As banking customers demand more convenient account access, opening an online account with the best online bank is increasingly on the minds of many consumers.
The best online banks maximize the value of your money with a variety of financial services, high earning potential, and low fees. While traditional banks are certainly capable of this, online banks are in a great position to perfect the banking experience on all three fronts.
Lower overheads compared to traditional, brick-and-mortar banks allow them to offer competitive interest rates while shedding annoying fees. But banking isn’t only about the money; a great bank also makes transactions convenient and provides customer support.
When it comes to online banking, we’ve compiled the best accounts to provide you with a perspective on the available options banking customers now have online.
5 best online banks of 2020
- Ally Bank: Best overall
- Discover: Best for frequent travelers
- Capital One: Best hybrid
- Axos Bank: Best rewards
- USAA: Best for military
Ally: Best overall
If you want to keep all your banking activity under one roof, we recommend starting your search with Ally Bank. Opening a checking and savings account with Ally is simple because, like most of our top picks, it has no minimum balance requirements or monthly maintenance charges. That means you can start with whatever you have on hand, and Ally won’t eat away at your balance with unnecessary fees. It also offers one of the highest-yield savings accounts we found, at 1.25% APY.
Ally also offers a full suite of banking services. Customers can open up a credit card, take out an auto or home loan, invest in an IRA or CD, and more. Ally affords you the simplicity of keeping all your finances in one place.
The other reason we love Ally (and what put it at the top of our list) is its excellent customer support. Among all our contenders, Ally’s resources came out on top. Its reps are available 24/7 through live chat and over the phone, including phone lines for international callers and those hard of hearing. If you prefer, you can also connect through email, Facebook, Google Plus, or Twitter.
Discover: Best for frequent travelers
What we really love about Discover, is that it doesn’t charge international fees. By comparison, most of our other top picks will slap you with a surcharge of 1% to 2% for every card transaction on foreign soil. It may not sound like a lot, but if you’re a frequent traveler, those charges can add up quickly. We recommend looking into a Discover account if you often travel for business, if you’re a student studying abroad, or if you simply vacation a lot. Avoiding those small percentage charges could save you a lot in the long run.
Discover offers a range of services, including credit cards, loans, and IRAs. Like Ally, Axos Bank, and Capital One, it has no minimum balance requirements for checking and savings accounts. It even rings in at one of the highest savings APY among our finalists, at up to 1.25%.
The main reason Discover isn’t higher up on our list is that it has poorer customer support than our other top picks. We couldn’t find an email address listed on its site, and you have to be a member to use its live chat function — which meant we couldn’t easily reach a rep while we were comparing accounts.
Capital One: Best hybrid online bank
While you won’t find Capital One outposts as frequently as you see US Banks or, for that matter, Chick-fil-As, there are Capital Ones available to you if your major qualm with transferring to online banking boils down to the loss of IRL money management. Capital One offers the increased interest rates of online options with the person-to-person contact of physical offices, or Capital One Cafés, as it were. Locations are cropping up in cities across the U.S., allowing you to bring your money questions to tellers and get a cup of Peet’s coffee while you’re at it.
For those who travel, Capital One is a great option, nearly on-par with our top travelers pick, Discover. Like Discover, Capital One levies no international fees, meaning purchases made outside of the U.S. don’t earn you a slap on the wrist. If an interest-garnering savings account is important to you in the search for an online bank, it’s worth considering Capital One as a serious contender.
Axos Bank: Best rewards checking account
Formerly known as Bank of Internet USA, the rechristened Axos Bank offers checking accounts with rewards — a feature that’s usually relegated to credit cards and savings accounts. The Rewards Checking account grants APY interest (up to 1.25%) in increments, using a tiered rewards system that takes into account how many transactions you make per month and if you have monthly direct deposit set up.
The CashBack Checking account lets you earn up to 1% cash back on all transactions that require a signature (up to $2,000 in cash back per month). You earn 0.5% cash back if your daily account balance is below $1,500 and 1% cash back if it’s above that amount.
At 1.30% APY, the Axos savings account is much better than traditional banks, but it still lags behind many of our other online bank picks in this review. If you’re looking for a higher APY, we recommend Ally Bank, our best overall pick.
USAA: Best for military
Membership to USAA Federal Savings Bank is not open to everyone. To become a member, you have to be active military, former military, or an honorably discharged veteran, or a family member of one of the three. But once you’re in, you’re in. USAA membership affords you access to checking and savings accounts, credit cards, personal loans, insurance, mortgages, and a slew of other benefits.
The USAA Cashback Rewards Checking gives you 10 cents for every debit card purchase (excluding ATM withdrawals, cash advances, tax payments, and such). The rewards can either be credited to your account or redeemed for gift cards or travel through usaa.com (minimum reward amount for redemption is $20).
With the USAA Classic Checking, you can get 0.01% APY interest if you maintain a daily balance of $1,000 or more. While USAA only has five physical locations, you are able to withdraw funds from more than 60,000 ATMs within the U.S.
Compare the 5 best online banks of 2020
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What is an online bank?
Online banks handle all business online or via mobile apps. Without physical branch locations, online banks have a leg-up on the financial schema of traditional banks.
Online banks have the ability to provide customers access to many different types of savings options, including high-yield accounts, CDs, and loans. While traditional banks can offer similar services, online banks tend to offer higher savings rates due to lower overhead costs of traditional banks.
Online banks vs. other types of banks
Online banks vs. traditional banking
If you don’t mind traveling between different branches to manage separate accounts, brick-and-mortar banks or traditional banks make sense. With digital banking, however, you can hand-select the best options from multiple institutions.
If it’s the variety in banking accounts you need, online banking leaves you with many more options than you might typically have. You have the luxury of picking bank accounts based on what matters most to you.
Online banks vs. credit unions
Credit unions are not-for-profit banks that are member-owned. It’s essentially the co-op of the banking world. We considered credit unions in our search for the best bank, but none of them made it to our top picks due to better rates from online banks. Nonetheless, credit unions offer every feature you’d need from a bank, including high CD rates and competitive APY.
While relying on a single entity to serve every money-related need isn’t necessary, you should be adequately served by your bank so that seeking services elsewhere is a choice rather than an obligation.