In-branch banking used to be the norm – for a long time, it was the only way to open a savings or checking account. But online banks aren’t just an alternative way to keep your money – they can also be a valuable tool for your finances.
Here are some reasons why you should consider using an online-only bank instead of your local bank.
Fewer fees
Online banks don’t have to deal with costs like leasing multiple physical locations or building branches, so they can afford to offer their services at lower fees. For example, there are many online banks that don’t charge a monthly account maintenance fee, while traditional banks must (or do) charge fees to cover these overhead costs.
While there are traditional banks that offer fee-free bank accounts, your choices may be more limited. You should compare these accounts with those offered by online banks to make sure you’re not only getting a free bank account, but also additional perks that can make banking there worthwhile.
Our pick of the best high-yield savings accounts of 2024
|
American Express® High-Interest Savings 
APY 4.25%
Price info
4.25% annual percentage rate from August 19, 2024
Member of the FDIC. |
APY 4.25%
Price info
4.25% annual percentage rate from August 19, 2024 |
Min. to earn 1 dollar |
|
UFB Portfolio Savings Account 
APY 5.15%
Price info
To ensure you continue to receive the highest interest rate with UFB, you need to keep an eye on their interest rates. Occasionally, the bank opens new accounts with higher interest rates. Existing accounts will need to contact the bank to request to be transferred to one of these new accounts.
Member of the FDIC. |
APY 5.15%
Price info
To ensure you continue to receive the highest interest rate with UFB, you need to keep an eye on their interest rates. Occasionally, the bank opens new accounts with higher interest rates. Existing accounts will need to contact the bank to request to be transferred to one of these new accounts. |
Min. to earn $0 |
|
CIT Platinum Savings 
APY 5.00% APY for balances of $5,000 or more
Price info
5.00% APY for balances of $5,000 or more; otherwise 0.25% APY Min. to earn $100 to open an account, $5,000 for maximum APY
Member of the FDIC. |
APY 5.00% APY for balances of $5,000 or more
Price info
5.00% APY for balances of $5,000 or more; otherwise 0.25% APY |
Min. to earn $100 to open an account, $5,000 for maximum APY |
Better prices
Online banks can also offer better interest rates on many products, from checking and savings accounts to CDs and loans. Over the course of your banking relationship, this can add up to significantly more money in your bank account.
Let’s say a traditional bank offers a savings account with an annual interest rate of 0.36% – the national average as of July 2024, based on data from the St. Louis Fed. If you have $10,000 in that account, you could earn $36 over the course of the first year and $36.13 the next year.
However, if you choose an online bank with a 5% interest rate, you could earn $500 the first year and $525 the next. And over a 10-year period, that difference would only get bigger.
Please note that banks’ APYs are not fixed and may change over time, so returns are not guaranteed. However, since online banks tend to offer better interest rates, you are still better off with this type of account.
You can do everything online
When you have a bank that focuses exclusively on online banking options, user experience is not a secondary concern, it is the key. And if you (especially as a millennial) have ever had the problem of having to make a phone call or visit a bank branch because you need to speak to a human to resolve an issue with your bank account, this is a convenient solution.
This doesn’t mean you don’t have the option to call customer service. It’s just a convenience you can take advantage of.
Tip: Many online banks have partnerships with ATM providers or offer ATM discounts, so you can still withdraw money or deposit checks in person if you need to. Just make sure there is a branch (or branches) near you before you sign up.
Just because you opened the account years ago, the decision about which bank you bank with shouldn’t be a foregone conclusion. And given the benefits, it makes sense to at least slowly move to an online bank if you want to get the most out of your bank accounts.
These savings accounts are FDIC insured and could earn you more than ten times your bank account
Many people miss out on guaranteed returns because their money sits in a large bank savings account and hardly earns any interest. Our selection of the best online savings accounts could earn you more than ten times the national average interest rate on savings accounts. Click here to discover the best-in-class accounts that made our shortlist of the best savings accounts for 2024.
