In a world in which cash seems less and less necessary (hello Venmo), online banks have many advantages. Because they don’t have to maintain the same bricks-and-mortar presence of traditional banks, the online variety can offer better rates on accounts and loans and lower fees.
Today, the majority of banking customers are banking either online, on their smartphone, or a combination of both, according to a recent digital banking survey by PwC. “People’s comfort level with online banks is growing,” says Kimberly Palmer, banking expert for NerdWallet. “That’s because online banks are really evolving and offering more convenience to customers.”
How To Choose An Online Bank
When it comes to choosing an online bank, there are a few things to consider:
Skip the fees. Choose a bank account that will charge you no monthly fees. This might depend on your behavior—maintaining a minimum balance, for instance, or linking the account to another account—but you can often avoid fees with the right bank.
Read the fine print. There are a variety of fees banks charge other than monthly fees, so make sure you understand what those are. You may be charged a fee if you complete more than six transactions a month in your savings account, for instance. “Even with online banks, people need to read the fine print,” says Amanda Dixon, financial analyst for Bankrate.
Earn some interest. Online banks tend to pay higher rates, so do some comparison shopping to get the best rate you can. “Some online banks paying the best savings rates are paying 2.25%,” Dixon says. “While there are other online banks paying 1%.”
Check out the website and app. “The website and app are often how you’re primarily interacting with your bank,” Palmer says. “You want to make sure it’s easy for you to use and that you’re comfortable with it.” Read the reviews of the mobile app for more insight.
Make sure you’re protected. Be certain that the bank is FDIC insured, which means that your money is insured up to $250,000. If you’re using a mainstream online bank, you’re likely fine, but if you’re putting your money with a quirky little startup, it’s worth checking.
Best Online Banks
Here are a few of the best online banking options available today (note that the rates and fees listed below are subject to change):
Ally
Ally Bank traces its history back to 1919. It started out as GMAC, a division of General Motors, focused on auto financing. GMAC Bank formed in 2000 and become Ally Bank in 2009.
Today Ally Bank offers a range of financial products, including deposit accounts. auto loans, a credit card, and home financing. Through Ally Invest, it offers online brokerage services.
Banking products it offers: Interest checking, savings, money market, CDs, and a cash back credit card.
Rates (APY): 0.1% on checking (0.6% with $15,000 minimum balance), 2.20% on all tiers of savings, 2.75% on a 12-month CD with less than $5,000 deposit, 0.90% on money market with less than $5,000
Fees: No monthly fees for savings, $25 overdraft, $10 excessive transaction fee; no fees for CDs
Website: ally.com
App: 5 stars on App Store, 3.5 stars on Google Play
Access: 43,000 Allpoint ATMs
CIT Bank
CIT Bank was founded in 2008, although its history dates back to 1908. The online bank we know today offers savings and money market products, as well as certificates of deposit. It does not offer a checking account. The bank also lends to homebuyers.
Banking products it offers: Savings, money market, CDs with options
Rates (APY): 1.55% on savings, up to 2.45% on Savings Builder (limitations apply), 1.85% on money market, 2.25% on 13-month CD with minimum $1,000 deposit, 2.05% on 11-month CD with penalty free withdrawals
Fees: No monthly fees
Website: bankoncit.com
App: 4.5 stars on App Store, 2.5 stars on Google Play
Access: No ATM access
Discover Bank
The first purchase with a Discover credit card was made on September 17, 1985 in the amount of $26.77. A lot has changed since that first purchase at a Sears store in Atlanta, including the introduction of deposit accounts. Today, Discover’s online bank offers checking and savings products, as well as an IRA CD.
Banking products it offers: Checking, savings, money market, CDs
Rates (APY): 2.10% on savings, 1.95% on money market balances under $100,000, 2.65% on 12-month CD with minimum $2,500 deposit
Fees: No monthly fees on any accounts
Website: discover.com/online-banking
App: 5 stars on App Store, 4.5 stars on Google Play
Access: 60,000 ATMs
Capital One
In 2012 Capital One finalized its purchase of ING Direct, one of the first internet only banks in the United States. Initially rebranded as Capital One 360, the online banking operations have now been folded into Capital One. The 360 brand, however, remains in the names of its online banking products, such as its 360 Money Market account.
Banking products it offers: Checking, savings, money market, CDs
Rates (APY): 0% on checking, 1.00% on savings, 0.85% on money market balances under $10,000, 2.00% on money market balances of $10,000 or more, 2.70% on 12-month CD
Fees: No monthly fees
Website: capitalone.com/bank
App: 4.5 stars on App Store, 4.5 stars on Google Play
Access: 39,000 ATMS
Synchrony
Previously known as GE Capital Retail Bank, Synchrony Bank is a subsidiary of Synchrony Financial, headquartered in Stamford, Connecticut.
Banking products it offers: savings, money market, CDs
Rates (APY): 2.20% on savings, 1.20% on money market , 2.75% on 12-month CD with minimum $2,000 deposit
Fees: No monthly service fees
Website: synchronybank.com
App: 4.5 stars on App Store, 4.25 stars on Google Play
Access: Synchrony doesn’t charge ATM fees and will reimburse for up to $5 in fees when you use domestic ATMs
