How to choose an online bank: 7 things to look for

The perks often provided by online banks can be significant, including accounts with a competitive Annual Percentage Yield (APY), as well as low or no maintenance fees or minimum balance requirements. Online-only banks can also offer plenty of fee-free ATMs along with a secure and user-friendly digital banking experience.

When choosing a bank that only maintains an online presence, some of the aspects you should look for are the same as many brick-and-mortar banks offer, such as deposit insurance that ensures your money is safe. However, things like easily accessible customer service can also be of great importance to online banking customers, as it is not possible to visit a branch to speak to a teller.

Taking a look at a variety of benefits and services available can help you find the best online bank for your needs. Here is a list of the main things to watch out for.

1. FDIC Insurance

When a bank is covered by the Federal Deposit Insurance Corp. (FDIC), client funds are protected up to $250,000 per depositor, per ownership class. This insurance is backed by the full faith and credit of the US government, and it guarantees that customers will not lose their money should the bank fail.

You can confirm coverage by visiting the FDIC BankFind site and searching by bank name and location.

2. Competitive rates

Online banks tend to offer very competitive returns on savings accounts, often paying 10 times or more the national average interest rate. The difference can really add up over time. For example, if you deposit $5,000 into an account with an APY of 0.1% and let the money sit for five years without adding it, at the end you will have $5,025.06. However, if you put $5,000 into an account with an APY of 1.15%, after five years you will have $5,295.92, which is $270.86 more than what you would earn on the account with the return. the weakest.

In some cases, online banks can afford to pay higher rates because they don’t have the overhead of maintaining branches. Additionally, having competitive rates can help drive customers away from traditional banks that tend to offer customers lower APYs in general.

3. Low fees

A competitive APY can be mitigated when you have to pay maintenance fees, but many online-only banks don’t charge monthly fees for their accounts. For example, online savings accounts offered by Capital One Bank, Ally Bank, and Marcus by Goldman Sachs do not charge maintenance fees or require a minimum balance.

A trend among banks in recent years is to eliminate or reduce overdraft fees, and various online banks no longer charge for things like overdrafts, overdraft protection transfers, insufficient funds, and returned items.

4. Robust ATM networks

Online banks are often owned by large ATM networks, such as Allpoint and MoneyPass, which offer 55,000 and 37,000 ATMs in the United States, respectively.

Online-only banks often do not charge ATM fees to their customers, and some also reimburse the fees you incur from other banks for using out-of-network ATMs. These refunds can be made at the end of each business day or in a lump sum at the end of a statement cycle, depending on the bank.

5. Customer service readily available

Since online banks do not offer branches, it may be advantageous to choose one with easy-to-reach customer service. Some provide real-time 24/7 support via phone or online chat, while others also allow you to message bank representatives in their mobile apps.

6. Money Management Tools

In addition to providing standard banking services through their website or mobile app, various online banks offer features that can help with budgeting money or building savings.

For example, the online savings account offered by Ally Bank allows you to create a compartment for each of your savings goals, so you can designate how much of your funds to save for a new car. , a down payment on a home or the next year’s vacation.

Seeing a snapshot of all your finances in one place is possible with the Marcus by Goldman Sachs mobile app, which allows its customers to link external savings and investment accounts.

7. User-friendly digital banking services

Many online banks offer user-friendly websites and mobile apps, which allow you to transfer money between accounts, pay bills, deposit checks, and perform various other transactions that you would otherwise do at a branch. or an ATM.

Other transactions possible through online banking include opening new accounts, applying for a credit card, sending money to others, and stopping a check from being paid.

Potential Disadvantages of Online Banking

Lack of in-person customer support

Online-only banking may not be suitable for those who prefer face-to-face contact with a customer representative. Some online banks that offer phone support may have hard-to-find phone numbers, as well as limited customer service hours.

Limited product range

Although many established brick-and-mortar banks offer several types of savings and checking accounts, as well as money market accounts, CDs, and loans, you won’t always find such a wide variety of products with an online bank.

Difficulty depositing money

The lack of branches can make it difficult when you want to deposit money into your online bank account. Some ATMs accept cash deposits, but not all, so be sure to check your bank’s website beforehand.

At the end of the line

Online-only banks may have some distinct advantages over banks that maintain branches, including a tendency to offer higher rates and lower fees. Anyone looking for an online bank would do well to compare things like APYs, digital banking experiences, ATM availability, and quality of customer support.


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David A. Albanese