We all know how hectic going to the banks can be. Even though most banks claim they have quick response times, how quick can they be especially on a day where there are a lot of customers to respond to.
It’s no wonder that people have started to switch to Online Banks. Numerous pros come with the use of Online banks but as you can imagine, with every pro, there’s a con to match it. Thankfully, we’ve set out to find out the 15 best online banks in 2021, with the least amount of cons attached to them.
The History of Online Banks
Online banking is the use of a computer or mobile device to manage your bank accounts. This includes electronic fund transfers, check deposits, and bill payments. Customers can typically access their accounts via the internet through traditional banks with branches, but online banks and providers focus primarily on mobile access. You will not meet a banker one on one, but you can access your account at any time using a mobile device or computer.
As the internet began to be commercialized in the early 1990s, traditional banks began to look for ways to provide online services to their customers. Though initially limited, the success of these early efforts prompted many banks to increase their internet presence through improved websites. This resulted in the establishment and growth of internet-only banks. These institutions provide online banking and other financial services without a branch network. Customers’ enthusiasm for online banking grew as the number of virtual banks available increased.
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Online Bank VS. Traditional Bank
We all have our preferences and at the end of the day, some people will always prefer traditional banks to online banks. However, we’re going to highlight some key differences between the two.
- No physical locations as all transactions are handled on the internet or via a mobile app
- Higher interest rates are offered by online banks
- Little to no charges on your account
- Phone or online customer service support
- Swift account opening process
- Physical branches are available
- Large ATM network
- Lower interest rates
- In-person customer service
- Longer account opening period
The reasons for using online banks outlined above demonstrate that they are a convenient option for web-savvy customers looking for affordable, high-interest accounts with advanced features, but they are not perfect or for everyone.
If you prefer to transact with or receive account advice from agents in person, you should stick with a traditional bank. If you choose to bank online, you must also be comfortable with computers and have a basic understanding of internet security. If you choose a legitimate bank that offers deposit insurance, online banking is generally regarded as a safe way to conduct transactions.
As expected when it comes to technology, there’ll always be glitches. However, for a lot of users, online banks are the way to go.
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Pros and Cons of Online Banks
One of the pros of business online banks is that they offer better (lower) rates than traditional banks. Due to the lack of infrastructure and overhead costs, online banks tend to be more generous in this aspect.
Another pro is that the online banking experience is practically seamless. Although traditional banks in recent times have put a lot of funding into making their online experience enjoyable, Online banks have more of an edge above them.
Moving on to the cons of online banks, there is no personal relationship between the users and the bank. Because there is no physical structure, it is quite difficult to establish a firm relationship with its customers.
Depositing cash into your online account can prove to be difficult, thus making it a con for online banks. If you’re someone that does more cash transactions than check deposits, then maybe online banking might not be for you.
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How To Choose An Online Bank
There are some factors to consider when deciding on an online bank. They are:
- Customer experience
- ATM networks
Before you make the choice of an online bank, here are a few things you need to do:
1. Make sure the bank is FDIC insured
It may seem like an obvious question, and you may take it for granted if you walk into a branch to open a new account, but you want to ensure that your money is safe if the bank fails. Even if the site bears the FDIC logo, visit the agency’s website to confirm compliance. “Name recognition should not be a factor as long as the bank is FDIC insured,” says Richard Barrington, Money Rates personal finance analyst. “After all, some of the biggest names in banking had some of the most serious problems in 2008.”
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2. Check the institution’s stability
Even if you are insured by the FDIC, you do not want the headache of watching your bank fail. Determine the size of the bank’s asset base and the length of time it has been in operation. If the bank is publicly traded, you can look up the stock price and read its financial statements. While these characteristics aren’t foolproof indicators of financial stability, a small or new institution may be more vulnerable to economic upheaval.
3. Ensure the bank has an ATM network or reimburses out-of-network fees
Some online banks have a network of ATMs customers can use, fee-free; if they don’t, make sure that you’ll be reimbursed for fees you incur when using other banks’ machines. Make sure there is either a very high cap or none at all. With some banks charging as much as $5 to non-account-holders, you want to make sure you’re not going to be saddled with those kinds of charges. Put together a checklist of other fees you’re currently being charged by your financial institution for things like debit card use, monthly maintenance and so on, then compare that to what the online bank is offering. Online banks have lower overhead, so they can sometimes offer for free the kind of services that brick-and-mortar banks are increasingly charging for.
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4. Check the bank’s security record
Choose a bank that has a high standard for customer passwords if you intend to do all of your banking online. When you log in from another computer, the bank should prompt you for backup authentication. You’ll also want to be able to receive alerts when transactions exceed a certain dollar amount or occur outside of a specific geographic range, according to Philip Blank, managing director for security, risk, and fraud at Javelin Strategy & Research.
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5. Confirm they have an active customer support system
Because you can’t just walk into a branch and speak with a teller, find out how quickly you can speak with someone if you have a question, misplace your debit card, or have an issue with your account. The gold standard is to provide live service 24 hours a day, seven days a week.
15 Best Online Banks 2022
Because they are so convenient, online banks have become a reality. Ridiculous fees are also simple to avoid. It’s not uncommon for large brick-and-mortar banks to charge $30 or more per month, even if you’re an excellent customer—even if they’re already making money by holding your money.
Here’s an outline of the top 15 online banks in 2021.
#1 Discover Bank
Standing as one of the oldest online banks, Discover bank is one of the first to offer up high yield savings accounts and more. Most users only go to Discover bank for their credit cards.
Barclays, based in the United Kingdom, provides online savings accounts and CDs to clients in the United States. Barclays online savings accounts have no minimum balance requirements and no monthly maintenance fees.
Chime customers have free access to over 60,000 ATMs, but out-of-network ATMs are charged per transaction. Chime customers must go to a Green Dot location to deposit cash, and they may be charged a fee. Customers can also receive their pay up to two days early via direct deposit with Chime.\
#4 Ally Bank
Ally does not accept cash deposits; accounts must be funded through transfers from an external account, mobile or mail deposit of a check, or wire transfer. Ally’s phone support is available 24 hours a day, seven days a week, and its website includes a chat feature to assist customers.
#5 Aspiration Bank
Aspiration is an innovative cash management account that offers a competitive APY, cashback rewards, and other benefits. This account has no hidden fees, unlimited fee-free ATM withdrawals through a network of 55,000 ATMs, and extra cashback at select environmentally friendly merchants!
#6 Synchrony Bank
Synchrony does not provide a checking account, but it does provide a competitive savings account as well as certificates of deposit. Twitter, live chat, and phone are all ways to contact customer service. According to user reviews, Synchrony’s mobile app accepts mobile check deposits and performs well.
#7 LendingClub Bank
LendingClub Bank offers a Hybrid Checking account, which combines the best of both checking and savings accounts. They are one of the few banks on this list that offer interest-bearing checking, but with extremely low interest-earning minimums. They also have a fantastic mobile platform with mobile deposits and other features.
MemoryBank will pay you up to 1.5 percent APY on balances up to $250,000 for the first year if you meet the following conditions: Receive at least one electronic deposit per month, have payroll deposited into the account, and opt for paperless statements.
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GoBank, a Green Dot Bank-backed banking services provider, does not offer savings or certificates of deposit, but it does offer a checking account with a large ATM network. Customers can receive their paychecks two days early thanks to GoBank’s early direct deposit service.
#10 Bank 5 Connect
Axos Bank offers a free checking account called the Essentials Checking Account. We prefer free checking accounts, and this one has no minimums, no overdraft fees, and more.
#11 Marcus by Goldman Sachs
Marcus by Goldman Sachs offers excellent online banking services. They specialize in high-yielding savings accounts and CDs. They are, however, continuing to diversify their product offering and provide excellent options for users.
#12 Capital One 360
Capital One acquired and rebranded Capital One 360. Capital One 360, formerly known as ING Direct, provides online checking, savings, CDs, business savings, and children’s accounts, many of which have no minimum balance requirements or monthly fees.
#13 American Express Bank
Through the American Express Personal Savings online bank, customers of American Express Bank can access online savings accounts and CDs. The online savings account has no monthly fees or minimum balance requirements.
#14 TAB Bank
TAB Bank’s Cash Back Checking account allows customers to earn 1% on monthly purchases with no earnings cap, and the bank reimburses up to $15 in ATM fees per month.
#15 TIAA Bank
TIAA Bank, formerly Everbank, is an excellent online bank because it guarantees that its rates will always be among the top 5% of all rates. They also provide an excellent first-year introductory APY on checking accounts with balances up to $250,000.
Frequently Asked Questions (FAQs)
If an online bank is part of an ATM network, then deposits can be made via the ATM
Online banks are typically safe. Most banks use data encryption, and some allow customers to opt into two-factor authentication when logging in to their accounts.
Because online banks do not have to pay for things like electricity, janitorial services, landscaping, or rent, they can pass on those savings to their customers. As a result, online banks can typically charge lower fees than traditional banks.
Your money will be protected from theft and fires. Plus, your money will be federally insured so if your bank or credit union closes, you will get your money back.
Online banking allows you to access your account history and transactions from anywhere. This is the quickest way to see whether a transaction has cleared your account. It also enables you to find out about any unauthorized transactions more quickly, so you can dispute them right away.
Online banking for those who are tech-savvy is the way forward. Ultimately, whether you choose an online or traditional bank is highly dependent on your banking demands, as well as your tastes and budget. Traditional banks may be ideal if you’re looking for a low-cost, independent option, while online banking may be just perfect if you’re looking for a high-budget, high-features option.
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