Online Interest Power

Many of the accounts have no minimum balance requirements and charge almost no fees. ING Direct -- which does not offer ATM cards -- has no fees at all. Bank of Internet goes one step further: It will reimburse customers up to $8 a month in fees paid to other banks to use their ATM machines.

The banks are able to make these deals available for two key reasons: internal cost-savings and rising interest rates. Since June 2004, the Federal Reserve has slowly boosted its core lending rate from 1 to 5 percent, enabling banks to increase the interest they offer to savings accounts and certificates of deposit. The online application and money-management processes mean that customers do most of the work themselves, cutting overhead for the banks.

"We have $700 million in assets, and we have 25 employees," said Bank of Internet chief executive Gary Lewis Evans. "The typical bank would have 150 employees in lots of branches."

For many of the banks, online accounts allow them to attract customers in areas where they do not have a physical presence. HSBC, for example, has 428 branches, but 80 percent of them are in New York state, and even Citibank operates in only 10 states and the District of Columbia.

"The bet is that you will be so thrilled how easy it is to bank with us that you'll want a home equity loan," said Catherine Palmieri, managing director of Citibank.com.

The potential market is enormous. In addition to the more than $1 trillion already sitting in low-interest accounts, the Internet banks hope to reach out to the many Americans who have ditched their savings accounts in recent years. Between 2001 and 2004, the share of U.S. households that had savings accounts dropped 8.1 percent, to 47 percent, according to the Federal Reserve.

But many Americans may be willing to return to savings accounts now that rates are higher and the online application process is so easy. Several of the biggest competitors brag that their application process can be completed in less than 10 minutes.

"We see anyone that pumps their own gas as a potential Internet banking customer," said Bank of Internet's Evans. "Banking is a commodity."

Still, there are barriers.

First of all, it's not clear how much money Americans really are willing to devote to savings. The nation's overall personal savings rate has dropped to -0.8 percent in March from 4 percent in the mid-1990s. Americans have been spending more than they earned since the second quarter of 2005.

"Americans have been caught up with consumerism and spending. . . . Our vision is to lead Americans back to saving by simplifying financial processes," said ING Direct chief executive Arkadi Kuhlmann. He said 30 percent of his customers have a monthly savings plan in which they automatically transfer money to their account.

Although consumers are becoming more accustomed to using the Internet to shop, renew library books and other basic functions, many are reluctant to trust it with their money. An earlier round of Internet banks went belly up in the late 1990s for exactly that reason. ING, a Dutch financial giant, encountered significant skepticism from banking analysts when it first began to offer online savings accounts in 2000, Kuhlmann said.