BANK.NET; NET THRIFTS OFFER HIGHER RETURNS THROUGH LOW OVERHEAD.

Byline: Deborah Adamson Daily News Staff Writer

During the '90s, consumers funneled more money at a faster rate into the stock market than any time in history. Much of that, obviously, is due to a raging bull market that has given impressive returns to its investors.

But that's only part of the story. Another reason many investors put their money in the markets is the paltry interest rates paid out by banks and thrifts. While low interest rates have meant lower home loan and credit card payments, for example, they've also meant poorer returns on savings accounts and certificates of deposits.

A handful of thrifts are hoping to bring customers back to the fold by jacking up the rates they pay and holding down the fees they charge.

The linchpin of their business plan: A strategy called ``branchless banking.'' By not spending on fixed assets like buildings and by conducting business over the Internet, by phone or by mail, these financial institutions can theoretically give customers better rates on loans or savings accounts.

``We provide value,'' said Laurence Greenberg, executive vice president of marketing at Telebank (1-800-Telebank), which is owned by Virginia-based Telebanc Financial Corp.

To be sure, not everyone feels comfortable conducting financial business in cyberspace. But the concept is gaining popularity.

``Three years ago, Internet banking was a scary thing,'' said Don Shapleigh, president of Net.Bnk (1-888-256-6932) in Atlanta, formerly Atlanta Internet Bank. ``That's not nearly as big an issue now.''

Net.Bnk is opening 1,200 new accounts a month. Deposits have grown 129 percent since the beginning of the year to $200 million today.

In 1993, TeleBank had fewer than 3,000 accounts and $220 million in assets. At the end of 1997, TeleBank had 22,000 accounts and $1.1 billion in assets.

About 5 million people use online banking in some way, up from 200,000 in 1995, said Jim Bruene, editor of the Online Banking Report newsletter in Seattle. He believes the figure will balloon to 22 million, or 21 percent of U.S. households, by the end of 2001.

So is online banking safe? Not always. Bruene said he has heard of con artists putting up Web sites that look like those of legitimate banks, fooling some customers into typing in their account numbers and passwords.

So before customers sign up with a branchless bank, they should check out the institution by calling its regulators, said Linda Sherry, a spokeswoman at Consumer Action, a San Francisco-based group that follows banking issues. To find out which government body oversees an institution, ask the bank, thrift or credit union.

``That's very important if you're going to send your money through cyberspace,'' she said.

Also don't forget to compare rates and fees against local banks to see if they are offering better deals, Sherry said. Just because a bank doesn't have a branch office doesn't mean its rates are always better.

Still, rates offered by the players in the new industry tend to be better.

Net.Bnk, for example, pays 5.8 percent APY on a six-month CD with a $2,000 minimum. A money market account with a $100 minimum gets 5.5 percent. That compares with a national average of 4.82 percent APY for a six-month CD and 2.53 percent for a money market account, according to Bank Rate Monitor in Florida.

The SuperValue Interest Checking account at Net.Bnk pays a 4 percent APY with a minimum of $100 to open and a $4.50 monthly fee. That compares with 1.48 percent APY on the average nationally.

As with most banks and thrifts, the savings, checking and certificates of deposit are insured by the FDIC. However, money market accounts are not always insured.

Recently, Telebank opened a business development office in West Los Angeles to handle sales and marketing. The firm also launched an aggressive local print, radio and billboard advertising campaign.

``Los Angeles has always been a good market because of the high education level, and it's a higher-income area,'' Greenberg said.

Close to 10 percent of the bank's $522 million in deposits in 1997 came from California. In the first half of 1998, deposits from California have risen by 35 percent, about half due to increased business from Angelenos.

While there are plenty of perks - free checks and stamped envelopes - there are down sides as well.

TeleBank limits ATM uses to 10 a month, with more charges for greater frequency. An Internet account that is not used at least once every quarter gets a $5 charge.

Customers considering branchless banking should read the fee table and other terms of their accounts closely.

CAPTION(S):

Drawing

DRAWING: (Color) no caption (Bank building linked to computers)

Jon Gerung/Daily News