In the age of online shopping and video conferencing, there is perhaps no better example of digital-enabled productivity than the emergence of online banks. Online banking allows consumers and financial institutions to use their time and money more efficiently. Without the need to pay for physical branches, online banks usually offer much better interest rates and far fewer fees than traditional banks. To help you find the best online bank for your needs, we compared offerings, APY rates, minimum deposits and additional perks.
The 8 best online banks of 2020:
Ally – Best Full-Service Online Bank
Ally offers checking, savings, money market, and IRA accounts, along with just about every other service a bank could provide, including CDs, auto and home loans, and online stock trading via Ally Invest. With an Ally savings account, interest compounds daily, allowing you to earn more money faster. There is no required minimum deposit for savings accounts, which can be attractive if you’re just starting to build your savings. One of Ally’s biggest differentiators is its commitment to low fees. You won’t be charged for monthly maintenance on your account, ACH transfers, online statements or cashier’s checks. Ally also offers 24/7 support, so you can speak with a representative at any time. You won’t be able to deposit cash at a branch (since there are no branches), but customers have access to 43,000+ ATMs across the United States to withdraw money (and some ATMs accept cash deposits).
Axos – Best for Business Owners
Like Ally, Axos offers many customer-friendly benefits, such as no monthly maintenance fees and interest that compounds daily. In addition to savings, Axos offers checking accounts, CDs and personal and auto loans. If you’re concerned about keeping your bank account secure, Axos has a strong focus on cybersecurity and offers account monitoring, two-step authentication, SSL encryption and more. For business owners, Axos provides business banking solutions, specializing in industries such as HOAs and property management, not-for-profits and the public sector. But unlike many other online banks, Axos requires a minimum deposit of $250 to open a savings account.
Capital One – Best Customer Service
Unlike most online banks, Capital One operates a line of physical cafes where you can create an account, sign up for a free workshop and drink coffee. Like Ally, Capital One offers a variety of accounts, including CDs, checking, IRA, and savings. It doesn’t offer an online investing platform, but it does have a full suite of competitive credit cards. Capital One doesn’t charge a monthly fee to maintain your account, nor does it require minimum deposits or minimum balances on its savings accounts. It has other advantages as well, including automatic savings plans and budgeting tools, and always scores very high in customer satisfaction surveys from J.D. Power.
Chime – Best Challenger Bank
Chime has a few key differences compared to the other online banks on our list. The APY on Chime’s savings account is only 0.1%, which is comparable with a traditional brick-and-mortar bank. However, Chime also has exclusive features that other banks don’t. If you use direct deposit with your employer, for example, you may be eligible to receive the funds in your Chime account up to two business days early (though this perk is becoming more popular, and is now available via Axos, N26, and Varo). Chime doesn’t charge account maintenance or foreign transaction fees, and its customers can withdraw money for free from 38,000+ ATMs across the United States. If you’re interested in increasing your savings without having to think about it, Chime could be a wise choice. You can arrange to have every debit card transaction rounded up, with the change deposited into your savings account. You can also automatically transfer a percentage of your paycheck into your savings if you’ve set up direct deposit. However, with Varo your savings will earn interest at a much lower rate than with the other banks on this list.
Discover, Member FDIC – Best Checking Account
Discover’s online banking offerings are similar to Capital One’s, with one incredible exception: Discover offers a checking account with 1% cash back on up to $3,000 of qualifying purchases per month. That means you could earn up to $360 per year just by using your checking account. Outgoing wire transfers are the only fees Discover charges its savings account customers, so you won’t need to pay for things like stop payment orders, insufficient funds or account closures. Discover customers can access a network of 60,000+ fee-free ATMs across the country and benefit from a mobile app where they can deposit checks and transfer funds quickly.
N26 – Best Mobile App
Based in Germany, N26 only began operating in the United States in August 2019, but it’s already made a splash in the world of online banking. N26 offers a handful of competitive advantages such as no foreign transaction fees, no monthly account fees and earlier access to your paycheck (similar to Chime). You can open an account from your phone in five minutes, subdivide your account into custom “spaces” based on your savings goals, and get discounts on subscription services like Luminary. In the US, N26 offers two free ATM withdrawals each month from any network. As a mobile-first bank, N26 makes all of its services available via a slick, intuitive mobile app.
SoFi Money – Best Bonus Perks
Best known for its personal loans, SoFi also offers checking and savings accounts with competitive rates. With a SoFi Money savings account, you’ll earn 1.60% APY and won’t face maintenance fees, account minimums or overdraft charges. For frequent travelers, SoFi offers one key advantage that not many other banks (online or physical) offer. Wherever you are in the world, SoFi will reimburse you for ATM charges if you use a machine that accepts Visa. The only exception is Visa’s 1% fee, which cannot be waived. SoFi does charge fees for certain things like stop payment orders ($20) and replacement card rush delivery ($25). However, most customers won’t need to make these types of requests often. If you like to travel and want a higher APY, SoFi could be a strong contender.
Varo – Best High-Yield Savings Account
Once you’ve set up a checking account with Varo, you can open a high-yield savings account. If you make at least five debit card purchases and receive direct deposits of at least $1,000 every month, your savings will earn a sky-high 2.80% APY. Otherwise, you’ll see a 2.02% APY, which is still very high. Like Chime, Varo can help you save money automatically, so before you know it, you’ll have saved up more than you realize. If you’ve set up direct deposit, Varo can take a percentage of your paycheck (as determined by you) and instantly deposit it into your savings account. You can also benefit from rounding up transactions and collecting the change into your savings. There aren’t any fees for overdrafts or minimum balance requirements. Also, like Chime and N26, you might be able to access your paycheck funds earlier than you would with a traditional bank.
What is an online bank?
Online banks offer many of the same benefits of traditional banks, such as robust mobile apps and a variety of financial products. The critical difference is that online banks don’t operate physical branches, so they’re able to reduce the amount of money spent on overhead. A percentage of that money is passed back to customers in the form of higher interest rates on savings accounts and fewer fees. When choosing the best online bank for you, verify that the bank you’re interested in is FDIC-insured, so that your money is protected in the event a bank fails (like some did during the financial crisis of 2008). All reputable online banks will have an FDIC disclosure on their website. If you don’t rely on a physical bank branch for your banking, switching to an online bank could save you a ton of money in fees, and earn you a ton of money in interest. But keep in mind that online banks typically can’t accept cash deposits (accept via a cash-accepting ATM), so if you frequently use cash, you might want to stick with a traditional bank.
Best online banks
||Savings Minimum Deposit
||No monthly maintenance fees
||No minimum balances
||Capital One cafes
||Early direct deposit
|Discover, Member FDIC
||Cashback checking account
||Exclusive membership events
||Automatic savings round-up
The bottom line
In the digital age, fewer people are visiting banks in person like they used to. These days, we can deposit checks, pay bills and send money easily from our phones. As a result, the popularity of online banks is increasing because they offer the same functionality but with higher interest rates and lower fees. As a customer, choosing the best online bank requires a bit of research, but with so many options available, you’ll certainly find one that suits your financial needs.