What online banks do and how they differ from traditional banks
An online bank is a bank that operates primarily through the internet and mobile apps, with no physical branches. You deposit money by mailing checks or transferring from another account, withdraw cash at ATMs (usually for free through a network), and handle all banking through a website or phone app. Online banks have lower overhead costs than traditional banks, so they typically offer higher interest rates on savings accounts and checking accounts, and charge fewer or no monthly fees.
The trade-off is that you cannot walk into a branch to deposit cash or speak to someone in person about a problem. Most online banks have phone support during business hours and email support around the clock. Some people find this convenient; others find it frustrating when something goes wrong. The choice depends on whether you prefer lower fees and better rates over the option to visit a physical location.
Online banks are insured by the FDIC (Federal Deposit Insurance Corporation) the same way traditional banks are, so your money up to $250,000 per account type is protected if the bank fails. This is a real protection, not a marketing claim.
Key Takeaways
- Online banks pay higher interest on savings and checking accounts because they have no branch costs, and most charge no monthly maintenance fees.
- You cannot deposit cash in person, but most online banks let you deposit checks by phone app and withdraw cash free at ATM networks.
- The best online bank for you depends on whether you need a high savings rate, low checking fees, good customer service, or a combination of all three.
- All online banks are FDIC-insured up to $250,000 per account type, so your money is protected the same way it is at a traditional bank.
- Opening an account takes 10 to 20 minutes online and usually requires a government ID, Social Security number, and an initial deposit or transfer.
Online banks with the highest savings account rates
If your main goal is to earn money on savings, look for banks advertising the highest APY (annual percentage yield). Rates change frequently—sometimes weekly—so the bank with the best rate today may not have it next month. Check the current rate on the bank's website before you open an account, because the rate you see when you sign up is the rate you lock in.
Banks that consistently rank high for savings rates include Marcus by Goldman Sachs, Ally Bank, American Express Personal Savings, and Discover Bank. Each of these typically offers APY between 4% and 5% on savings accounts, though this varies based on market conditions. None of them charge monthly fees on savings accounts. The difference between a 4.5% rate and a 4.75% rate matters if you have $10,000 or more saved, but becomes less important with smaller balances.
Some online banks offer different rates for different account balances—higher rates for larger deposits. Read the fine print to see whether the rate you see applies to your balance size. A few banks also offer promotional rates for new customers that drop after three or six months, so confirm what your rate will be after the promotion ends.
Online banks with low or no checking account fees
Traditional banks often charge $10 to $15 per month to maintain a checking account, or waive the fee if you keep a minimum balance. Most online banks charge no monthly fee at all, regardless of balance. Ally Bank, Charles Schwab Bank, Chime, and Discover Bank all offer checking accounts with no monthly maintenance fee and no minimum balance requirement.
The real cost difference appears in overdraft fees and out-of-network ATM fees. Some online banks reimburse all out-of-network ATM fees, which means you can use any ATM in the country without paying. Others charge $2 to $3 per out-of-network withdrawal. If you use ATMs frequently, this adds up—$3 per week is $156 per year. Charles Schwab and Ally both reimburse ATM fees nationwide, which is rare and valuable if you travel or live in an area with few ATMs from your bank's network.
Overdraft fees vary widely. Some online banks charge $25 to $35 per overdraft; others charge nothing and simply decline the transaction. A few offer overdraft protection that links your checking account to a savings account and transfers money automatically if you overdraw. Check what happens when you overdraw before you open an account, because this fee can surprise you.
Online banks with strong customer service and features
Customer service quality matters most when something goes wrong—a fraudulent charge, a missing deposit, or a technical problem with the app. Some online banks offer phone support only during business hours; others offer 24/7 support. Ally Bank and Charles Schwab Bank both offer phone support around the clock, which is unusual for online banks. Chime offers phone support during business hours but has a reputation for fast email responses.
Features also vary. Some online banks offer early direct deposit, which means your paycheck appears in your account one or two days before the official payday. Chime and Varo both offer this. Some banks offer savings "buckets" or "pockets" that let you separate money for different goals within one account. Others offer bill pay, mobile check deposit, and person-to-person transfers as standard features. Most online banks now include these basics, but confirm the bank you choose has the features you actually use.
A few online banks are designed for specific situations. Varo and Chime target people with lower credit scores or thin credit histories. Charles Schwab Bank is part of a larger investment firm and appeals to people who also invest. Marcus by Goldman Sachs focuses on savings and personal loans. Choose based on what you actually need, not on marketing claims about who the bank is "for."
How to compare online banks side by side
| Bank | Savings APY (typical range) | Checking Monthly Fee | ATM Network | Phone Support Hours |
|---|---|---|---|---|
| Ally Bank | 4.0%–4.5% | None | Nationwide reimbursement | 24/7 |
| Marcus by Goldman Sachs | 4.5%–5.0% | No checking account | N/A | Business hours |
| Charles Schwab Bank | 4.0%–4.5% | None | Nationwide reimbursement | 24/7 |
| Discover Bank | 4.0%–4.5% | None | Allpoint network | Business hours |
| Chime | 2.0%–2.5% | None | Allpoint + Visa network | Business hours |
Rates and fees change, so check each bank's website for current information before you decide. The table above shows typical ranges based on recent data, but your actual rate depends on market conditions and the balance you deposit. Use this as a starting point, not as a may provide of what you will receive.
To narrow your choice, write down what matters most to you: the highest savings rate, no ATM fees, 24/7 support, or a combination. Then visit the websites of the two or three banks that rank highest on your priorities. Open an account with the one that feels right, and remember that you can always move money to a different bank later if you change your mind.
How to open an online bank account and move your money
Opening an account takes 10 to 20 minutes. You will need a government-issued ID (driver's license or passport), your Social Security number, and your current address. Most banks ask for an initial deposit or transfer, usually $0 to $25, though some have no minimum. You can fund the account by transferring money from another bank account or by mailing a check.
The transfer from another bank usually takes one to three business days. If you need money immediately, mail a check instead—it takes longer but guarantees the bank receives it. Some banks offer a temporary debit card number you can use while you wait for the physical card to arrive in the mail.
Once your account is open, you do not have to close your old bank account right away. Many people keep both accounts for a month or two while they make sure direct deposits and bill payments route correctly to the new bank. Once you confirm everything works, you can close the old account. If you have automatic payments set up with your old bank, update them to the new bank's account number before you close the old account, or those payments will fail.
What to watch out for when choosing an online bank
Promotional rates are real but temporary. A bank might advertise 5.0% APY for new customers, then drop it to 4.0% after six months. The rate you see at signup is what you get, but read the terms to see when it changes. If you plan to keep money in savings for years, the long-term rate matters more than the opening offer.
Some online banks are not true banks—they are fintech companies that partner with a real bank behind the scenes. Chime, for example, is a fintech company whose accounts are held at Bancorp Bank or Stride Bank. This does not make Chime unsafe (your money is still FDIC-insured), but it means Chime does not set interest rates or make lending decisions—its partner bank does. This matters if you care about which institution actually holds your money.
ATM access varies by region. A bank might advertise a large ATM network, but if that network has few machines near your home or work, the benefit is worthless to you. Before you open an account, use the bank's ATM locator tool to see how many machines are within a mile of your home, workplace, and anywhere else you spend time regularly.
Frequently Asked Questions
Is my money safe in an online bank?
Yes. Online banks are FDIC-insured the same way traditional banks are. Your money up to $250,000 per account type (checking, savings, money market) is protected if the bank fails. The FDIC insurance is backed by the federal government, not by the bank itself. Online banks are also regulated by the same agencies that regulate traditional banks.
Can I deposit cash into an online bank account?
Most online banks do not accept cash deposits because they have no physical branches. You can deposit checks by photographing them with your phone app, transfer money from another bank account, or have your paycheck deposited directly. If you need to deposit cash regularly, a traditional bank or credit union may be a better fit, or you can use an online bank for savings and keep a traditional bank account for cash deposits.
What happens if I need to dispute a charge or report fraud?
Contact the bank by phone or email and report the fraudulent charge. The bank will investigate and typically refund the money within 10 business days while the investigation is ongoing. Federal law requires banks to refund fraudulent charges, and online banks follow the same rules as traditional banks. Keep records of your report and follow up if you do not see the refund within the timeframe the bank gives you.
Can I use an online bank if I have bad credit?
Most online banks do not check your credit score to open a checking or savings account. They may check ChexSystems, which is a banking history report, to see if you have had problems with previous bank accounts. If you have been denied accounts before, mention this to the bank when you open an account. Some banks like Chime and Varo are designed for people with limited banking history and may be more willing to work with you.
How long does it take to transfer money out of an online bank?
Transfers to another bank account take one to three business days. Withdrawals at an ATM are instant. If you need cash immediately, use an ATM. If you need to move money to pay a bill, initiate the transfer at least three business days before the due date to be safe.