As you work toward better money management and financial goals, where you choose to do your banking will be an important decision.
You have options like major well-known banks you see commercials for, think Wells Fargo or Bank of America. Or you have options like local banks or even Credit Unions, which offer different advantages and disadvantages to the big banks.
Yet, there is another option that has grown in popularity in the banking industry: opening an online only bank account. Yes, a bank with no physical location.
While any good bank will have online and mobile options, online only banks are throwing a wrench in the traditional industry — in a good way.
Can I Open a Bank Account Online?
At this point, I think it is safe to assume that we all know you can open a bank account online.
Any bank or credit union will have an option to sign-up online or use their mobile app. Not all banks operate the same way, so some online experiences and designs won’t be the best.
If you do not have an account with a bank already, many will still let you open up one directly online.
To open a bank account online, you’ll need to have some personal information ready so the bank can verify your identity. Additionally, there may be some initial deposit required to get started as well.
While that is all great, most of the bank accounts you open online will have physical locations. That way you can do your banking in person as well. And many people may like that experience still and being able to chat with someone face to face.
However, with technology and people looking to shake up the finance industry, online only bank accounts have started to surge in popularity.
What is An Online Only Bank Account?
As the term “Online Only” would suggest, this is a bank account you open online, manage everything via their web or mobile apps, and generally will have no physical location to do your banking at.
With a simple internet connection or data from your phone, you have access to all your banking needs at anytime of the day.
So why would anyone want an online only bank account?
Well, there are various online banks that I’ll get to later in this post, but many offer a bevy of great features.
And why you choose an online only bank or which one, will depend on your personal finances and goals.
A great option is to have both a traditional bank or credit union and also have an online only bank account to take advantage of potential features.
Below I’ll list some of the pros and cons of the online banking experience.
Pros of Online Only Bank Accounts
Let’s start with the pros of online bank accounts. After all, we want to know about the good stuff, right?
Below is only a handful of advantages and why you may want to look into an online only bank.
- The convenience factor and access 24/7
- Less fees with traditional banks
- User-friendly websites and accessible mobile apps
- Simple management features for paying bills
- Early deposit options, to get paid faster
- Zero or refunded ATM fees
- Better overdraft protection programs
- Higher interest rates for saving accounts
- Real time banking alerts
- Additional savings options
Cons of Online Only Bank Accounts
That’s a pretty big list of pros for online bank accounts, but no financial model is perfect.
There are also some cons to online only banks, which are listed below.
- No physical branch locations for assistance
- Depositing actual cash is typically not an option
- While online banks offer high security, there is always a potential for data breaches
- Some online only banks have limited ATMs for access
- Potential limited services like brokerage account or better rates on loans (customer loyalty programs)
Are Online Only Bank Accounts Trustworthy?
Now that you know the pros and cons, you probably want to know how trustworthy online bank accounts are for you.
As you may have noted, I did mention a con is that there is potential for data breaches. This is a fact with literally anything you do online, so always take strong preventative measures to protect your login information.
But at the basic level, yes online bank accounts are trustworthy. Any of the popular and quality accounts will have high security features for their data and of course your information.
A common thing you’ll read is 128-bit AES encryption, which makes it hard for hackers to access your information.
Additional security measures like security alerts, ability to block any credit/debit cards, and the big one — ensuring they are FDIC Insured (typically up to $250,000).
Before opening an online only bank account, ensure you read their security features so you know your money is protected and your data is safe.
What Are the Best Online Banks?
Now that you know more about online only bank accounts, what are the best ones you should consider? There are so many online banking options that it can be hard to choose.
If you do choose to open an online only bank account, which option you actual pick should be based on your needs and financial goals.
That said, I did narrow down the list to a few I really like and think are the better options out there.
As technology improves and the finance industry gets new groundbreaking products, this list could evolve further over time. But for now, here are the best online banks to consider.
One of the first online only banks I first came across a while back was Chime Bank. You might have even seen some of their commercials recently, whether on T.V. or video ads from Youtube.
But there are plenty of great banking features with Chime, that they are certainly a potential top choice for you.
Personally, the online experience and mobile apps are clean and easy to navigate. User experience is always important when it comes to your banking.
Now, I won’t go through everything about this online bank, but here are some of the awesome features.
- Get paid up to 2 days early with direct deposit
- No overdraft fees
- No minimum balance
- No monthly fees
- No foreign transaction fees
- Allow you to overdraft up to $100 without charging a fee
- When you use their Chime Debit Card, it automatically rounds up transactions to the nearest dollar and transfers the Round Up from your Spending Account into your Automatic Savings Account app
- Deposit insurance amount of $250,000 through our partner banks, Stride Bank, N.A. or The Bancorp Bank, Members FDIC
Another online only bank you might have heard of is Ally Bank. This financial company has a huge list of options that go beyond banking, but I’ll stick the basics here.
Ally Bank has beautiful designed online banking and mobile apps along with 24/7 customer care, so you always have access to someone for any help you may need.
But what are some of the great features of Ally Bank?
- Easily set up direct deposits
- Receive incoming wire transfers from any U.S. bank
- Mail in deposits with postage paid envelopes
- Move funds between your Ally Bank accounts
- Make transfers to and from accounts at other institutions.
- Request cash back during checkout when you make purchases using your debit card
- Use any Allpoint® ATM in the U.S. for free, plus we reimburse up to $10 per statement cycle for fees charged at other ATMs nationwide
- Pay bills from your Interest Checking account to anyone with a U.S. postal address, and set up one-time or recurring payments online or on your mobile device – with rush delivery options available
- High yield online savings account
- Interest checking account
- Money market account
- Open a self-directed IRA wit $0 commission fees
Simple Bank is one bank that was a bit newer to me when I came across it, but is also shaking up the industry.
I always like seeing some disruptors work to improve the way we handle our finances.
That said, Simple Bank is pretty cool in that it has budgeting tools within the online banking experience.
When you open a checking account, Simple Bank makes sure your expenses and goals are covered automatically. And provide alerts so you know how much is okay to spend.
One downside is Simple Bank does not offer a savings account currently or additional features that Chime or Ally might have.
Here are a few of the pros of Simple Bank:
- Free checking and online bill pay
- Budgeting and monthly expenses tool
- No monthly fees or overdraft charges
- No minimum account balance needed
- External account linking in just a few clicks
- Instant funds transfer to other Simple customers
- Third-party payment services like Square, Venmo, and Paypal
- Debit card blocking if it’s been lost or stolen
- High-interest checking account
The last online bank you might want to consider is Radius Bank. This bank has a few more features that might interest you like: business banking, loan services, escrow, credit card options and more.
Although Radius Bank is an online bank, they are not online only as they do have a physical branch location in Boston, as that’s where they were founded in the late 1980s.
But Radius Bank pivoted and adapted to technology, making it so anyone can open a bank account outside of the Boston area.
And they put a huge focus on their online banking experience, so it was worth including them in this post.
Since they have a ton of features as well, I’m going to highlight a few:
- Free ATMs worldwide
- Cashback rewards in checking account
- No monthly maintenance fee
- Early direct deposit
- High-interest savings account
- FDIC insured
- Overdraft protection features
- Online and mobile banking
- Radius deposit services