The best online bank for you depends on what you actually do with your money
There is no single "best" online bank because different banks serve different needs. One person needs a place to park savings and earn interest. Another needs to move money between accounts quickly. A third needs customer service they can call. Before you compare banks, think about what matters to you: Do you need to deposit checks? Do you want the highest interest rate on savings? Do you prefer to handle everything on your phone, or do you sometimes need to talk to a person?
Once you know what you need, you can compare the actual banks that offer it. This guide walks you through the main things that differ between online banks, and how to think about each one.
Key Takeaways
- Online banks have lower fees than traditional banks because they do not pay for physical branches, but they differ widely in what they charge for overdrafts, transfers, and account closures.
- Interest rates on savings accounts change frequently and vary by bank, so comparing rates today does not tell you which bank will pay the most a year from now.
- Some online banks let you deposit checks by taking a photo on your phone; others require you to mail checks or transfer money from another account.
- Customer service availability ranges from email-only to 24-hour phone support, and this matters most if you need help quickly or do not use computers easily.
- Most online banks are insured by the FDIC, which means your money is protected up to $250,000 per account type, but you should confirm this before opening an account.
How online banks differ on fees
Online banks typically charge fewer fees than banks with physical branches, but "fewer" does not mean "none." The fees that vary most are overdraft fees (charged when you spend more than you have), monthly maintenance fees, and fees for closing an account early.
Some online banks charge no overdraft fee at all. Others charge $25 to $35 per overdraft. A few let you link a savings account or another bank account to cover overdrafts automatically, which costs nothing if you have the money available. Monthly maintenance fees range from zero to $15, though many banks waive the fee if you keep a minimum balance or set up direct deposit.
Before you open an account, read the fee schedule on the bank's website. Look specifically for overdraft fees, monthly fees, and fees for transfers to other banks. These are the ones that add up fastest.
Interest rates on savings accounts
Online banks typically offer higher interest rates on savings accounts than traditional banks do, because they have lower costs. However, interest rates change constantly—sometimes weekly—and they are not locked in. A bank that pays the highest rate today may not pay the highest rate in three months.
When you are comparing banks, look at the current rate, but do not choose a bank based on rate alone. The difference between 4.5% and 5.0% on $1,000 is about $5 per year. The difference between a bank with a $35 overdraft fee and one with no overdraft fee could cost you hundreds if you overdraft even a few times. Balance the interest rate against the fees and features you actually need.
If you want to track rates over time, websites like Bankrate and DepositAccounts list current rates at many banks and update them daily. These sites do not sell anything; they just show you what is available.
How you deposit checks and move money
Online banks cannot take cash deposits because they have no branches. But most can take checks. The most common methods are mobile check deposit (you photograph the front and back of the check with your phone), mailing the check to the bank, or transferring money from another account you already have.
Mobile check deposit is the fastest—usually the money shows up in one to two business days. Mailed checks take longer, sometimes five to seven days. If you receive checks regularly, make sure the bank you choose offers mobile deposit before you open an account.
Moving money between your online bank and another bank usually takes one to three business days through the standard transfer system. Some banks offer faster transfers for an extra fee, or they may partner with other banks to move money the same day. If you need to move money quickly and often, ask about this before you open an account.
Customer service and how to reach it
Online banks offer customer service in different ways. Some have phone support available 24 hours a day. Others offer phone support during business hours only. A few offer only email or chat support, with no phone line at all.
Think about when you might need help. If you have a problem on a Sunday night and need to talk to someone when ready, you need a bank with 24-hour phone support. If you are comfortable waiting until the next business day and prefer to write out your question, email support may be fine. If you are not comfortable using a computer or phone app, you may want a bank that has phone support during the hours you are awake.
Most online banks have a phone number on their website. Call it before you open an account and see how long you wait and whether the person who answers can actually help you.
FDIC insurance and account safety
Most online banks are insured by the FDIC (Federal Deposit Insurance Corporation), a government agency that protects your money if the bank fails. FDIC insurance covers up to $250,000 per account type at each bank. This means if you have a checking account and a savings account at the same bank, each is covered separately up to $250,000.
Before you open an account, check the bank's website for the FDIC logo or a statement that says the bank is FDIC insured. If you cannot find it, call the bank and ask. You can also search the FDIC's bank database at fdic.gov to confirm a bank is insured.
If you have more than $250,000 to deposit, you can open accounts at multiple banks to keep all your money insured. For example, $250,000 at Bank A and $250,000 at Bank B are both fully covered.
Comparing specific banks side by side
Once you know what features matter to you, you can compare actual banks. Make a list of what you need: for example, "mobile check deposit," "no overdraft fees," "phone support 24 hours," and "savings account with competitive interest." Then visit the websites of three to five online banks and see which ones offer all of it.
Write down the fees, interest rates, and customer service hours for each bank. Call the customer service line and ask a question to see how helpful they are. Open an account at the bank that meets your needs at the lowest cost. You can always move your money later if the bank does not work out.
Some online banks that are commonly used include Ally, Charles Schwab Bank, Marcus, Discover Bank, and Axos Bank, but there are many others. This list is not a recommendation—it is just a starting point for your own research.
Frequently Asked Questions
Can I use an online bank if I do not have a computer?
Yes. Most online banks have mobile apps that work on smartphones, and you can do almost everything through the app. However, if you do not have a smartphone or do not want to use one, you should choose a bank with phone support so you can call for help. Some online banks make it difficult to do things by phone, so ask before you open an account.
What happens if I need to deposit cash?
Online banks cannot take cash deposits directly. If you receive cash regularly, you have a few options: deposit it at an ATM that is connected to your online bank's network, transfer money from another bank account you have, or use a service like MoneyGram or Western Union to move cash into your account (though these usually charge a fee). Ask your online bank which options are available before you open an account.
Is my money safe at an online bank?
If the bank is FDIC insured, your money is protected up to $250,000 per account type, the same as at a traditional bank. Online banks use the same security technology as traditional banks. The main risk is that you might lose your password or fall for a scam, not that the bank itself will lose your money. Use a strong password and never share it with anyone.
Can I switch to a different online bank later?
Yes. You can open a new account at a different bank and transfer your money over. The new bank can often help you move money from your old account. You can close the old account once the money has arrived. This usually takes a few days.
Do I need a minimum balance to open an online bank account?
Most online banks do not require a minimum balance to open an account, but some do. A few waive monthly fees if you keep a certain balance, or they pay higher interest rates if your balance is above a certain amount. Check the bank's website or call before you open an account to see what the requirements are.