Gone are the days when we had to choose a bank based on branch locations. In this digital world, you can choose a bank that exists entirely online and has no branches at all.
Let’s take a closer look at online banks and the benefits they offer for savings accounts, checking accounts, and more.
Online banks have some pretty nice perks
If you’ve never thought about looking beyond your neighborhood banks, here are some great features of online banks.
Higher APYs
First of all, I have to mention the higher interest rates you find on deposit accounts of online banks. This is due to the lower overhead costs at online banks – they don’t have to maintain branches.
Our pick of the best high-yield savings accounts of 2024
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Capital One 360 Performance Savings 
APY 4.25%
Price info
For the most current rates, visit Capital One’s website. The advertised annual percentage rate (APY) is variable and is effective April 11, 2024. Rates are subject to change at any time before or after account opening.
Member of the FDIC. |
APY 4.25%
Price info
For the most current rates, visit Capital One’s website. The advertised annual percentage rate (APY) is variable and is effective April 11, 2024. Rates are subject to change at any time before or after account opening. |
Min. to earn $0 |
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American Express® High-Interest Savings 
APY 4.25%
Price info
4.25% annual percentage rate from August 23, 2024
Member of the FDIC. |
APY 4.25%
Price info
4.25% annual percentage rate from August 23, 2024 |
Min. to earn 1 dollar |
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UFB Portfolio Savings Account 
APY 5.15%
Price info
To ensure you continue to receive the highest interest rate with UFB, you need to keep an eye on their interest rates. Occasionally, the bank opens new accounts with higher interest rates. Existing accounts will need to contact the bank to request to be transferred to one of these new accounts.
Member of the FDIC. |
APY 5.15%
Price info
To ensure you continue to receive the highest interest rate with UFB, you need to keep an eye on their interest rates. Occasionally, the bank opens new accounts with higher interest rates. Existing accounts will need to contact the bank to request to be transferred to one of these new accounts. |
Min. to earn $0 |
At a local bank (or even a branch of a large national bank), the best you’ll get on a savings account is often just 0.01%. If you have $10,000 in your savings account, that will only earn you $1 a year.
But put that $10,000 into a high-yield savings account that pays 4.5% APR (10 times the national average). If you can maintain that rate for an entire year, you’ll end up $460 richer—just for keeping the money in the account.
However, the 4% and 5% interest rates we currently see on high-yield savings accounts are outside the norm and are due to a higher prime rate that will likely drop soon. Still, you can still expect to earn a higher interest rate than 0.01% on an online bank savings account – even at a 1% or 2% rate, your $10,000 will earn you $100 or $200 in a year.
Fewer (or no) fees
Another great benefit of online-only banks is that they don’t charge fees. My savings account at a large national bank has a monthly maintenance fee when my balance falls below a certain amount. But my online bank has very few fees – no maintenance fees, no overdraft fees, and no excessive transaction fees.
Granted, a branch bank might allow you to meet certain requirements (like having paychecks direct deposited) to avoid a monthly fee, but wouldn’t it be nice to not have to worry about that at all?
Better customer service times
How about 24/7 customer service? Of course, with an online bank, this isn’t face-to-face customer service, but you can probably speak to a human anytime by phone or online chat. My online bank even has a handy tool on its website that shows you the expected wait time when you ask for help.
Saving tools
Want to take advantage of tools like savings pots, summaries, and charts that show you your progress over time? Online banks are ahead of the game when it comes to saving smarter, not harder.
Savings pots are my favorite feature in online banking – they allow you to split money in a single savings account into multiple sub-accounts, making it easier to save for different goals at once.
Are online banks safe?
You may be wondering how safe online banks are – many people find the idea of a bank branch that they can just walk into during business hours very comforting. But don’t worry: As long as you choose a reputable and FDIC-insured online bank, your money is safe with them (up to $250,000 per depositor, per FDIC-insured bank, per category of owner).
Read reviews of each bank you’re considering, from personal loan experts (like us here at The Ascent) as well as regular consumers. This will give you an idea of potential problems with a particular bank.
How do you know if an online bank is not right for you?
As much as it pains me to say this, online banks may not be right for everyone. If you’re not comfortable with new technology, you may find it difficult to manage your money in an online account. And if you value personalized customer service, a local bank may be right for you. Finally, if you get paid in cash, an online bank may not be right for you, as you probably won’t be able to deposit cash directly into an online bank account.
In this case, I recommend you shop around to see which bank or credit union offers you the best terms on fees and interest rates. Just because you’ve been with the same bank for years doesn’t mean you have to stay there if a better deal comes along.
