The 6 Best Online Banks of July 2024

The Bottom Line

The best online banks can do it all—and Ally Bank does, consistently offering some of the highest rates on completely fee-free accounts, and with a wide array of products: from checking and savings to CDs, money markets, and investing.

But if earning one of the highest rate on savings is one of your top priorities, Synchrony Bank is a good alternative for its superior savings account rate. Meanwhile, Discover is great for those who make frequent use of a debit card, with its 1% cash back feature on debit purchases.

For certain categories of banking customers, other options are best. Capital One offers great features for college students, like easy payments from parents, while Axos' high interest rate on checking accounts means couples with a high combined cash balance can earn more than at other banks. For international travelers, Schwab's offer to reimburse ATM withdrawal fees worldwide is appealing.

Compare the Best Online Banks

What Is Online Banking and How Does It Work?

Online banking refers to using a mobile app or desktop computer to access your account and conduct transactions. Since internet banks don't operate physical branches, online banking is often the only way customers can interact with their bank. But online banking is also offered by traditional brick-and-mortar banks.

When you open a new bank account, you'll be prodded to set up a username and a password, allowing you—and only you—to securely enter the bank's online customer site. You'll then be able to use those login credentials to access online banking service anytime you want, such as to check a balance, download a statement, transfer funds, or set up bill payment.

What Are the Pros and Cons of Online Banks?

Just like any other type of financial institution, there are benefits and drawbacks to online banks. When deciding whether an online bank is for you, consider these pros and cons.

Online Banks vs. Traditional Banks

Traditional banks operate brick-and-mortar locations, giving customers the option to visit a branch to conduct their banking business in person. The biggest of these—like Chase, Bank of America, Wells Fargo, Citi, and U.S. Bank—staff and maintain hundreds of physical branches in multiple states.

Online banks, in contrast, operate primarily, or even exclusively, online. While a rare few may have some branch locations, the vast majority offer no physical branches at all, making it possible to do all of your banking without going to a bank at all.

Because online banks don't have the overhead costs of operating, maintaining, and staffing brick-and-mortar locations, online banks tend to charge fewer and lower fees (the best online banks charge no fees). They also often offer higher interest rates on your savings. That said, you won't always get the whole suite of financial services—such as mortgages, personal loans, and retirement—that you can find at traditional banks.

As you can see, for those wanting a very traditional, full-service experience from a bank, including the ability to walk in and deposit cash, a traditional bank may offer the right fit. But for those looking to maximize their financial resources by earning more on the savings and reducing what they pay in bank fees, online banks offer a strong advantage.

How to Choose an Online Bank

Choosing the best online bank is all about finding the right features for your needs. Here are some considerations:

• Rates: A smart strategy for finding the best checking account, savings account, or CD is to start with those offering the highest interest rates possible, enabling you to make the most out of your money. Opt for banks that offer a high annual percentage yield (APY) compared to competitors.
• Monthly fees: Monthly maintenance fees are the most common, and they add up quickly. Now that there are so many free bank accounts, there's no reason to go with one that charges a monthly fee.
• ATM fees: If you're getting an account that comes with an ATM card, make sure it doesn't charge ATM fees. You might still see ATM fees charged by other institutions making out-of-network ATM transactions, but the best online banks now offer ATM fee rebates as well.
• Other fees: Overdraft fees and foreign transaction fees are two other big ones to avoid. Several of the best online banks don't charge overdraft fees. You can also find checking accounts with no foreign transaction fees, which is important if you travel internationally. Be sure to read the terms and conditions.
• Minimum balance requirements: Some bank accounts require a minimum monthly balance to keep your account open, while others require one to avoid fees. The best online banks have no minimum balance requirements—that way, you never have to worry about keeping your balance at a certain number.
• Early paycheck deposit: Some banks offer the ability to access your paycheck up to two days early. So instead of waiting until payday to use your money, banks with this customer-friendly feature make those funds available much sooner. In addition to paychecks, it may also apply to other regular and recurring deposits, such as monthly social security payments.
• Bill pay: If you want to pay bills directly from your online account, look for accounts that offer a bill pay service. Also notice if it will let you pay as many bills as you want each month, or if there is a cap to its bill pay service.
• Mobile access: Assuming you want to be able to interact with your account via mobile device, check that the bank you're considering offers a full-service app. Not only will you want to be able to check account balances, but you may want full mobile banking services that allow you to set up transfers and pay bills.
• Types of accounts: If you want to do all your banking in one spot, you need a bank that offers it all. While it can be a little less convenient, holding different accounts at different online banks can help you get the best deals. For example, you could open a checking account with the best online bank for checking, but keep some money in a savings account at another bank that offers a higher APY.

How to Open an Online Bank Account

One of the notable advantages of online banks is that they are generally easy to interact with from the comfort of your home. Even getting started with a new account can be done via your computer or smartphone. Here are the basic steps:

1. Visit the bank's website: Visit the bank's website and locate a button or link that says "Open an Account" or "Apply Now".
2. Complete your application: Follow the online instructions to provide your personal information—such as physical address, social security number, email address, mobile phone number, and so forth.
3. Indicate the account(s) you want: You'll then need to answer some questions about the account(s) you want to open, and the features you want (such was whether or not you'd like a debit card).
4. Prove your identity: You'll also be presented with a set of questions used to determine if you are who you say you are, and may additionally be prompted to verify your phone number with a code sent to you via text message.
5. Put money in the account: Once the application is completed, the last step is usually to fund the account. Sometimes a minimum initial deposit is required, other times it is not. If you opt to fund the account at the time of account opening, you're usually offered the option of transferring funds from another bank account via ACH. Only some institutions will allow you to make the initial deposit with a debit or credit card.

When your application process is complete, you may be provided with your new account number and be able to interact with your account right away. Or you may need to wait a day or two to receive confirmation that the account has been opened and how to establish your online banking credentials.

Alternatives to Online Banks

An online bank can be a solid choice for many people—either as a primary banking option or as a supplement to their primary checking or savings account. But if you’re unsure whether online banks are right for you, here are a few alternatives to consider. 

• Traditional banks: Large banks sometimes have a negative reputation for a lack of individualized customer support, high fees, and lower interest rates on deposit accounts. But big national banks can offer benefits to their customers as well, such as a broad network of branch and ATM availability, top-of-the-line digital banking apps and tools, a larger offering of financial services, and even generous bank account bonuses for new customers. 
• Credit unions: Credit unions often offer their members higher annual percentage yields (APYs), lower fees, and superior customer service compared to traditional banks. Yet these member-owned financial institutions may still offer in-person banking solutions for people seeking this type of financial service. And, if you choose one insured by the National Credit Union Administration (NCUA), your deposits are federally protected in the same way that bank coverage is provided by the FDIC.
  
• Community banks: If you’re looking for a smaller bank that doesn’t have membership requirements like a credit union, a community bank might be a good fit for you. Community banks tend to offer more personalized customer service and may have more competitive interest rates. However, branch availability tends to be more limited than larger national banks. 
• Reloadable prepaid cards: A prepaid debit card is an alternative that some people may consider instead of online banks or other types of financial institutions. You can open this type of account even if you’re unable to open a traditional bank account due to ChexSystems challenges or other issues. Some prepaid cards may offer direct deposit capabilities, ATM access, cash management services, and more. Yet these types of cards may also feature significant drawbacks in the form of high fees, no credit-building potential, and no rewards-earning capability.
  

Why You Should Trust Investopedia Reviewers

Investopedia collected more than a dozen key data points on each online bank we considered to identify the most important factors for readers choosing an internet banking partner. We used data on fees, rates, account features, and minimum balances to review each bank and provide unbiased, comprehensive reviews so readers can make the right financial decisions for their needs. Investopedia launched in 1999, and has been helping readers find the best online banks since 2021.

How We Picked the Best Online Banks

To select the best online banks, Investopedia researched 19 institutions, reviewing rates, fees, minimum balance requirements, rewards, customer service, mobile banking apps, and types of accounts offered. These are the most important features when it comes to online banking if you want to minimize your costs, maximize your earnings, and enjoy a convenient and easy banking experience. To provide a numeric score to each institution, the most heavily weighted parameters were interest rates on savings, money market, and CD accounts available at the bank, the number of states from which the bank accepts customers, and the number of available ATMs.

Learn More About Online Banks

• What is online banking?
• How does online banking work?
• Pros and cons of online banks
• Are online banks safe?
• How to open a checking account online
• How to choose a bank
• Credit unions vs banks
• Best high yield savings accounts
• Best banks for savings accounts
• Best free checking accounts
• Best credit unions