choose lower-cost banking options, many banks will nickel-and-dime you to death, charging fees for things you'd never imagine. NetBank, for example, charges $5 a month if you sign up for online bill payment and don't use it, and $3 for a paper statement. Principal Bank's Web site trumpets, "How free is free checking? It's really free!" and lists a long menu of free services. But check the list at the end of a 20-page disclosure document found on the site's "customer-service" page: There's a monthly inactivity fee, a check-printing fee and, yes, an account-closing fee. A bank spokesperson says the disclosures are "easy to find."

6. "...and lower our interest rates."
Maybe your online bank has eliminated free checking and zapped you with pesky fees. At least there are still those good interest rates to keep you banking online, right? Not always. In yet another attempt to make this difficult business profitable, some Internet-only banks have chipped away at the rates that they once used to draw new customers. While some pure Internet banks do consistently offer superior rates, "There's no systematic evidence these banks are giving better prices across the board," says DeYoung.

Even seemingly unbeatable deals can have a hitch. Everbank, for instance, offered a 4.25% APR on checking this past August — about three points higher than the average interest-bearing checking account — but the rate expires after three months. (CEO Frank Trotter says that even so, its 3.25% base rate ranks in the nation's top 5%.)

7. "We'll hold your money hostage."
Worried about that check clearing on time? You should be. Like traditional banks, many Internet banks make you wait up to five days after you deposit a nonlocal check before it makes the funds available. Problem is, unless you happen to live near your Internet bank's headquarters, every check you deposit will be considered nonlocal.

Also, because the Web offers fertile ground for anonymous fraudsters, your e-bank may be quick to put a hold on your money if it spots a red flag. While most customers would applaud such vigilance, it can get annoying — especially when you can't resolve a false alarm by flashing a photo ID at the teller. In April, NetBank froze two accounts belonging to Paul Davis of Anchorage, Alaska, leaving him without access to $14,000 in deposits. "They sent a postcard that says your account has been frozen for administrative review," says Davis, who believes the trouble began when another customer's funds were mistakenly deposited into his account. But that's all he knows. "They've locked my account for over three months," says Davis. "They won't answer my calls, return my calls or answer emails." ("Most people understand we're doing this to protect our customers," responds NetBank's Fitzgerald, who declined to comment on Davis's case, citing customer-privacy issues.)

You can avoid a freeze by providing your bank with scrupulously correct information when you apply for any new account; little discrepancies such as the incorrect spelling of a street name can trigger a freeze later on. Also, beware of radically altering your usual banking habits. If you normally get $40 at the ATM down the street, trying to get $1,000 from an ATM in Europe could raise your bank's suspicions.

8. "Our email 'customer service' is a black hole."
Most people who choose to do their banking on the Internet probably do so because they would prefer to conduct all their banking business online, such as resolving any questions via email. Too bad online customer service is generally dismal.

A recent study of the Web sites of the nation's top 100 banks by customer-service consulting firm Amacis found that only 38% of its test email inquiries were responded to satisfactorily within one day, and 27% never got a response. And only four of these 100 banks provided customers with a tracking number to help them follow up on their query.

The trouble, for the most part, is that the banks — including Internet-only banks — were never prepared for the volume of email they would receive. "Typically, these banks still have a lot of manual systems in place," says Erik Hille, vice president of marketing at Amacis. "Rather than routing or sorting email to the right person, they still have George and Jane sitting in the back room trying to answer everything. And a lot falls through the cracks."

9. "Don't call us! (We can't afford it.)"
If you think email customer service is bad, try getting help over the phone. "Banks thought customers would go to a pure online world and never need to call them again," says Hille. "But most people need to talk to an actual person sometime. And the online paradigm doesn't offer much in the way of that."

The reason? It's too expensive. Arkadi Kuhlmann, CEO of ING Direct, says that 80% of his customers get their calls taken in 20 seconds — just don't call too often. "Every time you call me, it costs $5.25 (in operating costs), and with my average customer, I earn $11 a month," he says, referring to the amount ING Direct earns on an average deposit account. "If you call us every day, we're going to close your account. We've already closed over 2,000 accounts." Some other banks discourage calls by making hold times unbearable. A study by Gomez Inc., a firm that analyzes e-commerce Web sites, found that 42% of consumers who conduct their banking online reported hold times of more than two minutes when they call, with 15% reporting waits of more than four minutes.

Peak calling times vary from bank to bank, but if you want to get through fast, avoid calling while your bank is running a big ad or direct-mail campaign, or right before a predicted change in federal rates (activity increases as people try to lock in a good rate).

10. "Got problems? Get in line."
When NetBank failed to send Jennifer Sablan's check to the telephone company on time, the San Luis Obispo, Calif., technical writer canceled her automatic bill payment and withdrew her money. But NetBank ignored the cancellation and continued issuing checks from her empty account, billing her $25 each time they bounced. "I kept calling them, waiting on hold 20 minutes, and they'd say they'd take care of it," she says. But the checks kept bouncing, and the fees piled up. Soon Sablan was getting notices from NetBank's debt collectors. It took NetBank two months to fix the problem. NetBank's Fitzgerald had no comment on Sablan's experience, adding that "hundreds of thousands of NetBank customers have had wonderful experiences nothing like that one."

Again, the lack of face-to-face contact compounds the issue. "If you can go into a branch and talk to a manager, you're more likely to have a situation fixed because you have a relationship. It's harder to brush someone off when they're in front of you," says Lewis.

Another underlying problem is that Internet-only banks, like most small banks, farm out many of their responsibilities, such as check processing and call-center management, to outside vendors. "That can be good, until things go wrong," say Breune. "Then you have all these third parties trying to correct the problem, and the customer may get squished in between."