The best online banks in July 2024

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Discover Bank

Best for cashback checking account

Quontic Bank

Best for variety of products and services

Current

SoFi

Best for combined checking and savings

Bread Financial

Capital One

Synchrony Bank

Bank5 Connect

Best for high savings balances

Ally Bank

Best for variety of CD types

EverBank

Best for introductory APY

What is an online bank?

An online bank is typically a financial institution that only operates digitally, with no physical locations.

With an online bank, you do your banking online through a secure website or app instead of visiting a local branch to make deposits or handle other tasks.

Most online banks carry FDIC insurance, and many have a wide network of ATMs that customers can use without paying fees. Because they have lower overhead costs than traditional brick-and-mortar banks, online banks can typically offer better interest rates and charge low or no fees.

Some online-only banks are owned by large corporations with millions of customers, hundreds of billions in assets and a full suite of products. Others are small fintechs or virtual banks that offer only one type of account.

How does online banking work?

Online banking simply refers to banking activities that are completed using a financial institution’s website or mobile app. With online-only banks, customers must conduct all of their banking online, while traditional banks and credit unions typically offer customers the choice of banking online or in person.

Many people use online banking for at least some of their banking needs. This could include monitoring account balances and transactions, transferring funds between accounts, paying bills and making debit card purchases.

Online banks aren’t for everyone. You need to be comfortable handling all of your banking needs on a laptop, tablet or smartphone. Also, you won’t have access to in-person service. If that’s a priority, you might be better off sticking with a traditional bank.

Even if you’re comfortable with digital banking, you’ll find things you like about an online-only bank and some things you don’t like. Here’s a look at some of the pros and cons of online banking.

Pros:

• Convenient transactions: With online banks, you can bank anywhere you can access the internet and at any time of day.
• High APYs: Online banks offer some of the highest savings account rates.
• Streamlined experience: You can usually open an online bank account in minutes and often in just a few clicks. The best online banks also easily handle various functions quickly and simply.
• Innovative features: Some mobile apps can help you manage almost every aspect of your account from almost anywhere.

Cons:

• No physical branches: The most obvious downside of an online bank is that you don’t have access to in-person service.
• Customer service: Some online banks have limited customer service departments. This means you will often have to deal with automated phone lines and chatbots rather than humans.
• Limited account options: Some online banks offer a few accounts.
• ATM fees: Because most online banks have a smaller network of ATMs than traditional banks, you could face fees when using an ATM.

What to consider when choosing an online bank

Choosing an online bank is not the same as choosing a traditional bank because location is not a key consideration. However, there are many factors that you should consider when comparing online banks.

• ATM fees and networks: Ideally, you want to find an account with access to a large network of ATMs. Some will also reimburse you for out-of-network ATM fees.
• Bonuses and other perks: Some online accounts offer sign-up bonuses, cash-back rewards, shopping discounts and other perks. Just make sure you can meet the requirements to receive those benefits.
• Mobile bank features: The best online bank accounts offer user-friendly mobile apps that let you pay bills, make deposits, review your transactions and handle other banking tasks.
• Overdraft protection options: Many banks charge fees for overdrawing your account. If this is a concern for you, look for an online account that provides overdraft protection and charges low or no fees.
• APY: Many online bank accounts pay interest on your balances, which is always preferable to those that don’t. In fact, some online banks offer high-yield savings accounts with APYs of 5.00% or higher.
• Safety/security features: Online bank accounts should provide security measures to protect your money and identity, including encryption, multifactor authentication and fraud monitoring.
• Customer service options: Another important consideration is access to reliable customer service and support. Check when live customer service is available either over the phone, via email or through live chat. You should also read online reviews and customer testimonials.
• Make sure it’s federally insured: Most online banks are federally insured through the FDIC, and most online credit unions are insured through the NCUA. However, you’ll want to confirm that the institution you’re opening an account with has that protection.

Opening an account with an online bank

Opening an account with an online bank is similar to opening one with any other financial institution, except you don’t have the option to do it in person at a branch. The process usually takes just a few minutes, and the website or app will provide step-by-step instructions. Most banks require you to be at least 18 years old to open an account. Non-citizens might need to provide a permanent resident card or other types of documentation.

Different banks will have different requirements to open an online bank account, but the basic process involves many of the same steps.

Step 1: Compare banks to find the best fit

Since online banks are highly competitive, you’ll want to shop around and compare institutions and all they have to offer. This means looking at their interest rates, bonus offers (if they apply) and any fees that could come into play.

Financial advisor Michael Collins of WinCap Financial said that besides comparing banks based on obvious benefits like interest rates on offer, you’ll want to research the bank’s background, reputation and security features as well.

“Look up reviews and ratings from reliable sources to get an idea of the bank’s customer satisfaction and financial stability,” he said. “Also look into the bank’s security protocols, such as encryption, firewalls and multi-factor authentication, to ensure that your information is kept safe.”

Step 2: Gather the necessary documentation

Next, you’ll want to gather the necessary documents and information to open your new online account. For example, you’ll need to have the following ready:

• Full name and address
• Date of birth
• Phone number
• Driver’s license or other ID to provide proof of age and address
• Social Security number or tax identification number
• Bank account information (to fund your new account)

Step 3: Complete an online application

Once you have your information ready, head to the website for the online bank you choose and find where to open a new account. This is where you’ll provide personal information such as your name, address, contact information and Social Security number. You might also be asked to set up a username and password and create security questions to help protect your account.

Step 4: Wait to be approved

Many online banks let you know right away if you’re approved for the account, though in some cases the bank might take a day or longer to respond.

Step 5: Transfer funds to your new account

Once your new account is approved and you have a username and password set up, you can use the bank account information you entered during sign-up to transfer funds to your new account. You may also be able to add a new account to use for this transfer as well.

Remember that some banks require you to have a minimum amount on deposit to earn a certain amount in interest or avoid account fees. Knowing these details about your new account ahead of time can help you meet any applicable requirements.

Are online banks safe?

Online banks are just as safe as brick-and-mortar financial institutions, provided they have the same federal protections. Most of them do, but you’ll still want to confirm this before you open an account.

“Make sure the online bank is FDIC insured, which means that in the event of bank failure, your money is protected up to $250,000,” said Collins.

Opening an account with a credit union instead of a bank? Check for NCUA insurance instead, which works similarly and offers the same level of coverage for credit union accounts.

Because you’ll be doing all of your banking digitally, it’s important to choose an online bank with plenty of security measures in place. The safest online banks and credit unions use the latest technology to protect your money and identify and prevent unauthorized access to your accounts.

Among the standard security measures used by online banks are antivirus protection, firewalls, fraud monitoring, website encryption and multi-factor authentication. Before opening an account, check the bank’s website to see what security tools it has in place.

In the case of a neobank that isn’t chartered (a neobank is a tech company offering a banking product), check to see that it partners with an FDIC-backed bank to protect your deposits against bank failure.

Finally, you’ll want to make sure you understand all of your bank’s fine print and account limitations and that you know the institution’s policy on fraud.

“Make sure to read and understand the bank’s terms and conditions, including their policies on fees, fraud protection and liability in case of unauthorized account access or transactions,” said Collins.

The main difference between online and traditional banks is that the latter have physical branch locations. Nearly all traditional banks also offer online and mobile banking options, so even if you prefer banking online you can still do so at traditional banks.

You’ll likely get lower fees and higher interest rates at online banks because they aren’t saddled with the cost of building, maintaining and staffing branches.

Both types of banks have their strengths and weaknesses. You may also find that some traditional banks outperform online banks in areas where online banks typically excel, and vice versa.

For example, a traditional bank may offer an account with a high APY, no fees and a cutting-edge mobile app. And you may discover an online bank with every financial product you need and an expansive ATM network. However, here’s a look at where each type of bank typically shines.

Managing your finances with online banks

One of the advantages of online banking is that you can manage your finances from anywhere and at any time, 365 days a year. This is true whether you do your online banking with an online-only bank or a traditional bank. However, keeping up with your finances at an online bank is especially important because you can’t rely on visiting a branch to clear up any problems.

The best online banks offer a wide range of features that make it easy to manage your money. Here are some tips to get the best results:

• Learn your way around the website or app: To take full advantage of online banking, you need to build expertise in all of the tools available on the platform. Some online banks offer tutorials or guides that can help you learn how to navigate the site or app.
• View statements online: You can check your statements and activity online to stay current on your finances, track transactions and confirm that everything is accurate.
• Set up account alerts: These alerts, typically delivered by email, text message or push notification, can keep you posted on withdrawals and other charges. You can also use alerts to let you know when your balance is getting low and when a payment is due. Some banks send alerts about upcoming promotional offers.
• Enroll in automatic bill pay: This is a useful feature if you have numerous bills to pay and a hard time keeping up with them. With automatic bill pay, you can link your bills to your bank account to prevent late payments.
• Track your spending patterns: Online banks may help you track your spending either through your account statements or daily activity log. In some cases, you can create a chart that analyzes your spending habits and lets you know which areas you need to cut back on to stay on budget.

Methodology

Our team of experts at CNN Underscored Money analyzed dozens of financial institutions to determine the rankings for the best online banks. We ranked each account on 18 data points across seven categories.

Here are the categories we analyzed and how we weighted each:

APY (25%)

APY is a critical factor for online banks because this determines how quickly your deposit will grow.

Product offerings (20%)

One of the general downsides to online banks is fewer product offerings than traditional banks, so we rewarded banks that offer more products.

Fees (15%)

Fees are a critical factor to consider because they can eat away at any interest earnings, especially if an account has a high monthly maintenance fee.

Minimums (10%)

Minimum opening deposits determine how accessible accounts are, so we rewarded banks with accounts that more people can use. Low minimum balances to avoid fees are ideal so you have fees eating away at your balance.

Customer experience (10%)

It’s important to have a bank that’s trustworthy and easy to reach when you need help. We considered customer service availability and Trustpilot ratings in this category.

Digital experience (10%)

You’ll want a bank with a usable app and plenty of online features so that it’s easy to bank from anywhere.

ATM network (10%)

Since online banks typically don’t have branches, ATM access is very important.

Frequently asked questions (FAQs)

Additional reporting by Holly Johnson