It might be hard to imagine these days, but internet banking didn’t exist before the mid-1990s. Before then, if you wanted to do any type of banking, you had to call or visit a branch. But even with the convenience that online banking brought, it took a while to achieve widespread acceptance. Some customers were worried about the security of online transactions, while others still preferred the personal touch and hand-holding that comes with an in-branch visit.
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As of December 2021, however, it seems like those concerns have mostly fallen by the wayside. According to a GOBankingRates survey of 1,335 Americans in that month, just over 14% prefer banking via a physical branch or ATM, while nearly one-third of respondents, 31%, prefer online banking via a web browser. Perhaps the greatest sign of the times is that more than half of respondents — almost 55% — prefer banking via a mobile app. If you’re like the more than 85% of Americans that prefer banking via a web browser or a mobile app, here are five top online banks that may suit your needs.
Ally Bank traces its history back to 1919, when it began as GMAC, the financing arm of General Motors. In 2009, the company rebranded itself as Ally Bank and went completely online. As of 2022, Ally Bank ranks as one of the best online banks available, offering a wide variety of customer-friendly features. Ally Bank has no account minimums and charges no fees on its deposit accounts, and in 2021, it permanently eliminated overdraft fees as well.
Yields on its checking and savings accounts are high, at 0.10%-0.25% and , respectively, and the bank also offers a wide range of high-yielding CDs, including a no-penalty CD and a Raise Your Rate CD. Customer service options are also strong at the bank, which offers live chat and a 24/7 phone line manned by live customer service agents. Ally Bank also offers surcharge-free ATM access at over 43,000 Allpoint ATMs.
Discover Bank is another solid entrant in the online bank category, with the same no-fee, no-minimum structure as Ally Bank. Discover Bank also boasts 24/7 customer service lines with a live person, but it goes one step further and ensures that all of its phone agents are based in the U.S.
Current yields on the Discover Online Savings account are just a touch below those of Ally Bank’s, at a APY, but Discover Bank offers surcharge-free ATM access at over 60,000 machines, including both the Allpoint and the MoneyPass networks. Instead of paying interest on its online checking account, Discover Bank instead offers 1% cash back on most debit card purchases made using the account.
TIAA Bank offers some great online account options, with the only minor drawback being that they carry minimum deposit requirements. The Yield Pledge Checking account, for example, pays a 0.10% APY and has no fees but requires a $100 minimum deposit. The Basic Savings account pays a stellar 0.50% APY but requires a $25 minimum deposit. The CD minimum, however, jumps to $1,000.
ATM fee reimbursements are fairly generous, starting at $15 per month and becoming unlimited if you have at least $5,000 in a TIAA bank account. CD yields are fairly high as well, hitting 0.55% for a 12-month CD and 1.05% for a five-year CD. A 3 1/2-year “Bump” CD starts at 0.80%. As with most quality online banks, TIAA doesn’t charge fees on its deposit accounts.
Axos Bank offers the highest online savings account yield in GOBankingRates’ Best Banks study, at a 0.61% APY. Interest is compounded daily and there are no account minimums or monthly maintenance fees. However, there is an initial deposit requirement of $250, and that featured APY declines to 0.25% on balances from $25,000 to $100,000, and to 0.15% on balances of greater than $100,000.
The bank does offer three types of online checking accounts, Essential Checking, Rewards Checking and Interest Checking. This is a great convenience for banking customers as they can choose the type of checking account that best suits their needs. The Rewards and Interest Checking accounts pay back up to 1%, and all three checking accounts provide unlimited domestic ATM fee reimbursements, which is a huge convenience for customers who don’t want to search for an ATM in a specific network.
First Internet Bank
As its name implies, First Internet Bank was indeed the first state-chartered, FDIC-insured bank to operate entirely online. Given its head start, it’s perhaps not surprising that one of First Internet Bank’s strengths is the depth of its product line. In addition to checking, savings and money market accounts, First Internet Bank offers CDs, IRAs, health savings accounts, home mortgages, credit cards, auto and RV loans, personal and student loans, accounts for kids, and a wide range of business accounts as well.
The bank doesn’t scrimp on its deposit accounts either, offering a 0.50% APY on its no-fee savings account and a 0.30% on its Interest Checking account, although that account does also come with a $10 monthly fee.
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Pros and Cons of Online Banking
If you’re still deciding what type of banking is best for you, here’s a rundown of the most common pros and cons of online banking.
- Mobile deposit
- 24/7 accessibility
- All account information laid out in front of you
- Online bill pay and money transfers
- Lower fees
- Higher interest rates
The biggest pro of online banking is convenience. Rather than having to drive to a branch to deposit a check, for example, you can usually use a mobile app and upload your deposit from the comfort of your own home. You also won’t have to call or visit a banker to get any of your account information. Most online banks also have low account minimums and fees, often charging nothing at all to maintain an account. As online banks typically have lower overhead, they can often pay higher interest rates on savings accounts, CDs and other deposit accounts.
- No physical branches
- Can only talk to bankers over the phone
- Hard to deposit cash
- Unlikely to be a complete solution
Although most people don’t want to visit a bank branch unless they have to, it’s a definite plus to have bankers and branches available in case you need assistance. While many online banks have 24/7 customer service phone lines or chat options, in some situations, it’s easier to resolve an issue by dealing face-to-face with a banker. Another drawback of online banks is that you can’t usually deposit cash to your accounts. Some banks may offer the option to deposit cash via an ATM, but that’s usually an option of last resort. Other online banks simply don’t accept cash deposits, which can make them off-limits for cash-rich businesses, for example. Although they are widening their product lines every day, most online banks don’t yet offer the full range of services that traditional banks do.
How To Switch To an Online Bank
Switching to an online bank is easy. First, you’ll have to open an account at an online bank via a website or mobile app. As with traditional banks, you’ll have to provide basic personal and financial information, such as your name and address, date of birth, Social Security number and a source of funding for the account. From there, most banks will offer you various options to switch over an account from another institution. For example, you can typically transfer directly from another institution via wire transfer or ACH transaction, or you can deposit a check via mail or mobile app.
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This article was updated on Feb. 11, 2022 to clarify Discover Bank’s online savings account APY.
Methodology: GOBankingRates surveyed 1,335 Americans aged 18 and older from across the country on between December 1 and 3, 2021, asking twelve different questions: (1) What category does your current financial institution fall under?; (2) Have you considered changing Banks within the past year?; (3) If you have considered changing banks in the past year, were any of the following factors? (select all that apply):; (4) Which feature, perk, or other offering is most important to you when opening an account with a new institution?; (5) Are you currently satisfied with all your banking products and services offered by your Bank/Credit Union?; (6) Would you ever have different types of accounts across multiple banks? (i.e. Checking at Chase, but Savings at TD Bank); (7) What is your most preferred method of banking?; (8) Which of the following is the biggest factor of you staying with your current bank?; (9) Which of the following bank accounts do you currently use/have open? (Select all that apply); (10) How much is the minimum balance you keep in your Checking Account?; (11) How much do you currently have in your Savings Account?; and (12) If you are in a relationship or married do you share bank account(s) with your partner? All respondents had to pass a screener question of: Are you currently a member of a Bank (online included) or Credit Union?, with an answer of “Yes”. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.