The term ‘online bank’ is loosely used to refer to banking activities that are conducted without going to physical bank locations.
Unlike traditional banks, online banks give their customers the options of either performing your transaction in a banking hall or the comfort of your own home with a laptop or phone.
The creation and proliferation of online banks are because a large number of transactions are performed with the use of the online banking option offered by traditional banks.
Online banks do not incur the cost of maintaining numerous locations and staff. For these reasons, they are usually able to provide better banking rates and charges to their customers. Aside from better banking rates, online banks are more convenient than traditional banks as consumers can perform transactions anytime and anywhere.
An important factor to note when assessing online banks is that transactions are conducted using mobile phones, laptops, ATM cards, US mail, and even paper checks. However, to deposit paper checks, consumers may still need the services of a traditional bank.
You can check also best online only banks.
Best Online Banks
With the numerous online banks that have been created, it becomes difficult to choose one. Below are four of the best online-only banks and their pros and cons:
Ally Bank is an online-only bank. Well known for its high interest rates, this bank does not have a minimum balance requirement for savings and checking accounts. Interest rates on all bank accounts range from 1.45%-1.90% annual percentage yield. The interest rates are particularly advantageous when the customer’s account balance is high.
Users of Ally bank can transact with ATM cards, apps, online or even with the use of checks. Transactions performed with the debit cards at Ally Bank ATMs do not attract ATM fees. However, every month the bank reimburses up to $10 worth of ATM fees on transactions using the ATMs of other banks or networks.
The bank has a mobile app for consumers on-the-go. To prioritize customer satisfaction, means of contacting customer representatives are available at any day and any time, 24/7.
Loans can also be taken for financing a home or vehicle purchase.
Pros of Ally bank
- Savings and checking accounts do not have a required minimum balance.
- Savings accounts attract high-interest rates, and this is increased with a high account balance.
- ATM uses do not attract a fee.
Cons of Ally bank
- The best interest rate is not available without a balance of up to $15000.
- Ally bank is best suited for people who wish to generate interest on their money.
Charles Schwab Bank
The Charles Schwab online bank is the second on our list. This bank does not have a minimum balance requirement. Furthermore, savings and checking accounts attract 0.35 and 0.15% interest rates respectively. Also, there are no monthly fees for savings or checking accounts.
Transactions can be conducted using ATMs, mobile apps, the internet, and checks. ATM users are not subject to maintenance charges. Importantly, any fees attached to using another bank's ATM is refunded at the end of the month.
It is important to note that opening a Charles Schwab account causes the institution to run a hard inquiry. The evaluation of a consumer’s credit score can hurt the already existing score. Roughly, five points could be deducted from the credit score after a hard inquiry.
Pros of the Charles Schwab bank
- Interests are payable on checking accounts.
- There are no ATM maintenance fees.
Cons of the Charles Schwab bank
- Interest rates of this online bank are low when compared to other banks.
- You will need a check or money order to make deposits.
Discover bank provides owners of checking accounts with cash back on certain purchases made via debit card. This cashback applies on purchases up to $3000. Therefore, it is a great way to save. Significantly, the interest rates for savings account are as much as 1.90% annual percentage yield, which is especially possible when the balance in the savings account is up to $15000.
The checking accounts do not have a minimum balance requirement or monthly charges. The bank also forgives one fee every year. This is advantageous in cases where one defaults on a payment or overdraws their account.
Customers can carry out transactions on the bank’s platform using mobile apps, the internet, debit cards, and checks.
Pros of discover bank
- Discover bank has high-interest rates on their savings accounts.
- Purchases made with debit cards may be eligible for cash back and rewards.
Cons of discover bank
- If you attempt to make a transaction while having insufficient funds, it will attract a fee.
- The overdraft fees charged by discover bank is higher than the fees charged by other online-only banks.
Synchrony Bank is an online bank with one physical location. Opening an account with this bank is relatively easy, and synchrony bank is focused on a savings account, so it does not offer checking accounts and loan services. Apart from providing different saving accounts, Individual retirement accounts and money market accounts can be opened with synchrony bank.
Transactions can be made with one of the over 2 million Synchrony bank ATMs. These transactions are free, but when a different bank’s ATM is used, the bank refunds up to $5 of ATM fees a month. Up to 6 withdrawals can be made from a Synchrony bank saving account every month. Unlike other online banks that have no fees, this bank has a monthly fee on its accounts.
Benefits such as increased interest rates and ATM rebates are dependent on how long the consumer has had the account and the consumer’s account balance.
Pros of synchrony bank
- There are millions of charge free ATMs for customers to use.
- The interest rates are one of the highest available for online banks.
Cons of synchrony bank
- This bank cannot be used by people in need of checking accounts.
- If you make over six withdrawals in one month, the bank reserves the right to close your account.
These four online banks listed are our top picks for the best online banks. Each of these banks has an area where they stand out, such as high-interest rates, cash back on purchases, availability of loans and easily accessible ATMs. Consider your needs before choosing a bank to use and be careful with all online transactions.