Online banks can help you earn a high rate of interest or APY (Annual Percentage Yield) and keep fees low. They also tend to provide user-friendly apps and tools that make it easy to manage your finances. But that doesn’t mean you need to abandon brick-and-mortar banks and credit unions if you don’t want to. You can always have the best of both worlds: Tap into the strengths of online banks while keeping an account open at a local institution.
Whether you’re looking for a single online bank to handle your needs or you just want to open a high-yield savings account, you’ve got plenty of options. But don’t let the range of choices overwhelm you. We’ve identified some of the best online banks with a reputation for keeping costs low, while still insuring your deposits up to federal limits.
Best Online Banks of 2020
- Ally Bank: Best Overall
- Discover Bank: Runner-Up
- Charles Schwab: Best for Frequent Travelers
- Alliant Credit Union: Best for Students
- First Foundation Bank: Best for High Rate on Savings
- nbkc Bank: Best for Interest Checking
- Capital One: Best for Mobile App
- Simple: Best for Managing a Budget
We partnered with the following banks to bring you the savings account offers in the table below. Under that, you'll find additional details on our editors' picks for the best online banks and why we chose them. All of the banks and credit unions listed are insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA).
Ally Bank: Best Overall
When choosing an online bank, there are numerous excellent choices. Ally Bank stands out with a broad lineup of offerings, competitive rates, and high scores on banking surveys such as the J.D. Power 2019 Direct Banking Satisfaction Study.
If you want interest earnings, it’s easy to open an interest checking account, high-yield savings account, a money market account, or CDs at Ally—and there’s no minimum required. The rates might not be the highest online, but they’re consistently competitive.
Ally Bank accounts charge no monthly fees, and transactions at Allpoint ATMs in the U.S. are also free. You can open online savings accounts, interest-bearing checking accounts, CDs, money market accounts, IRAs, or use any combination of those services for one-stop shopping.
To maximize interest earnings, it may be best to keep money in the online savings account and transfer funds to your checking account when you’re ready to spend. Just make sure you don’t exceed the maximum amount of transfers your bank account allows each month (usually six).
Ally Bank’s CDs are known for being flexible and have competitive rates. For example, the Raise Your Rate CD gives you the chance to increase your rate once during your term if Ally’s rates go up, so you won’t miss out on earning more while your money is tied up. Ally also offers ways to invest and potentially grow your money through ETFs, mutual funds, bonds, and options.
Competitive liquid CDs
24/7 customer support
No minimum deposit requirements
Higher earnings available at other online banks
No in-person banking options
Discover Bank: Runner-Up
Discover Bank is another option for one-stop shopping with an online bank. Like Ally, Discover offers checking, savings, money market, CD accounts, and more, all with no monthly management fees. For starters, Discover’s Cashback Debit account provides rare cash back rewards in a checking account. You can earn 1% cash back on up to $3,000 of qualifying monthly debit card purchases.
Discover does have minimum balance requirements though, such as a $2,500 minimum to open a CD. The Discover Money Market offers a higher interest rate than Ally Bank's money market (as of May 29, 2020), but that account also requires a minimum deposit of at least $2,500 to open.
It’s hard to go wrong with Ally or Discover (and there are other good choices on this page, as well). But if you have the assets—or if you need cash-back rewards—Discover may be worth a look.
Hard-to-find cash-back reward in a checking account
Full suite of banking products available
24/7 customer service
$2,500 minimum on CDs and money market
Checking cash back reward limited to $30 per month
Charles Schwab Bank: Best for Frequent Travelers
Charles Schwab Bank earned high marks on the J.D. Power 2019 Direct Banking Satisfaction Study, and it may be especially appealing for global travelers. Schwab Bank’s checking account is interest-bearing, offers unlimited ATM rebates within the U.S. and abroad, and has no foreign transaction fee when using other currencies.
Otherwise, Schwab Bank’s online offerings are fairly standard. The checking account has no monthly fee and no minimum balance requirement. The same is true of the savings account, though the interest rate is unimpressive for an online bank. The main draw to Schwab Bank probably isn’t the interest you earn, though—it’s the advantages you get while traveling outside the U.S. with the Schwab debit card. So if you’re a traveler, it’s wise to consider Charles Schwab Bank.
Rare offering of unlimited ATM rebates
No foreign transaction charges
No monthly fees
Must open a brokerage account to use the checking account
Interest rate is unimpressive
Alliant Credit Union: Best for Students
Alliant Credit Union has several accounts geared toward those under age 18, and adults can continue using Alliant’s offerings later in life. For minors, a parent, grandparent, or guardian must be a joint owner on the account, and the adult can monitor account activity.
- The Kids Savings Account pays an attractive rate on savings account balances. There’s a $5 minimum deposit required to open, but Alliant will pay it for you. Plus, there are no monthly fees.
- If you want to provide more autonomy, the Teen Checking Account is available to those between the ages of 13 and 17, with no monthly fees or minimum balance requirements.
All of Alliant’s checking accounts earn interest, which can help you save even more.
Once children reach age 18, they can convert to a standard checking account at Alliant, which also keeps fees to a minimum.
Credit unions require customers to qualify by meeting specific criteria, but it’s easy to meet the requirements at Alliant. Anyone can become eligible by joining Foster Care to Success, which provides resources for foster children throughout the U.S. The membership fee is $5, but Alliant covers that cost. So if you want to get your child started with a savings account or need to teach your teen a little more about their personal finances, Alliant may be right for you.
Accounts specifically designed for children
Excellent rates, especially on small balances
ATM fee rebates up to $20 per month for Teen Checking
Must join a separate organization for eligibility
Even higher rates available elsewhere
First Foundation Bank: Best for a High Rate on Savings
If you value high rates on savings accounts, First Foundation bank pays 1.20% APY in the Online Savings account. This is one of the highest rates currently available, and you can get that rate with a $1,000 initial deposit.
To earn a rate this high, other banks require you to deposit substantially more or meet other cumbersome requirements. First Foundation even allows you to withdraw funds without losing access to the rate or facing monthly maintenance charges.
ATM card available on request
No monthly fees or ongoing minimum balance requirements
Branch locations limited to California, Nevada, and Hawaii
$1,000 minimum may be a hurdle for some savers
Online banks often pay high interest rates, and that applies to checking accounts as well as savings accounts. nbkc Bank pays 0.65% APY on your checking account with no monthly fees and a $5 minimum to open the account. This isn’t a rewards checking account that requires you to use your debit card numerous times every month—you simply qualify for the rate regardless of your activity.
nbkc also has relatively low fees. There are no overdraft or insufficient funds charges, and you get up to $12 per month in ATM fee rebates. Although nbkc technically has a few branches in the Kansas City area (both in Kansas and Missouri), it calls itself an online bank and the offerings are consistent with other online banks. The checking account has critical features like free online bill pay, mobile check deposit, a free book of checks, a Mastercard debit card, and fee-free access to over 32,000 MoneyPass ATMs in the U.S. and Puerto Rico.
Easy-to-meet $5 minimum initial deposit
No fee for insufficient funds
Cashier's checks at no charge
Branch footprint limited to Kansas City area
Capital One: Best Mobile App
An online bank’s mobile app is especially important given that you often have to handle service requests and transactions yourself. Capital One received the highest score across all online-only banks in J.D. Power’s 2019 U.S. Direct Banking Satisfaction Study, so picky customers may appreciate working with Capital One. With the app, you can handle essential tasks like mobile check deposit and payments. You can also lock your debit card temporarily, view free credit scores, and more.
Capital One’s online banking products include high-yield savings accounts, checking accounts, and more. Online savings and checking accounts have no monthly fees and no minimum deposit required to open an account. Parents can also open accounts for minors, allowing them to handle and learn about money while an adult oversees the account.
Capital One also offers a high-yield savings account with a competitive rate and no minimum balance required.
Though Capital One has branches, J.D. Power classifies it as a direct—also known as branchless—bank. Capital One is one of the largest U.S. banks but only has branches in a few states, meaning Capital One does a massive amount of business online.
Free online checking available
No monthly fees
No minimum balance requirements
Higher rates available at other online banks
Limited in-person service for customers nationwide
Simple: Best for Managing a Budget
If you want help managing your finances, Simple can help. This online institution automatically tracks your spending and helps you understand where your money goes. There’s no need to sign up for third-party apps, link accounts, and deal with dropped connections—robust budgeting tools are already in your account. Note though that Simple actually isn't a bank, but accounts are FDIC insured through its partnership with BBVA.
With Simple, you can specify monthly recurring bills as well as goals you want to save for. After accounting for those needs, Simple predicts how much you can spend without jeopardizing those goals. Speaking of goals, you can set aside cash in a dedicated account (separate from your everyday spending account) and earn a competitive rate of interest on your money while the funds build up.
There are no minimum deposit requirements or monthly fees at Simple, and other charges are relatively minimal. So if you’re looking for a little help in managing your money, Simple may be the way to go.
Budgeting tools included with your day-to-day account
Help saving for specific goals
Competitive rate on savings
Terminology may take some getting used to
Savings and CD accounts require a Simple account
What Is an Online Bank?
Online banks are banks and credit unions that operate without brick-and-mortar branches. As a result, they may have lower overhead, and they may be able to get up and running without waiting to build and outfit branches.
Online banks have a reputation for offering high interest rates on deposits and keeping fees low. That makes them ideal for building up your savings without worrying about getting nickel-and-dimed.
Is Money Safe in an Online Bank?
Online banks can be just as safe as traditional banks and credit unions. When an institution is federally insured, your money is protected against bank failures up to $250,000 per account, per institution. With banks, that coverage comes from the FDIC. Federally insured credit unions receive equivalent coverage through the NCUA.
With any financial account, whether it’s at an online bank or not, there are fraud risks. It’s critical to monitor your accounts, and that’s especially easy when you set up account activity alerts. You might be protected against fraud and errors, but you need to act fast to benefit from the highest levels of protection.
Keep your devices up-to-date, and be vigilant about any communication you receive—whether by mail, email, text message, or other means. If you have questions, call the bank at a number you know is legitimate, and discuss your concerns with customer service. Don’t click on links or provide sensitive information just because someone reached out and said they work at your bank. Always take the time to verify the information on your own.
How Do I Access Money in an Online Account?
There may be several ways to spend your money, but the details vary from bank to bank. For example, you might receive an ATM card you can use to withdraw cash or make purchases. Some banks also provide checking accounts, which enable you to write checks, spend with a debit card, or pay bills through online bill pay.
At most online banks, you establish an electronic link to an external account, and you can transfer funds into and out of the online bank on demand. That external account might be your checking account at a brick-and-mortar bank or credit union.
So, Do I Need a ‘Traditional’ Bank?
Online banks can offer all of the services you need, but it’s smart to keep an account open with a local institution. Local banks and credit unions can provide additional benefits like instant cashier’s checks, notary services, in-person advice, and more. Plus, those institutions might contribute to the community you live in. If you go 100% online, you may occasionally face wait times of several days for checks to move through the mail, and you may feel powerless if the bank’s website ever goes down.
J.D. Power. "Feature Overload Strains Customer Satisfaction with Online Banking and Mobile Apps, J.D. Power Finds." Accessed May 29, 2020.
Ally Bank. "Opening an Account FAQs." Accessed May 29, 2020.
Discover Bank. "Discover Online Banking." Accessed May 29, 2020.
Charles Schwab Bank. "Schwab Bank High Yield Investor Checking Account." Accessed May 29, 2020.
Alliant Credit Union. "Kids Savings Accounts." Accessed May 29, 2020.
Alliant Credit Union. "Teen Checking Account." Accessed May 29, 2020.
Alliant Credit Union. "Why Alliant." Accessed May 29, 2020.
First Foundation Bank. "Online Savings Account." Accessed May 29, 2020.
First Foundation Bank. "Digital Bank Frequently Asked Questions." Accessed May 29, 2020.
nbkc Bank. "Contact Us." Accessed May 27, 2020.
nbkc Bank. "Personal Accounts." Accessed May 29, 2020.
Capital One. "Why Bank With Capital One?" Accessed May 29, 2020.
The Federal Reserve. "Large Commercial Banks." Accessed May 29, 2020.
Simple. "Trackable Spending." Accessed May 29, 2020.
Simple. "Frequently Asked Questions." Accessed May 29, 2020.