When it comes to managing your money, there are more options than ever before. One of these options is online banks. But what exactly are online banks, and what do you need to know before choosing to use one?
Put simply, online banks are banks that operate solely online, without any physical branches. This means that all of your banking needs, from opening an account to making transactions, can be done entirely online. While this may sound convenient, you should weigh the pros and cons before making the switch.
Advantages of Online Banking
Online banking offers a range of advantages over traditional brick-and-mortar banks:
- Lower fees: Online-only banks don’t have the overhead costs associated with physical branches, resulting in lower fees for customers.
- Higher interest rates: With no physical locations to maintain, online banks can offer higher interest rates on savings accounts and CDs.
- 24/7 availability: Online banks allow customers to access their bank accounts anytime and anywhere, without the restrictions of physical branch hours.
- Convenience: From opening an account to making transactions, everything can be done from the comfort of your own home.
- Mobile banking: Most online banks provide user-friendly mobile apps that allow for easy banking on the go.
- Security: Advanced encryption and other security measures are used to protect personal and financial information.
Disadvantages of Online Banking
While online banking has many benefits, there are also some drawbacks to consider:
- Lack of in-person support: If you prefer face-to-face banking, online-only banks may not be the best fit for you.
- Limited services: Online banks may not offer all the services traditional banks do, such as cash deposits, safe deposit boxes, or specialized loan products.
- Limited availability of ATMs: While many online banks offer access to a network of thousands of ATMs, there may not be as many options in your area.
- Potential for technological glitches: While online banks are typically reliable, there is always the chance that something could go wrong with your account due to a technical issue.
- Depositing and withdrawing money can be more difficult: Many online banks offer mobile check deposit and other convenient features. However, there may be limits on the amount of money you can deposit or withdraw at one time.
- Customer service issues: With no physical locations, it can be more difficult to get in touch with a representative if you have questions or concerns. But, that’s not always the case. Some digital banks offer excellent customer service.
What are the best online banks?
Given the multitude of options, it can be challenging to discern which online bank aligns best with your requirements. The following are some of the best online banks along with explanations of why they might be the perfect fit for your needs.
SoFi is an online bank that provides fee-free checking and savings accounts, alongside a unique cash management account that combines the features of both. Customers can enjoy a high-yield savings account with a 4.60% APY and take advantage of exclusive member benefits, including career coaching, financial planning, and loan discounts.
Notably, SoFi Money’s mobile app is a standout feature that enables customers to manage their finances seamlessly, offering features such as mobile check deposit, bill pay, and peer-to-peer payments.
Chime is an online bank that offers fee-free checking and savings accounts. They also offer a feature called SpotMe®5, which allows you to overdraft your account up to $200 without incurring any fees.
GO2bank is a one-stop solution designed to meet all your banking needs. There are no monthly fees when you set up qualifying direct deposits, and you can get your paycheck up to two days early. Plus, you’ll have peace of mind with $200 in overdraft protection.
Boost your savings by earning a generous 4.50% APY on balances up to $5,000. And if you’re looking to build your credit, take advantage of the no-annual-fee GO2bank Secured Visa® Credit Card.
You’ll also have over 19,000 fee-free ATMs and 90,000 cash deposit locations at your fingertips.
Capital One 360
Capital One 360 is a well-recognized online bank, known for its diverse range of banking products and services. Customers have access to a variety of free checking and savings accounts, CDs, money market accounts, and credit cards.
A remarkable aspect of Capital One 360 is its mobile app, which provides a seamless banking experience for customers on-the-go by allowing them to deposit checks, pay bills, and transfer funds with ease.
Ally Bank has gained popularity as one of the leading online banks, and rightfully so. Its appeal lies in its absence of monthly maintenance fees, minimum balance requirements, and competitive interest rates on savings accounts and CDs, making it an ideal option for those seeking cost-effective solutions.
In addition, Ally Bank provides a range of checking accounts, including interest-bearing options and accounts that offer ATM fee reimbursement, thereby offering greater convenience and flexibility to its customers.
While Discover Bank may be renowned for their credit cards, their online banking products and services are equally noteworthy. Customers can benefit from fee-free checking and savings accounts, as well as CDs and money market accounts.
Additionally, Discover Bank’s cashback rewards program for checking accounts stands out as a notable feature, enabling customers to earn 1% cashback on debit card purchases of up to $3,000 per month.
How to Choose the Best Online Bank
Choosing the best online bank requires careful consideration of several factors. Start by researching and comparing different banks to weigh their pros and cons against your needs and preferences.
You also need to ensure that the bank you choose has a solid reputation, financial stability, and strong security measures to protect your personal and financial information. Additionally, choose a bank with low fees and high annual percentage yields (APYs) on deposits to maximize earnings and minimize expenses.
Finally, look for a bank with responsive customer support and robust mobile banking features for added convenience. Taking these factors into account will help you confidently manage your finances with an online-only bank.
Tips for Managing Your Online-Only Bank Account
Managing an online-only bank account can be a breeze if you follow these helpful tips:
- Set up alerts and notifications: Get instant updates on any suspicious or unusual account activity by setting up alerts and notifications.
- Regularly monitor your account: Keep tabs on your account transactions to ensure accuracy and detect any problems early on.
- Keep login credentials secure: Protect your account by using strong passwords and enabling two-factor authentication whenever possible. Avoid sharing your login details with anyone, including family and friends.
- Use mobile banking features cautiously: While mobile banking is convenient, use it on secure and trusted devices. Be wary of accessing your account on public Wi-Fi networks to prevent unauthorized access.
- Prepare for emergencies: Plan ahead by having a backup option for accessing cash or emergency funds. This could involve keeping a small amount of cash on hand or having a traditional bank account as a contingency plan.
Online-only banks have their pros and cons, and it’s crucial to consider them carefully before making a decision. Although they offer convenience and cost savings, they may lack face-to-face assistance and have limited product offerings.
When selecting and managing an online-only bank account, reflect on your banking requirements and preferences, assess the bank’s reputation and security protocols, and stay informed about fees and interest rates. Additionally, make sure to use the bank’s mobile banking features and notifications judiciously, and safeguard your login credentials.
As the banking industry continues to evolve, it’s vital to stay attuned to emerging trends and technologies, and to adapt your banking strategies accordingly. By doing so, you can optimize your online banking experience and achieve your financial objectives.
Frequently Asked Questions
What is an online-only bank?
An online-only bank a financial institution that offers users a convenient and accessible way to manage their money without ever having to step foot inside a branch. It’s all done digitally.
With just the click of a button or the touch of a screen, customers can check their account balance, transfer funds, pay bills, make deposits, and more. It’s an easy and efficient alternative to traditional banking that allows users to take control of their finances from anywhere on the planet!
What is a neobank?
A neobank is a financial technology company that operates exclusively online, without any physical branches. Neobanks typically offer banking services such as checking and savings accounts, debit cards, and mobile banking apps, often with lower fees and more attractive interest rates than traditional banks.
They are able to offer these benefits by leveraging technology to reduce overhead costs, and by partnering with other financial institutions to provide access to the necessary infrastructure.
How do online banks differ from traditional banks?
Online banks differ from traditional banks in that they don’t have physical branches, which means they have lower overhead costs and can offer higher interest rates on deposits and lower fees. However, they may have limited ATM access and less personal interaction with customers.
Are online banks safe?
Online banks are generally safe and secure, but customers should take precautions such as choosing a reputable bank and protecting their personal information. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per depositor, per account in case the bank fails.
How do I choose an online bank?
When choosing an online bank, several key considerations should be taken into account, like interest rates, service costs, accessibility to ATMs, customer care quality and data protection standard. Opting for a dependable bank which boasts advanced security protocols and excellent client assistance is of paramount importance.
What should I do before switching to an online bank?
Before committing to an online bank, you should research their reputation, compare fees, and analyze interest rates. Furthermore, you should make sure you are adept at using the bank’s website or mobile app to deposit and withdraw money.
Are there alternatives to online banks?
Alternatives to online banks include traditional brick-and-mortar banks, credit unions, and digital banks with both online and physical presences. Customers should consider their personal banking needs and preferences when choosing a bank.
How can I ensure the security of my online bank account?
You can maximize the protection of their online bank account by developing strong passwords, enabling two-factor authentication, consistently monitoring their statements, and safeguarding any personal identifiers. When accessing your account, it’s essential to avoid public Wi-Fi connections or devices that are not your own.
What does the future hold for online banks?
The future of online banking looks incredibly promising, with more people turning to internet banking and technology continuing to improve. In addition, traditional banks are also adapting by incorporating online services, making for a more competitive market. However, if online banks want to remain competitive, they will have to continue to innovate.
Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A.; Members FDIC. Credit Builder card issued by Stride Bank, N.A.
3. The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is accurate as of May, 22, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.
5. Chime SpotMe is an optional, no fee service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account each at least once every 34 days. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member’s Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime’s discretion. Although there are no overdraft fees, there may be out-of-network or third-party fees associated with ATM transactions. SpotMe won’t cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.