When was the last time you checked how much you made with your checking or savings account just because you had money in it?
If you're working with a traditional stationary bank this might have taken a while – and that's not surprising.
When financial institutions like Wells Fargo and Bank of America offer annual percentage returns (APYs) as low as 0.01% on their savings and checking accounts, it's easy to get used to your money stagnating.
But savings accounts and even checking accounts can make money if you choose the right bank or credit union
The advantages of online banking
The biggest appeal of online banking is its high annual percentage rate of return (APY). APY is the interest (including compound interest) that you will earn on your money in one year.
Because online banks rarely have physical locations and require fewer employees, they have low overhead and can pass these savings on to customers.
The average APY for the online banks with checking accounts issued in our 2021 list is approximately 0.31%. Some accounts also offer cashback on debit cards. The average APY for our best online savings accounts is even higher: around 0.60%.
In 2019, the average APY on our list was 1.40%. The average savings account was around 2.00%. It is unclear how long these APYs will stay this low.
Keep in mind that traditional banks offer interest rates as low as 0.01% on both checking and savings accounts. (The national average for savings accounts is just 0.05%.)
However, online bank accounts offer many advantages outside of high interest rates. Here are just a few:
- Low (or no) fees, including monthly maintenance fees (sometimes called monthly service fees), overdraft fees, international transaction fees, and ATM fees. Some online banks even offer reimbursement of fees for ATMs outside the network.
- Low or no minimum balance requirements.
- Strong online and mobile banking experience, including apps and two-factor authentication.
- FDIC and NCUA insurance up to $ 250,000.
- Accessible customer service online or by phone.
Check out our current list of bank promotions to receive a cash bonus when you sign up for a new bank account.
Best online banks of 2021, ranking
These are the best online banks of 2021 starting with our top picks.
Editor's note: APYs are correct as of December 8, 2020.
1. Allied Bank
Why we like this online bank: Without a doubt, Ally is the best online bank of 2021, offering both online checking accounts and savings accounts.
Although APYs are now lower due to the pandemic and federal adjustments, they are still high with an APY of 0.60% for savings accounts and an APY of up to 0.25% for checking accounts.) You can also apply for loans through Ally, and access to ATMs is never a problem. This is because Ally gives you access to 43,000+ Allpoint ATMs nationwide and reimburses up to $ 10 a month in ATM fees.
Other hallmarks of Ally's online banking are the lack of monthly fees and minimum balance requirements, as well as the first-class mobile app with mobile check deposit.
Potential Pitfalls: If you travel overseas frequently, don't use your Ally Bank debit card. A fee of 1% for foreign transactions is charged for these. Travel credit cards are a better option when traveling abroad.
Also, don't be fooled by the 0.25% APY raffle for a checking account. You need at least $ 15,000 in the account, otherwise you will only earn 0.10%. However, if you have $ 15,000 to spare, consider putting it in a high-yield savings or money market account.
Why We Like This Online Bank: nbkc (the National Bank of Kansas City) makes things easy by combining checks and savings into a single account, the Everything Account. With this account you get an APY of 0.50% across the board.
Even better, there are no fees for banking with nbkc. We're not just talking about monthly maintenance fees. You also don't have to worry about minimum balance, foreign transaction fees, or even overdraft fees.
This bank also has an extensive ATM network (34,000 and up) with $ 12 monthly reimbursements for using an ATM off the network. The mobile app is easy to use, contains savings goals for organizing your money and offers a function for paying bills.
Potential Pitfalls: The APY savings (0.50%) are not the most competitive of the accounts listed here. Member actual locations are limited to Kansas City, Missouri. After all, it costs $ 5 to open the account. This is of course not essential, but most of the accounts on our list are free to open.
Carmen Mandato / The Penny Hoarder
Why We Like This Online Bank: Like Ally, Synchrony has a healthy 0.60% APY for the savings account, which also includes a convenience card for ATM access.
Though low compared to 2019, the fact that Synchrony still offers an APY 60 times bigger than Bank of America's – even in the midst of a pandemic – is pretty impressive. Another highlight is the lack of fees (even for withdrawals after a maximum of six per month).
Also noteworthy: Synchrony has joined the ranks of other top banks with the creation of an app called Synchrony Bank (not to be confused with MySynchrony, the bank's retail portal).
Possible pitfalls: Synchrony does not offer a checking account. This means that you will have to rely on an external account or direct deposit to fund your account.
If you want check writing capabilities, you can open a money market account – but the APY is lower (0.50%) than that of the savings account. Synchrony are also lacking home loans and auto loans.
4. Radius bench
Why We Like This Online Bank: Radius Bank may not compete with the current savings APYs found at some of the top competitors on this list, but this is offset by a unique checking account that offers 1.00% cashback offers on everyday purchases. This means that for every $ 100 you earn, you will earn $ 1.
Radius currently offers 1.50% cashback in certain categories including groceries, health, entertainment and social goods. Radius checking accounts also offer an APY of 0.15%.
There are several benefits to having Radius Bank online verification, but using ATMs is one of the best. When you transfer with Radius, you can always visit any ATM. Radius will reimburse you for all ATM fees.
Other benefits include paying up to two days in advance of your direct deposit, an innovative mobile app with location-based restrictions and spending caps, notifications when you or someone else is using your card, and the ability to turn off lost or missing debit cards.
The Radius Savings Account offers either an APY of 0.15% or 0.25% depending on how much you have in the account.
Potential Pitfalls: Radius requires a minimum deposit of $ 100 for the checking account, and the APY of 0.15% for the savings account won't activate until you've saved at least $ 2,500.
Something that is likely to be more frustrating for those with imperfect financial histories is the requirements placed on the checking account for rewards. Not everyone qualifies for the rewards portion of the checking account, which means you might miss out on cashback.
However, if you do not qualify for the award verification account now, you can use Radius to upgrade to that account using the Essentials checking account. This account, which does not offer a cashback option, has a monthly service charge of $ 9 (all other banks on our list do not charge a monthly fee). Daily deposits and debit card use are limited. However, if you have a positive 12 month banking history, you may be able to upgrade to the Rewards checking account.
5. Capital One 360
Why we like this online bank: Capital One 360 doesn't have the most attractive APYs (0.10% for checks and 0.40% for savings) for either its online check or savings account, but the online bank is the same ranked second in the industry – the highest rated app by JD Power, with users citing the app's speed, user-friendly interface and easy-to-use self-service options.
In addition, Capital One's accounts do not include any monthly fees and offer easy bank account integration. With the checking account you have access to more than 40,000 toll-free ATMs. Unlike some online banks, Capital One has physical branches – and Capital One cafes, where you can enjoy Peet & # 39; s Coffee, share a work space. Get in-person money coaching, attend workshops, and even host events for nonprofits.
Potential Pitfalls: The APY for the savings account isn't the strongest on this list. It is also not possible to categorize your savings into sub-accounts within the app, making it difficult to pursue multiple goals.
6. Axos Bank (formerly known as Bank of Internet)
Why we like this online bank: Axos offers consumers many checking account options:
The Rewards Checking account has the highest APY on our list at 1.25%. However, to earn this you must:
- Receive monthly direct deposits of $ 1,000 or more.
- Use your Axos-provided Visa debit card for a minimum of 10 transactions of $ 3 or more. and
- Use it five more times (for a minimum of $ 3 each).
If you only meet one of the three criteria, the APY is 0.4166%. When you get to two it doubles; and when you hit all three you get the full 1.25%.
This account also offers unlimited domestic ATM fee refunds and promises no overdraft fees or insufficient fund fees.
There are no fees to the Essential Checking account: unlimited domestic ATM fee refunds, no monthly maintenance fees, and no overdraft fees or insufficient fund fees. You can also get your paycheck up to two days in advance with Direct Deposit Express.
With the Cashback Checking account you can earn up to 1.00% cashback on all transactions that require a signature. As with the Essential Checking account, there are no monthly maintenance fees and unlimited refunds of domestic ATM fees.
Axos also offers special checking accounts for young people and senior citizens.
Axos' online high yield savings account is also impressive with an APY of 0.61%.
Possible pitfalls: Axos offers many options. Just determining the right checking account can be stressful. And once you've settled on a checking account, there are quite a few things to keep in mind to either earn the full APY or to make sure you're spending enough to get 1.00% cashback on purchases that are worth signing for . The minimum balance of $ 250 to open the savings account is also high.
7. Alliant Credit Union
Why we like this online bank: Access to ATMs is almost always guaranteed when you transfer with Alliant. The company has more than 80,000 ATMs on its network and offers $ 20 monthly refunds for off-network use. Alliant also operates one of the top rated checking and savings account apps and has physical locations in the Chicago area.
Alliant's APY checking account is currently at 0.25%. The account has no monthly service fee or minimum balance requirements and comes with a free Visa contactless debit card.
The savings account is equally impressive with an APY of 0.55%. Although the account requires a minimum deposit of $ 5, Alliant pays it for you. (Hey, that's free $ 5!)
Potential Pitfalls: Credit unions joining can be more difficult, and Alliant is no different. Overdrafts can be expensive, with high fees and unlimited daily fees.
Alliant does not currently participate in shared branching, a system that allows you to do your banking with other credit unions on the same network across the country. This is often a trademark of other credit unions.
Why We Like This Mobile Bank: Chime is great for first time savers and donors. Chime has no monthly service fees, no overdraft fees (you can overdraw up to $ 100 on debit cards without charging a fee), no minimum balance requirements, no international transaction fees, and access to 38,000 toll-free ATMs nationwide.
More importantly, it can be set up to automatically transfer a percentage of a direct deposit to the linked savings account and / or automatically round up to the nearest dollar on all purchases and deposit the additional change into the savings account. You may also have access to your direct deposit paycheck up to two days early.
If you want to save, you want to open a Chime savings account (only possible if you have a Chime spending account). The savings account has an APY of 0.50%.
Potential Pitfalls: Chimes are a newer option and may experience increasing pain. There is no personal service and the reviewers regularly complain about slow customer service.
Additionally, Chime is not a full suite bank (e.g. no loans).
9. CIT Bank
Why We Like This Online Bank: For the past several years, CIT has offered the highest interest rate on any savings account on our list. However, following the aftermath of the COVID-19 pandemic, interest rates have fallen dramatically and are well below those of some competitors.
Currently, the APYs are set at 0.29% or 0.45% depending on balances and / or monthly deposits. Although they are not as high as they used to be, we still estimate the APYs, especially when compared to the national average (0.05%).
The new eChecking account added to the portfolio is attractive: 0.10% APY on balances under $ 25,000 and 0.25% on balances at or above $ 25,000 – but it rarely makes sense to have that much in a checking account respectively. The account pays out $ 30 a month in ATM refunds, and the CIT mobile app has great reviews on the App Store and Google Play. You can also get home loans through CIT.
Potential Pitfalls: CIT's drop in APYs on offer for its savings account is one of the biggest we've seen. Additionally, the CIT Savings Builder account suffers from a lack of access to ATMs and a minimum balance requirement ($ 100).
10. Discover the bank
Why We Like This Online Bank: Discover Bank offers both savings and checking accounts. The Discover checking account is a rewards account. This means that instead of paying interest on the money in the bank account, you are making money on debit card purchases. Currently, you can earn 1% cashback on debit card purchases up to $ 3,000 per month for up to $ 30 per month and $ 360 per year. You also have access to more than 60,000 toll-free ATMs and don't have to worry about monthly maintenance fees.
Discover savings account is 0.50% APY. As with CIT, this is a sharp drop from previous years, but no online bank has been immune to the effects of COVID-19.
Potential Pitfalls: You can't get a car or home loan through Discover Bank. Cashback on checking accounts is helpful, but big lenders make more money using a credit card with no monthly cashback limit.
11. Simple banking
Why We Like This Online Bank: The APY for the Simple Protected Objective Account is 0.50%, and the minimum amount for this APY is only $ 0.01. Simple doesn't charge for overdrafts, monthly maintenance, incoming wire transfers, payment requests, or a dormant or closed account.
Some of these benefits, such as B. no fees for incoming transfers and payment requests, are extremely unusual for comparable accounts. And unlike most savings accounts, you can make unlimited monthly withdrawals from the Simple Protected Goals account, a high-yielding checking account that works much like a savings account.
Potential Pitfalls: To earn the 0.50% APY, you'll need to link your checking account to a Protected Destinations account. The simple basic current account does not have an APY.
Why We Like This Online Bank: Barclays offers a competitive APY of 0.45% on their online savings account. While not particularly attractive, it is still way above the 0.01% you make on Chase. The mobile app is highly rated.
Potential Pitfalls: You cannot open a checking account with Barclays, making it difficult to access funds.
13. Charles Schwab
Why We Like This Online Bank: Charles Schwab is ideal for those who love to travel – there are no international transaction fees and unlimited ATMs are refundable worldwide.
However, Charles Schwab is more suitable for investing than for saving and spending due to its diverse investment opportunities. For this reason, the current account called "High Yield Investor" was set up for investors and offers a direct connection to a customer's brokerage account for easy financing.
Possible pitfalls: The APYs are low: 0.05% for the savings account and 0.03% for the checking account.
Charles Schwab is ideal for investors looking for a brokerage account, but savers and financiers looking for simple, high-yielding online savings and checking accounts should look elsewhere.
Why we chose these banks
To help identify the online banks and credit unions for this list, we reviewed nearly 40 of the most popular banks. We picked the 13 banks on our list for their combination of high APYs, low minimum balance, low or no fees, mobile / online experience and easy wire transfer.
All the banks on this list are FDIC (Federal Deposit Insurance Corporation) or NCUA (National Credit Union Administration) insured and have no monthly fees.
Disadvantages of online banks
Banking online is not without its problems, but customers generally find that the high returns, great mobile experiences, and lack of fees more than make up for the pitfalls of online banking.
Below are some of the most common drawbacks of online banking:
Limited options for cash deposits
Depositing cash is the biggest challenge facing online banks due to the lack of physical locations. Even online banks that enter into partnerships with stationary banks for network-internal ATMs are often unable to accept cash deposits via ATMs.
If you want to deposit cash regularly (e.g. if you are a server or a hairdresser who relies on cash tips), but still want to take advantage of an online account, open an account at a stationary bank for exclusively Deposit cash Transfer electronically to your online account.
Challenges in transferring funds
Online checking accounts generally make it easier to access your money with debit cards that work at thousands of ATMs. Some also offer checkbooks, no matter how archaic they may seem.
Access to online savings accounts in emergencies can be more difficult than to savings accounts at stationary banks. However, this is due to improvements in the speed of electronic transfers (ACH deposits) and new solutions in online savings accounts (such as with convenience cards), this problem has been largely reduced.
No personal support
If you are old-fashioned about your money management and like the idea of going to a branch and singing your worries to a bank clerk who can help you figure out your financial troubles, an online bank might not be for you.
Online banks offer incredible customer service online and over the phone, but you can only get personal help with your accounts at a traditional bank.
Timothy Moore is an editorial and graphic design researcher and a freelance writer on topics such as personal finance, travel, careers, education, animal care, and automotive. He has been working in this field since 2012 with publications such as The Penny Hoarder, Debt.com, Ladders, WDW Magazine, Glassdoor and The News Wheel. He lives in Ohio with his fiancé and dog Goomba.
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