Summary of Best Online Banks 2024
What is Online Banking and How Does it work?
Online banking allows you to manage your bank account using a mobile app or computer. It allows you to check your balance, transfer money, and pay bills without going to a physical bank branch. To set up online banking, you must create a username and password. You can then log in to your account from anywhere with an internet connection.
When you log in to your online banking account, you can see your account balance, recent transactions, and other account information. You can also use online banking to transfer money between your accounts, pay bills, set up alerts, and more. Online banking is a convenient and secure way to manage your finances. It is also a cost-effective way to do so, as many banks offer free online banking services.
Every online bank is different in terms of its features, benefits, and limitations. That’s why comparing several options is important before choosing the right one for your banking needs.
Types of Online Bank Accounts
When it comes to online banking, here are the most common types of accounts:
- Checking accounts: A checking account is one of the most common bank accounts. You can use it for direct deposits, withdrawals, online transfers, bill pay, and everyday expenses. These accounts often come with a debit card with a chip and pin or contactless technology for in-person transactions. Checking accounts usually have lower interest rates than savings accounts.
- Savings accounts: Many online banking options offer savings accounts, which you can link to your checking account. You can send extra money to this account to save up money over time. Some savings accounts — high-yield savings accounts — come with higher interest rates than others. Certain banks will limit the number of transfers you can make each month between your checking and savings accounts.
- Credit card accounts: Some online banks come with a credit card option, which has a separate account. You’ll usually receive a physical credit card that you can use like any credit card. Oftentimes, you can monitor your account online, check your credit score, and make electronic payments using this account. Some credit cards even come with rewards or other perks, like cashback.
- Money market accounts: Some of the best online banking options also have money market accounts. These are interest-bearing accounts that are designed for investing purposes. They might have higher requirements or fees than other accounts.
- Certificate of deposit accounts: A CD is a type of savings account that earns interest at a fixed rate for a fixed period. This account typically has higher interest rates than regular savings accounts. When you open a CD, you agree to deposit a certain amount of money and leave it in the account for a specified time. When the CD matures, you can withdraw the money or roll it over into a new one.
What Are the Benefits of Online Banks?
- Better Interest Rates: Online banks often offer significantly higher APYs on accounts and CDs than traditional banks. This difference can be as much as 1% to 2% more, substantially increasing your deposits' earnings.
- Lower Fees: Direct banks typically have lower fees due to their lack of physical infrastructure. This means you're less likely to encounter fees associated with low balances, direct deposits, or using a check or debit card. Many online banks offer accounts with no minimum balance requirements or service fees.
- Convenient Online Experiences: Online banks usually provide a more user-friendly online banking experience. This includes efficient and simple online transactions and high-quality banking apps and websites.
- Accessibility: Online banking is accessible 24/7, allowing you to manage your finances at any time and from anywhere, as long as you have internet access.
- No or Low Minimum Deposit Requirements: Most online banks demand low or no minimum deposits to open accounts, making them accessible to a wider range of customers.
- Wide ATM Network: Online banks often provide access to a large network of ATMs nationwide, and many offer free access to these ATMs or reimburse ATM fees.
- Environmental Benefits: With a focus on digital transactions and electronic statements, online banking is a more eco-friendly option.
- Security: Both traditional and online banks are subject to the same laws and regulations, and online-only accounts are FDIC-insured just like traditional bank accounts. Online banks employ robust security measures such as encryption to protect your funds and identity.
Pros and Cons Summary
Whether opening your first bank account or switching from a traditional to an online account, here are the main pros and cons to consider.
Who Are Online Banks Best For?
Online banks are great for people who like doing things online and want to save on fees and earn more interest. They're especially good for:
- People Who Comfortable Using Online Platforms: Online banks are handy if you're comfortable using apps and websites for your banking.
- Those Who Hate Fees: Online banks usually have lower fees than traditional banks, so they're good if you don't want to pay extra charges.
- Savers Looking for Better Rates: Online banks often offer higher rates if you want to earn more interest on your savings.
- Travelers: If you travel a lot, online banks are convenient because you can bank from anywhere.
- People with Simple Banking Needs: If your banking is mostly about depositing checks, paying bills, and transferring money, online banks are a good choice.
- Anyone Who Wants 24/7 Banking: Online banks let you do your banking any time, not just during regular business hours.
- Eco-Friendly Folks: If you prefer paperless, online banks are great because everything is done digitally.
- Young Adults and Students: These banks are often more suited to the lifestyles of younger people who are always online.
- People Living in Remote Places: Online banking is a practical option if you don't live near a bank branch.
- Freelancers and Small Business Owners: If you're running your business, online banks can offer the flexibility and low fees you need.
How to Choose the Right Online Bank
If you’re shopping around for the best online banking options, here are the biggest things to consider:
- Rates: Look for high annual percentage yields (APY) to maximize your earnings on checking, savings, CDs, or money market accounts.
- Monthly Fees: Avoid banks that charge unnecessary monthly maintenance fees, as many now offer free accounts.
- ATM Fees: Check for ATM fee-free options or banks that offer ATM fee rebates.
- Other Fees: Be wary of overdraft and foreign transaction fees, and carefully review the terms and conditions.
- Minimum Balance: Choose online banks with no minimum balance requirements for hassle-free banking.
- Account Types: Consider diversifying accounts across different online banks to secure the best deals for your specific needs.
- Interest Rate: The interest rate, or yield, is especially important with savings accounts or money market accounts since these accounts tend to accrue interest. The higher the rate, the more you can earn over time.
- Account types: Choosing a bank with a variety of account options — whether they’re personal or business — can be convenient. However, you might want to open accounts with more than one bank to get the best features, highest rates, and lowest fees.
- Customer support: It’s important to find one with several support options. This can include mobile support, online chat, or 24/7 phone support. The best banks will also have good customer reviews online, particularly about their overall banking experience.
How to Open an Online Bank Account
The process of opening an online bank account is straightforward. Even getting started with a new account can be done via your computer or smartphone. Here’s how to do it, and what you’ll usually need:
- Determine the type of account you need: Start by figuring out which type — or types — of accounts you need. Do you need a personal or business account? Are you looking for a high-yield savings account where your money can grow? Do you want to open a money market account? Once you know this, you can narrow down your banking options.
- Compare different banking options: Shop around and compare several digital institutions to see which one best suits your needs. Check their interest rates, notable fees, online ratings, customer service options, features, and restrictions.
- Gather your documents: You’ll typically need a few things to open an account online. This may include your government-issued photo ID, Social Security number, and an initial deposit.
- Complete an application: When you’re ready, fill out the application. This is typically done online and may require you to provide some personal identifying and contact information. You will also typically need to create an online profile to go with the account. Be prepared to verify any information upon request.
- Make a deposit and wait for approval: If a deposit is required, it might take a few business days to go through. Once it does, your account should be good to go, so you can start using it immediately. If you ordered a debit card or checks, they might take up to a couple of weeks to arrive.
Online Banks vs. Traditional Banks
Online Banks and Traditional Banks each have their unique advantages and disadvantages, catering to different customer needs and preferences. Here's a comparison of the two:
Advantages:
Disadvantages:
Top Online Banking Options
Here are some of the best online banking providers to choose from:
*Rates and requirements subject to change
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Quick and easy online process
One branch with in-person banking
No monthly/overdraft fees
