Best Online Banks

Online banks provide an attractive alternative to traditional brick-and-mortar banks, offering leading rates on deposit accounts, low fees, robust digital experiences, and excellent customer support. With no physical branches to maintain, the top online banks pass major cost savings to customers in the form of higher yields on savings and checking accounts, low-cost loans, and reduced service fees.

This guide examines the advantages of banking digitally, reviews the top online banks for features like interest rates paid, availability of accounts, mobile apps, overdraft policies, and ATM access, and provides tips for choosing the right online bank for your specific needs.

The digital-first online banks emerging today provide an optimized user experience combined with attractive pricing difficult for tradition players to match.

Benefits of Online Banking

Key perks online banks offer compared to brick-and-mortar competitors:

• Higher interest rates – Online banks pay up to 15 times more on savings and CDs thanks to minimal overhead. This really adds up over time.
• Lower fees – Online banks typically reimburse out-of-network ATM fees and don’t charge maintenance fees.
• Robust mobile apps – Advanced apps allow remote check deposit, bill pay, account opening, and enhanced money management.
• Top-notch user experience – The digital-first interface is intuitive and convenient for tech-savvy users.
• Better rates on loans – Online lenders like SoFi offer competitive mortgage refinancing, personal loans, student loan refinancing and more.
• Strong customer service – Online chat, email support, video conferencing assistance, and user forums provide helpful guidance.

For those comfortable banking digitally, online banks provide attractive rates and an optimized customer experience difficult for legacy banks to rival.

Top Online Banks for High Savings Rates

Leading online banks offer yields far exceeding national averages. Top online savings account rates include:

UFB Direct Savings – 4.31% APY

BrioDirect Savings – 4.25% APY

CFG Bank High Yield Savings – 4.25% APY

Salem Five Direct eOne Savings – 4.25% APY

Quontic Bank Ultimate Savings – 4.21% APY

Thanks to minimal overhead, the top online banks provide interest rates on savings accounts that are exponentially higher than brick-and-mortar bank offerings.

Top Online Banks for Checking

For a digital checking account alternative, recommended online banks include:

Axos Bank Rewards Checking – Unlimited ATM fee rebates, up to 1.25% cash back on debit purchases.

SoFi Checking and Savings – No account fees, unlimited ATM reimbursements, 1.80% APY.

LendingClub High Yield Checking – ATM fee reimbursements, up to 3.00% APY.

CIT Bank eChecking – 0.50% APY, unlimited ATM fee reimbursements, no monthly fees.

Alliant Credit Union High-Rate Checking – 0.65% APY, $5 monthly fee refundable through debit usage.

Top online checking accounts offer robust mobile features, interest earnings, and ATM access with fewer fees than traditional banks.

Best Online Banks for CDs

For fixed-rate savings, online banks offer huge CD yields:

6-Month CD Rates

Sallie Mae – 4.40% APY

Synchrony Bank – 4.35% APY

Marcus by Goldman Sachs – 4.30% APY

1-Year CD Rates

Bread Savings – 4.85% APY

Quontic Bank – 4.75% APY

Crescent Bank – 4.60% APY

5-Year CD Rates

Crescent Bank – 4.50% APY

First Internet Bank of Indiana – 4.40% APY

Quontic Bank – 4.10% APY

Online CD rates provide multiples higher return versus brick-and-mortar bank certificates. Laddering CD terms takes advantage of high short-term yields.

Top Online Banks for Money Market Accounts

For deposit growth with check access, top online money market account rates include:

BrioDirect Money Market – 4.30% APY

CFG Bank Money Market – 4.15% APY

Salem Five Direct Money Market – 4.10% APY

CIT Bank Money Market – 3.85% APY

Marcus by Goldman Sachs Money Market – 3.55% APY

High-yield money market accounts allow growing savings rapidly while still accessing deposits. Online banks again dominate rates.

Online Banks Offering Rewards Checking

Some online banks incentivize activity on checking accounts with rewards points and cash back:

LendingClub Rewards Checking – 1.8% APY if meet requirements like direct deposit, 20 debit transactions monthly.

Axos Bank Rewards Checking – Unlimited ATM fee reimbursements, up to 1.25% cash back on debit purchases based on account balances.

SoFi Checking and Savings – 2.00% APY, up to 2.5% cash back on two categories like dining and travel.

Porte Checking – 1.50% APY on balances up to $15,000. ATM fee reimbursement.

Picking accounts with attractive rewards for routine usage provides yet another perk beyond great rates.

How Online Banks Compare to Traditional Banks

While online banks carry lower costs, brick-and-mortar banks have advantages:

Online Banks

• Top rates on deposit accounts
• Zero or low account fees
• Premium digital experience
• More basic products beyond just deposits

Brick-and-Mortar Banks

• Established reputation and financial strength
• Full suite of products like loans and credit cards
• Local branches for convenient face-to-face service
• More advisors and expertise available in person

Online and traditional banks have differing strengths based on needs for rates, digital experience, or local banking presence.

Tips for Choosing the Best Online Bank

Key factors when selecting an online bank:

• Interest rates and yields – Compare savings, checking, CDs, and money market rates.
• Account types available – Assess if bank offers all accounts styles needed.
• Mobile app interface – Preview app visually on app store and read user reviews.
• ATM access – See if online bank offers fee reimbursement and widespread no-fee ATM network access.
• Overdraft policies – Avoid banks manipulating overdrafts fees through re-ordering.
• Security protocols – Ensure adequate encryption, fraud monitoring, account protection.

Take time to thoroughly evaluate digital experience, product offerings, rates, fees, and security when choosing your online bank.

Avoiding Online Banking Pitfalls

Be sure to sidestep these online banking mistakes:

• Assuming top rates will continue indefinitely without occasional reviews of competitor offerings
• Overlooking monthly fees that may apply without certain usage or balance minimums met
• Not thoroughly testing mobile app functionality for features like mobile check deposit ease
• Forgetting to set external account links, bill pays, and direct deposits back up when switching banks
• Not taking advantage of features like ATM withdrawal and debit transaction limits to avoid overdrafts
• Relying too heavily on cost benefits and digital experience over financial strength of institution
• Not having backup deposit accounts at other banks in case of security breaches disrupting access

While the convenience and tech appeal is powerful, avoid taking benefits and security for granted when banking online only.

Future of Online Banking

Expect further digital banking innovation and disruption:

• Continued blurring between technology platforms and financial services
• Digital-first bank interface becoming the norm over legacy systems
• Robo-advisors and AI-driven services gain prominence
• Better data tools empower users with financial insights
• Rise of digital banking assistants and virtual agents
• Ongoing battle for deposit share between traditional and online banks

The online banking movement places greater power into the hands of banking consumers thanks to transparency, competition, and personalization. This requires legacy players to adapt quickly or fade away.

Is it Safe to Use an Online Bank?

Legitimate FDIC-insured online banks are just as secure as brick-and-mortar institutions:

• Deposits insured for at least $250,000 per account-holder by FDIC
• Follow federal cyber-security, privacy and fraud prevention regulations
• Provide two-factor authentication for account access
• Monitor activity for unauthorized transactions
• Encrypt all customer data and financial transactions
• Offer fraud-protection safeguards for debit cards and digital payments

Do diligence on security measures and protections before selecting an online bank. But rest assured money is just as safe held digitally as with a traditional institution if FDIC-insured.

Should Everyone Switch to Online Banking?

While online banks have clear advantages, weigh your personal preferences:

• Digital-savvy customers who value convenience and high rates gravitate toward online banking.
• Customers wanting personal advisory services still benefit from traditional brick-and-mortar banks.
• An online/offline hybrid approach maintains options accessing both digital and physical channels.
• Even tech-comfortable customers may want a local branch for occasions like discussing lending needs.
• Less financially-fluent consumers may prefer in-person guidance.

For those needing only basic services like deposit accounts and debit cards, online banks provide attractive user experiences and pricing. But the right blend of digital and localized banking offers most flexibility.

Is Mobile Banking Safe to Use?

Mobile banking via smartphone apps is quite secure when best practices followed:

• Download legitimate bank apps only from official App Store/Play Store.
• Check app has strong ratings, security, and active development before downloading.
• Enable strongest device login protection like fingerprint or face ID.
• Do not save passwords or account numbers on phones.
• Log out fully after every mobile banking session.
• Use only on personal devices never shared publicly.
• Connect only on secure trusted WiFi networks using encryption.
• Set up transaction alerts to monitor account activity.

With strong login protections and encryption, mobile banking provides safe account access and money management convenience. Take prudent steps choosing apps and securing devices.

Key Takeaways – Why Online Banks Lead

Key advantages online banks offer:

• Top interest rates on savings accounts and CDs
• Robust digital experience via web and mobile access
• Lower account fees and minimums
• Better loan options from online lenders
• Personal finance tools and account aggregation
• Premium customer service and convenience

For a simplified banking experience optimized for today’s digital world, outpace legacy players. From attractive deposit rates to leading apps and low fees, they cater to an underserved audience. For basic banking needs, it’s tough for traditional banks to compete.