Are you tired of waiting in long lines, and dealing with too many fees and minimum requirements? Opening a checking account with an online bank could be your solution.
Today, almost every bank offers online banking options, but did you know that there are banks that solely operate online, with no actual branch locations? These banks offer most of the products you find at traditional banks- checking, savings, CDs and money market accounts. A few even offer mortgage products!
Without the overhead of physical locations, online banks can pass the savings to their customers, who will enjoy lower fees and added benefits, including protection from bank fraud. The APY will also be higher than traditional banks.
Why Select Online Banks Over Traditional Banks?
Many have no bank fees, and most offer reimbursement for other bank fees. Just make sure the bank is FDIC insured, usually $250,000 in coverage at traditional banks. Consumers love the convenience of doing their banking from anywhere with a few simple clicks.
Most online banks offer the same banking products that you can find at traditional banks. Most online banks include checking, savings, CDs, and money market accounts.
Advantages Of Online Banks
Due to the nature of online banking, there are some distinct advantages that online banks can offer over traditional banks. Here are a few:
Disadvantages Of Online Banks
Of course, making the switch to online banking presents some challenges as well, although they are minor. Here are a few disadvantages of online banks:
Finding The Highest Yield
If your goal is only to have the highest yielding products, then check out this list:
The Best Online Banks
Below, we’ve put together a breakdown of some of the best online banks. Make sure you check out each one based on your situation. Our favorites include Aspiration and USAA.
All rates and APY were last updated on December 14, 2017.
Ally is an award winning online bank that charges no ATM fees. Ally bank offers 1.0% APY on savings accounts, and a $10.00 reimbursement on ATM fees. For checking accounts, you can earn 0.10% APY on balances less than $15,000, and 0.60% APY on balances of over $15,000.
American Express Bank
American Express Bank provides online banking customers with access to online savings accounts and CDs through the American Express Personal Savings online bank. There are no monthly fees or minimums associated with the online savings account. The account links with your 3 of your current bank accounts, so there is no need to completely switch banks.
Aspiration – The Summit Account
Aspiration is a great online banking option with no monthly fees, unlimited ATM reimbursement, and no minimum deposit.
The Summit Account will also give you a rate of 0.25% on balances up to $2,500, and 1.00% APY for daily balances more than $2,500. Aspiration has also free bill pay.
Bank 5 Connect
Bank 5 Connect has a rewards program where Bank 5 Connect debit cardholders earn rewards points for every $2 spent. Bank 5 Connect lets you write checks for free, and provides ATM reimbursements.
With a high interest rate of 0.76%, low minimum deposit requirements, and no monthly maintenance fees, Bank 5 Connect is a great choice with rewards to cash in for gift cards and other merchandise.
Bank Of The Internet
Bank of Internet USA Rewards Checking has flexible requirements to earn a high APY and also provides ATM fee reimbursement. Instead of requiring you to meet 3 requirements, you get 0.4166% APY for each requirement you meet: a monthly direct deposit of $1,000 or more, using your debit card 10 times per month, using your debit card 15 times or more per month, with a maximum 1.25% APY based on account activity.
Based in the UK, Barclays offers clients in the U.S. access to online savings accounts and CDs. Online savings accounts through Barclays feature no minimum balances to open and no monthly maintenance fees.
The online savings account 1.30% APY, Barclay 1 year CD 1.50% APY, Barclays 5 year CD 2.35% APY as of December 14, 2017.
Capital One 360
Capital One 360 was acquired and rebranded by Capital One. Formerly known as ING Direct, Capital One 360 offers online checking, savings, CDs, business savings, and children’s accounts, many with no minimum balance requirements or monthly fees.
In addition, Capital One 360 also offers brokerage accounts, IRAs, and mortgages.
Charles Schwab is geared towards investors who travel frequently and hold accounts with high balances. With the High Yield Investor Checking Account, there are no fees for ATM use anywhere in the world.
There are also no foreign transaction fees, and ATM reimbursement for any international ATMs that have fees. The account offers a 0.15% APY and no minimums or monthly service fees. If you have a linked Schwab brokerage or savings account, there are no fees to cover overdrafts.
Consumers Credit Union
The Consumers Credit Union is a credit union open to all members. It offers free checking and up to 4.5% APY if you meet certain conditions.
In order to join, you just have to pay $5 for membership with their sponsor, the Consumers Cooperative Association. Now, you will be eligible for a free checking account.
To get unlimited ATM reimbursement and 3.09% APY on balances up to $10,000 you need to make at least 12 debit card purchases per month without using the 4 digit pin code, at least one direct deposit or online payment per month, log in at least once per month, and sign up for paperless statements.
If you open a Visa credit card with the Consumers Credit Union and spend at least $500 per month with the card, they kick your interest rate up to 3.5% APY on balances up to $15,000. If you spend at least $1,000 per month, enjoy 4.59% APY on balances up to $20,000. Yes, the requirements are extensive, but the APY is substantial. If you fail to meet the requirements, you only get 0.01% APY with no ATM reimbursement.
CIT Bank has become known as a bank that loves to give incentives to people for opening an online account. Make sure you check out what promos and incentives they are currently running - you might just get some free cash!
If you’re interested in fixed options, CIT Bank has options for 6-month terms at 0.72% all the way to 5-year terms at 1.70% for a minimum $1,000 deposit.
Discover Bank is one of the "oldest" online banks - one of the first to offer high yield savings accounts and more. However, most people only think of Discover for their credit cards.
In addition to offering competitive credit cards, Discover Bank offers savings, money market, CDs and IRAs. Online savings offers 1.20% APY, and a 1-year CD with 1.50% APY.
If you’re able to make a long term commitment with your savings, take advantage of high APY on your savings with EverBank with their 2.28% APY for a 60-month CD and Yield Pledge that guarantees the best rates.
However, EverBank also offers a lot of great deals on savings and checking accounts as well.
Fidelity Cash Management Account
Fidelity’s Cash Management Account is structured similar to a brokerage account rather than a regular checking account. With a 0.07% APY and no monthly fees or overdraft fees, you can rest assured that your savings are growing at a steady rate.
There is a $1,250,000 limit with no required minimum balance. There are no ATM fees, and ATM reimbursement is available for ATMs located in the US. Read our full Fidelity review here.
First National Bank of Omaha currently offers a competitive APY for its online savings account, with a minimum deposit of $500. Even more impressive, it offers an interest bearing checking account that currently pays 0.65% APY and an online savings account that pays 1.15% APY with minimum requirements.
MemoryBank will give you up to 1.5% APY for the first year on balances up to $250,000 for the first year as long as you meet the following conditions: receive at least one electronic deposit every month, payroll deposited into the account, and select the paperless statement option.
If you have a large balance and want to find the best liquid account, MemoryBank has a good offer. You need at least $50 to open the account. You will get access to AllPoint ATMs.
Synchrony is widely recognized as one of the best banks around, and they have the best interest rates. Account holders enjoy a 1.05% APY, no minimum deposit or balance, and no fees or service charges.
Synchrony also rewards member loyalty with travel rewards such as car rentals, and hotels. Loyal customers can also take advantage of perks such as ATM fee reimbursements, travel rewards, and discounts on theme parks, car rentals, and hotels.
USAA Federal Savings Bank
USAA is a unique bank in that it limits it's membership to current and former service members, as well as their families. However, if you can become a member, USAA is hands down our favorite online bank.
They offer free checking, decent yields on their savings accounts, and a variety of perks that every online bank should offer. These include free checks, ATM fee refunds, mobile check deposit, and more. You can read our full USAA Bank review here.
The Bottom Line: It Comes Down To Your Priorities
We have established that most of the accounts offer a higher APY than traditional banks. If a high APY is your top priority, Bank 5, Bank of the Internet, Consumer Credit Union, and Everbank are some of our top picks. If you want an account that offers rewards and perks, Synchrony is your best bet.
For higher returns on higher balances, Charles Schwab may be your first choice. Whatever you decide, base your decision on how much you can afford to put into the account, and how you plan to use the account.
Have you opened a checking or savings account with an online bank?Do you enjoy the benefits of an online bank over a traditional bank? Tell us in the comments section below!