Since the start of online banking, more and more people have signed up for accounts with banks that have no physical branches. The advantages of online banking can go far beyond free checking accounts; you can now also get savings accounts, money market accounts, CDs and loans from online banks. And don’t be afraid that online banking isn’t as safe as a traditional brick-and-mortar bank — an online bank is just as safe as long as it’s covered by FDIC insurance. Read on to learn the ways you can save money with the best online banks.
6 Ways You Save Money With Online Banking
If you’re looking to make the most of your money, online banking could be the right solution. Learn why you should consider making online banking a part of your strategy. Here are the ways online banks save you money:
1. No Monthly Fees
Online banks can offer lower fees thanks to lower overhead costs, said Bill Clancy, vice president of deposit banking at Northpointe Bank, which serves online customers in all 50 states. For example, Bank of America’s Core Checking accounts charge a $12 monthly fee unless you have an average balance over $1,500 or a qualifying direct deposit of at least $250.
“The biggest benefit to customers in dealing with an online bank is the relatively lower cost of delivering services when compared to a traditional bank or credit union that possesses a large branch network,” Clancy said. “The costs to build, maintain and staff branches are extremely high. With an online bank, these cost savings can be passed along to our clients in the form of higher deposit rates and more investments in technology.”
A GOBankingRates.com ranking named Ally Bank the best online bank, owing in part to the fact that its online checking account doesn’t charge monthly maintenance fees. Discover Bank checking and savings accounts also have no monthly fees, regardless of your account balance, and you can even open a bank account online with no deposit.
Find Out: How to Open a Bank Account Online
2. Higher Interest Rates
As of October 2017, the FDIC reports that the average savings account interest rate is just 0.06 percent. That makes online savings banks’ higher rates a major selling point.
Bank of Internet USA’s high-yield Smart Savings Account earns 1.05% APY, and its Rewards Checking earns up to 1.25% APY if you meet certain criteria, plus cash back. Discover’s savings account earns 1.15% APY with no minimum balance. Among the highest-earning money market accounts from online banks is Everbank’s Yield Pledge Money Market account, which offers a one-year introductory 1.31% APY on balances up to $250,000.
To put that in perspective, say you keep an emergency fund of $20,000 in a savings account. At 0.06 percent, you would earn a measly $12 in interest after a year. At 1.31 percent, that same balance brings in $262 in interest — $250 more than the national average.
3. No Fees for Sending Money
Fees are an easy way for banks to make a quick buck. And most bank customers are used to paying fees on certain money transfers. For example, TD Bank charges up to $7 to move money from a TD Bank account to an account at another bank. Similarly, Sun Trust Bank imposes a $3 fee for standard transfers to an account at another bank, or $6 for next-day transfers.
But many online banks won’t charge you for these transfers. Ally Bank doesn’t charge you a fee to send money to an account at another bank or to receive money from an account at another bank, for example.
4. Ability to Earn Cash Back
Following in the footsteps of many credit cards, some online bank accounts offer cash-back reward programs on top of other money-saving benefits. With a Discover Cashback Checking account, for instance, customers earn 10 cents for each debit card purchase they make, every check they write, and every online bill payment — think of it as an internet check — on up to 100 transactions each month.
And with Bank of Internet USA’s Rewards Checking, for example, you can select from a variety of cash-back offers. Then, when you make purchases with your debit card, you earn extra cash back that gets deposited into your account at the end of the following month.
5. No or Low ATM Fees
No one likes paying ATM fees just to access their own money. But brick-and-mortar banks keep raising the fees, anyway. Bank of America charges $2.50 for each withdrawal from a non-Bank of America ATM in the U.S. At non-Wells Fargo ATMs, Wells Fargo charges customers $2 for a balance inquiry and $2.50 per transaction.
Discover doesn’t have any physical branch locations, but it’s part of a network with over 60,000 ATMs across the country that you can use fee-free, and its ATM locator helps you quickly locate a machine if you’re in a bind. Ally Bank is part of the Allpoint ATM network with over 43,000 ATMs in the U.S. that you can use fee-free. And if you must use an ATM that’s outside the network, Ally will reimburse you up to $10 each month for fees. EverBank reimburses all ATM fees if you keep your account balance above $5,000.
6. Minimal Time Requirement
Arguably the most valuable aspect of using online banks is the amount of time you can save. You can open your accounts online without having to fight traffic to get to a physical branch. You’ll also save money on the gas you don’t have to use to visit a branch. Should you move, you don’t have to worry about finding a new local bank and updating all your automatic payments with the new account information. And if you have a question about your account, online banks such as Discover have U.S.-based customer service representatives who are waiting to help you, 24/7.