Online banking has been gaining popularity for years — and that was before COVID shutdowns underlined the advantages of accessing your accounts from home.
But 24/7 convenience isn’t the only important benefit online banks offer. Because there are no brick-and-mortar bank branches, online banks tend to have much lower overhead than traditional retail banks. This often translates into lower or even zero account fees and higher interest rates.
To pick the Best Online Bank we reviewed account terms at more than 20 of the leading online banks, including interest rates on savings and checking accounts, minimum opening balance requirements, monthly service fees. We also considered the size of each bank’s ATM network, since even the most digitally-inclined among us need cash sometimes, and other factors like banks’ online tools.
Best Online Bank: Ally Bank
Why it wins: Ally Bank consistently offers some of the highest interest rates available on both its checking and savings accounts, charges no monthly service fees, has no minimum opening balances, and offers a variety of useful tools that make saving money for specific goals easier.
If growing your savings is your primary goal, Ally’s Online Savings Account paid a (comparatively) generous 0.6% on all balance amounts as of October 7. More than that though, you can open up to 10 different “buckets” or categories within the savings account to set aside money for specific needs such as college expenses, wedding plans, or retirement without having to open multiple savings accounts. You can specify how much money goes into each bucket, and you’ll earn interest on the total amount of money in the account, regardless of how many buckets you create.
Ally’s Interest Checking account is tiered, offering 0.1% interest on balances up to $15,000, and 0.25% above that, both rates being higher than what most banks offer, online or otherwise.
Then there are also useful extras like Ally’s Surprise Savings. This tool analyzes your linked checking account to identify money not being used to pay monthly expenses and that can be safely transferred to your savings account. You can set it up to make the transfers automatically, or you can decide to make the transfer yourself each month.
In terms of accessing your money, Ally gives you fee-free access to over 43,000 Allpoint ATMs around the country. If you do use an out-of-network ATM, Ally will reimburse up to $10 in third-party ATM fees every statement cycle.
Opening an account with Ally can be done online in a matter of minutes, and you can contact customer service in a number of ways, including by phone, email, online chat, text, or even through Amazon’s Alexa.
Caveat: While the interest rate Ally offers on its savings account is consistently among the highest for online banks, at any given point in time it’s not necessarily the highest. If maxing out the rate is your top priority, it pays to shop around.
Axos Bank: You could earn 0.81% interest as of Oct. 7 by opening a High Yield Savings Account — one of the highest interest rates you’ll find online. The account requires a minimum opening balance of $250 but doesn’t charge a monthly service fee.
Axos Bank also allows you to earn up to 1.25% in interest on its Rewards Checking Account but in order to get that rate, you have to receive monthly direct deposits totaling $1,000 or more and make at least 15 debit card transactions per month.
American Express: With American Express’ High Yield Savings Account you could earn 0.60% interest as of Oct. 7, with no minimum balance and no monthly service fees. You don’t need to have an American Express card to open a savings account.
You can link your savings account to other accounts and transfer funds between them without paying fees. However, unlike Ally, Amex doesn’t offer a checking account or an ATM card.
To produce this year’s Best Bank rankings, Money reviewed account information for over 20 of the nation’s largest online banks. The account information included account minimums and qualifications, interest rates, monthly service fees, ATM fees, overdraft fees, overdraft protection fees, insufficient funds fees, debit card replacement fees, domestic wire transfer fees, and online banking capabilities. When selecting finalists, priority was given to checking and savings accounts with no or easily waived monthly fees, free ATMs, and higher interest rates. In naming free accounts, we assumed customers would be okay with receiving e-statements to avoid a monthly fee. Money’s editorial team fact-checked information in October.
More from Money:
Money’s Best Banks: Why Capital One Is Our Pick for Best National Bank
Best Checking Accounts of 2020
How Can Retirees Living Off Savings Succeed in Today’s Low-Yield Environment?
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