The Complete Guide to Choosing the Best Online Bank
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In today’s digital age, traditional brick-and-mortar banks are no longer the only option for managing your finances. With the rise of online banking, you can now have complete control over your money without ever stepping foot inside a physical branch. Online banks offer a range of benefits, including convenience, lower fees, and higher interest rates. However, with so many options available, it can be overwhelming to choose the best online bank for your needs. In this comprehensive guide, we will explore the factors to consider when selecting an online bank and provide a list of the top online banks in 2024.
Factors to Consider When Choosing an Online Bank
When evaluating online banks, there are several key factors to keep in mind. By considering these factors, you can ensure that you choose an online bank that meets your specific requirements and offers the best overall banking experience.
1. FDIC or NCUA Insurance
One of the most crucial factors to consider when selecting an online bank is whether your deposits will be insured. It is essential to choose a bank that is either FDIC or NCUA-insured. The Federal Deposit Insurance Corporation (FDIC) provides insurance coverage of up to $250,000 per depositor, per account category, if the bank fails. Similarly, the National Credit Union Administration (NCUA) offers insurance coverage for credit unions. Before opening an account, verify that the online bank prominently displays FDIC or NCUA coverage on its website. You can also use the FDIC’s BankFind tool or the NCUA’s Credit Union Locator to confirm the institution’s insurance status.
2. ATM Access and Fee Reimbursements
Consider the accessibility of ATMs when choosing an online bank. Many online banks partner with national ATM networks, allowing you to access surcharge-free ATMs across the country. This is particularly important if you frequently need to withdraw cash. Additionally, inquire whether the bank offers reimbursements for out-of-network ATM transactions. In case you need to use an ATM from another bank, fee reimbursements can save you money.
3. Online Bank Interest Rates, Fees, and Product Offerings
One of the primary advantages of online banks is their ability to offer higher interest rates and lower fees compared to traditional banks. However, rates and fees can vary significantly between online banks. Before making a decision, compare the interest rates offered on savings accounts, checking accounts, and certificates of deposit (CDs). Additionally, consider the bank’s fee structure, including monthly maintenance fees, overdraft fees, and ATM fees. Some online banks may only offer savings accounts or CDs, while others provide a complete range of banking services. Evaluate your banking needs and choose an online bank that offers the products and services you require.
4. Online Bank Customer Satisfaction and Reviews
To gain insights into the customer experience, it is essential to review customer satisfaction ratings and feedback. Check reviews of the bank’s mobile app and browse through customer feedback on platforms like the Better Business Bureau website and Trustpilot. J.D. Power’s Customer Satisfaction results can also provide valuable information about online banks that prioritize customer experience. By considering the experiences of other customers, you can make an informed decision and select an online bank that aligns with your expectations.
Pros and Cons of Online Banking
Online banking offers numerous benefits, but it is crucial to understand the trade-offs involved to determine if it is the right choice for you. Let’s explore the pros and cons of online banking:
Pros of Online Banking
- Convenience and Accessibility: banking allows you to access and manage your accounts anytime, anywhere through a web browser or mobile app.
- Lower Fees: banks often have lower operating costs, resulting in fewer fees for customers.
- Higher Interest Rates: banks frequently offer higher interest rates on savings accounts, allowing you to grow your money faster.
- Simplified Transactions: With banking, you can easily connect accounts, make transfers, and track your expenses with just a few clicks.
- Innovative Features: Many banks provide advanced features such as expense tracking and savings subaccounts, helping you better manage your finances.
Cons of Online Banking
- Lack of In-Person Services: banks do not have physical branches, meaning you won’t have access to in-person customer service.
- Potential Delays: Certain banking services, such as transfers and deposits, may take longer to process compared to traditional banks.
- Limited Cash Deposit Options: Some online banks do not accept cash deposits through ATMs, which can be a challenge if you frequently receive cash payments.
- Cybersecurity Risks: Online banking carries the risk of scams, fraud, and identity theft. However, traditional banks that offer online services also face similar risks.
- Limited Features in Some Cases: While most online banks offer innovative digital tools, some may have limitations in terms of product offerings or customer support.
It’s important to weigh these pros and cons based on your individual banking needs and preferences before choosing an online bank.
Are Online Banks Safe?
The safety of online banks is a common concern for potential customers. However, as long as your bank has deposit insurance, it can be considered safe. Federally insured online banks and credit unions are protected by the FDIC or NCUA, respectively. This insurance guarantees up to $250,000 per depositor, per institution, providing a safety net for your funds in the unlikely event of the bank’s failure.
In addition to deposit insurance, online banks prioritize cybersecurity to protect your personal information from identity theft and data breaches. They employ various security measures such as antivirus protection, firewalls, fraud monitoring, and website encryption. Most online banks provide detailed information about their security protocols on their websites, assuring customers of their commitment to safeguarding their money and information.
To confirm whether a financial institution is federally insured, you can use the FDIC’s BankFind tool or the NCUA’s Credit Union Locator.
How to Choose the Best Online Bank
Now that you understand the factors to consider and the pros and cons of online banking, let’s dive into the process of choosing the best online bank for your needs. Follow these steps to make an informed decision:
1. Research and Compare Online Banks
Start by researching and comparing different online banks. Take note of their interest rates, fees, product offerings, and customer reviews. Look for online banks that align with your banking needs and priorities.
2. Verify Deposit Insurance
Before opening an account, ensure that the online bank is FDIC or NCUA insured. Look for clear indications of deposit insurance on the bank’s website or use the FDIC’s BankFind tool or the NCUA’s Credit Union Locator to confirm the institution’s insurance status.
3. Assess ATM Access and Fees
Consider your ATM usage and determine if the online bank has an extensive ATM network that meets your needs. Check if the bank offers reimbursements for out-of-network ATM transactions, as this can save you money in the long run.
4. Evaluate Interest Rates and Fees
Compare the interest rates offered by different banks on savings accounts, checking accounts, and CDs. Additionally, review the bank’s fee structure to ensure that it aligns with your preferences and financial goals.
5. Read Customer Reviews
Take the time to read customer reviews and ratings of the banks you are considering. Websites like the Better Business Bureau and Trustpilot can provide valuable insights into the customer experience. J.D. Power’s Customer Satisfaction results can also help identify banks with excellent customer service.
6. Consider Additional Features
Evaluate any additional features or services offered by the online banks under consideration. Some banks may provide innovative tools for budgeting, expense tracking, or saving subaccounts. Choose an online bank that offers features that align with your financial goals.
7. Review Mobile App Ratings
Check the ratings and reviews of the online bank’s mobile app. A well-designed and user-friendly mobile app can greatly enhance your banking experience. Look for apps that have high ratings on both Apple’s App Store and the Google Play Store.
8. Assess Customer Service Availability
Consider the availability and quality of customer service offered by the online banks. Look for banks that provide multiple channels of customer support, such as phone, email, or live chat. Prompt and helpful customer service can be crucial when you encounter any issues or have questions about your accounts.
9. Explore Additional Benefits
Some online banks offer additional benefits such as cashback rewards, budgeting tools, or educational resources. These can add value to your banking experience and help you achieve your financial goals. Could you consider whether these additional benefits align with your needs and preferences?
10. Evaluate the Overall Banking Experience
Take a holistic view of the online banks you are considering and evaluate the overall banking experience they offer. Consider factors such as ease of use, online banking features, website design, and user experience. Choose an online bank that provides a seamless and enjoyable banking experience.
11. Check for Promotions or Sign-Up Bonuses
Keep an eye out for any promotions or sign-up bonuses offered by banks. Some banks may offer cash bonuses or higher interest rates for new customers. You can take advantage of these offers if they align with your banking needs and goals.
12. Make Your Decision and Open an Account
After thorough research and evaluation, make your final decision and open an account with the online bank that best meets your requirements. Follow the bank’s account opening process, which typically involves providing personal information and, in some cases, additional identity verification documents.
The Best Online Banks in 2024
Now that you understand the factors to consider when choosing an bank, let’s explore some of the top banks in 2024. These banks have been selected based on their competitive interest rates, low fees, strong customer satisfaction ratings, and innovative features.
1. Alliant Credit Union
Alliant Credit Union offers a range of banking products, including checking accounts, savings accounts, and share certificates. With a high-yield savings account offering a 3.10% APY and a high-rate checking account with a 0.25% APY, Alliant provides competitive interest rates. The credit union also offers ATM access and fee reimbursements, making it convenient for customers to access their funds.
2. Varo Bank
Varo Bank provides checking and savings accounts with attractive interest rates. Customers can earn up to a 5.00% APY on their savings account by meeting certain monthly requirements. Varo Bank also offers a mobile check deposit feature and provides access to a large network of fee-free ATMs.
3. Discover Bank
Discover Bank offers a savings account with a 4.35% APY and competitive rates on certificates of deposit. The bank’s Cashback Debit account allows customers to earn 1% cash back on up to $3,000 in debit card purchases. Discover Bank also provides a wide network of fee-free ATMs and does not charge monthly fees on its savings account.
4. SoFi Bank, N.A.
SoFi Bank, N.A. offers a combination of checking and savings features in one account. Customers can earn a 0.50% APY on their checking balance and up to a 4.60% APY on their savings portion by setting up direct deposit or maintaining a certain deposit amount. SoFi Bank also provides access to a large network of fee-free ATMs and offers innovative features like Roundups for automatic savings.
5. Capital One
Capital One is known for its strong 4.35% APY on its savings account and competitive rates on certificates of deposit. The bank offers a range of accounts, including checking accounts with a 0.10% APY. Capital One provides free access to over 70,000 ATMs nationwide and has highly-rated mobile banking apps.
6. EverBank
EverBank, now known as TIAA Bank, offers checking, savings, and certificates of deposit accounts. The bank’s checking account provides a 0.45% APY, while its savings account offers a competitive 5.15% APY. EverBank also offers an ATM reimbursement program, providing unlimited ATM fee reimbursements for customers who meet certain balance requirements.
7. TAB Bank
TAB Bank’s High Yield Savings account offers an impressive 5.27% APY with no minimum opening deposit or monthly fee. The bank’s free Kasasa Cash Back Rewards checking account allows customers to earn 1.00% cash back on purchases and provides $15 per month in ATM fee reimbursements. TAB Bank also offers competitive rates on certificates of deposit.
8. Upgrade
Upgrade offers a Premier Savings account with a high-interest rate of 5.07% APY on balances of $1,000 or more. The bank’s Rewards Checking Plus account provides cashback rewards for debit purchases and offers up to 2% cash back on everyday expenses. Upgrade’s mobile app is highly rated and provides a seamless banking experience.
9. Marcus by Goldman Sachs
Marcus by Goldman Sachs offers a savings account with a 4.50% APY, making it an attractive option for savers. The bank also provides competitive rates on certificates of deposit. While Marcus does not offer a checking account or ATM network, it compensates with high interest rates and a user-friendly mobile app.
10. UFB Direct
UFB Direct’s savings account offers an impressive 5.25% APY on all balances and does not charge monthly fees. The bank provides 24/7 phone support and offers live chat with bankers on weekdays. UFB Direct’s mobile app is highly rated and provides a convenient banking experience.
It’s important to note that the selection of the best online banks may vary based on individual preferences and requirements. Before opening an account, please carefully review the features and offerings of each bank to figure out which one fits best with your financial goals.
Conclusion
Choosing the best online bank requires careful consideration of various factors, including deposit insurance, ATM access, interest rates, fees, customer reviews, and overall banking experience. By evaluating these factors and exploring the top online banks in 2024, you can confidently select an online bank that meets your specific needs. Remember to conduct thorough research, compare different options, and consider your personal banking preferences before making a decision. With the right online bank, you can enjoy the convenience, competitive rates, and innovative features that banking has to offer.
