According to Faulkner & Gray, 9.8 million U.S. households have an online banking relationship, with that number expected to jump to 20 million by 2003. While Internet banks are having trouble signing up cardholders, traditional brick-and-mortar banks like Wells Fargo, Bank of America, and Citibank are perfecting their online card offering operations. Because Internet-only banks avoid the overhead of running a branch, they are able to offer higher interest rates on depository accounts and lower consumer fees. It would seem that, with lower operating costs and the huge distribution channel of the Web, Internet-only banks would be able to acquire credit card accounts and use the accounts as an entry point to their Web site to sell more services. But acquiring a new cardholder costs Internet-only banks 12 percent to 15 percent more than accounts acquired through direct mail, because traditional banks are able to save money by their sheer volume. Also, Internet banks seem to attract a disproportionate number of applications from people with unacceptable credit ratings. Some analysts attribute this to the use of mass-market advertising campaigns like banner ads on Web sites and spots on radio and television. But many Internet-only banks without card portfolios are starting to negotiate with third-party card issuers or to offer cards through a sister company. The next step for online banks will be to offer ways for customers to electronically deposit funds.