In the age of the internet, almost every bank offers online banking services. But that doesn’t mean every bank is an online bank. Rather online banks are defined by an essential tradeoff: you’ll typically be offered higher yields and be charged fewer fees than you would from brick-and-mortar financial institutions, in exchange for a purely digital experience. That means no branches to visit.
We looked at hundreds of data points on account yields, fees and more to figure out the top ten best online banks for you to consider.
Why trust us
We analyzed over 35 data points on more than 75 online banks based on a methodology that heavily weighed the average yield each offered across all of their deposit accounts. And while financial rewards are a great indicator of a top bank, we also looked at how many types of accounts each online bank offered, their ratings, fees and minimum balance requirements.
Annual percentage yields (APYs) and account details are accurate as of June 14, 2023.
Best online banks of July 2023
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Methodology
APY 25%
The most important factor, albeit not the only one, in determining where you’ll bank is how much you’ll earn on savings. Therefore we prioritized a bank’s APY on savings products. This is especially true for online banks whose sole reason for being is that they can offer better yields than their brick-and-mortar competitors.
Product offerings 20%
When you join a bank, you expect it to offer more than a single type of account. While online banks may or may not offer a smattering of consumer loans, we specifically looked for checking, savings, CDs and money market accounts as a baseline. Online banks with all four scored well in this category.
App ratings 13%
A point of online banks is that they are easily accessible electronically. While they don’t have brick-and-mortar locations, they do have phone apps. And no one likes a glitchy app, especially one that interfaces with your money.
The Apple App Store and Google Play Store ratings factored into our analysis of online banks.
Fees 12%
Paying monthly fees to have a bank account is a fashion that’s rapidly going out of style, especially with online banking. But we still looked at whether the banks had fees for its deposit accounts and weighed it accordingly.
Minimum opening deposit and balance 12%
We believe in democratizing finance. Opening (another) bank account likely takes a backseat to priorities such as paying rent, buying things for your family and much more. If you do want to get a new online bank account, it should be within your financial reach. We considered how much you need to both open an account and to keep it open. The lower these numbers, the better.
After all, you likely have better uses for your money rather than keeping it in a bank account; whether it’s supporting your family or investing it for a greater return than what a bank deposit account can offer.
Size of fee-free ATM network 10%
Given that online banks don’t have any physical branches, being able to access cash (and your account in general) via an ATM can be important. And who wants to pay a fee each time? No one, that’s who. We considered the size of fee-free, in-network ATMs when we evaluated the online banks.
Customer service 8%
We reviewed the letter grades awarded by the Better Business Bureau, the scores from Trustpilot and factored in whether online banks offered an online customer chat function.
Why some weren’t picked
You’ll notice that some of the biggest names in banking aren’t on our list. Firstly, the largest banks in the nation by asset size all have physical locations (they’re not online-only banks). And, secondly, the largest banks tend to offer poor yields on consumer deposit accounts (which is the factor we weighed the most heavily).
The largest banks already enjoy the benefits of having a ton of deposits; they don’t feel the need to offer great rates to attract more customers (a.k.a. more deposits).
Smaller institutions typically offer the best rates in a bid to gain attention and attract customers.
What does digital banking mean?
Digital banking involves managing your bank accounts without stepping foot in a physical branch. The concept of digital banking can be broken down into two parts: online banking and mobile banking.
Online banking is when you use an internet browser like Google Chrome, FireFox or Safari to go to your bank’s website and log on to your account. Mobile banking is when you manage your money through a financial institution’s app on your smartphone or tablet. While the login details for your bank’s mobile app may remain the same, the interface within the app may look a bit different than the bank’s website.
Traditional banks with physical branches often offer both online and mobile banking services. Most customers expect it. But online-only banks don’t have branches and focus on the digital banking experience. This means that while you can bank from anywhere in the world, you need an internet connection or ATM as there are no physical branches.
How to open a bank account online
You don’t have to leave your home to open an online bank account. Once you’ve found a bank you want to work with, you’ll likely complete the following steps:
- Head to the bank’s website.
- Choose the type of bank account.
- Fill out an application.
- Provide identity verification documents.
- Wait for approval.
- Fund your new account.
In many cases, the application and approval process takes a matter of minutes.
You can make the process run smoothly by gathering necessary documents ahead of time. Most banks will ask for the following details:
- Your Social Security number: An Individual Taxpayer Identification Number (ITIN) may also fit the bill.
- A government-issued ID: Many people use their driver’s license. But a passport or other form of identification might be accepted.
- Any deposits: If you are required to make an opening deposit, have funding account information ready, including the routing and account numbers.
If you run into any issues, you’ll often find a customer support team ready to help.
Choosing the best digital banking experience
Digital banking experiences aren’t created equally. The features and the overall quality will vary based on the financial institution. It’s helpful to explore all of your options before signing up for an account.
Let’s explore some of the factors to consider when choosing the best digital banking experience:
- Account APYs: Online banks tend to offer higher APYs than traditional banks. But even among online banks, you can find a wide range of offered APYs. For most, a higher APY is a top priority to grow their funds. Take the time to find an online bank with a competitive APY.
- Bank fees: No one wants to pay bank fees. Before signing up for an account, check out the fee structure. Confirm you are comfortable with the fees before applying for an account.
- Product offerings: Some online banks offer a full suite of banking products, while others online offer a handful of savings products. When looking for an online bank, keep your goals in mind. For example, if you are looking for a top APY for your savings, you might choose a different bank than someone who wants to manage all of their accounts in a single location.
- ATMs: If you want to have access to physical cash with limited fees, look for an online bank that offers access to a fee-free ATM network.
- Mobile app: A glitchy mobile app can ruin your digital banking experience. Take a look at the app reviews in the Google Play Store and the App Store to see how the app stacks up. If reviewers are consistently calling out a glitch, you might want to choose another bank.
- Deposit insurance: It’s critical to confirm the financial institution you work is guaranteed by the Federal Deposit Insurance Corporation (FDIC), which protects your funds up to $250,000 per depositor, per covered institution, and per ownership type.
- Safety features: There are plenty of scammers in the world, but many online banks have extensive safety features to keep your funds safe. For example, some safety features include fraud monitoring, account alerts and multi-factor authentication.
A final and important consideration is the overall customer experience.
“Reliable customer support is an indispensable aspect to consider when selecting an online bank,” said Oliver Wagner, CPA and founder of 1040 Abroad, a tax firm for expats. “Whether it’s a question about account management, a discrepancy in transactions or assistance with navigating the online banking platform, having access to knowledgeable and helpful representatives can make all the difference.”
Online banking vs. traditional banking
Traditional banking comes with physical branch locations to provide customer support. Most brick-and-mortar banks offer a wide range of services at their branch locations. For example, you might be able to make deposits, check your account balance, apply for a loan or ask any number of questions about your banking experience.
While brick-and-mortar branch locations are still offered by many traditional banks, many traditional banks also offer online banking services. After all, many customers want the option to manage their finances from a website or mobile app.
In contrast, besides ATM access, online banks are exclusively digital. Because they tend to save on overhead expenses, and are less established and need to attract customers, they typically offer better rates on both savings and loan products.
However, they are often smaller and may have a limited number of financial products. For example, at one online bank, you might find a top-notch savings account, but no checking account. This might lead to you having accounts at multiple online banks to get the best deal for each type of deposit.
The right choice between traditional banking and online banking varies based on your situation. If you’re comfortable handling all of your money management needs online, then an online bank might be the right fit.
The allure of higher interest rates and lower fees is a strong feature of most online banks. But if you’re looking for a more comprehensive suite of banking products and you like the option of talking to someone in person, then working with a traditional bank might be a better fit.
Frequently asked questions (FAQs)
In general, digital banking is a safe option. Like brick-and-mortar banks, online banks can offer FDIC-insured savings products to provide peace of mind about your funds.
On top of FDIC insurance, many online banks offer extensive security features. Some common safety features offered by online banks include account alerts, fraud monitoring, and multi-factor authentication. Working with an online bank that offers a wide range of security features can keep your funds safe.
The digital nature of online banks doesn’t mean you have to skip FDIC insurance. Online banks, like traditional banks, can be FDIC-insured. Before signing up to work with a particular online bank, you can confirm that its accounts are protected with the FDIC BankFind tool.
Many online banks offer accounts with access to ATMs, which gives customers the ability to withdraw physical cash from their digital bank account. While most online banks offer some level of access to ATMs, not all online banks offer this perk. If you want access to ATMs, confirm the online financial institution offers this option before signing up for an account.
