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By Maggie Overholt, Senior Content Strategist & Insurance Writer

The Best Online Banks

The best bank maximizes the value of your money with a variety of financial services, high earning potential, and low fees. 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.

The 4 Best Online Banks

Ally

Best
Online Bank

Ally Bank
Ally
Outstanding customer support, minimal fees, and a wide range of financial products and services.
Pros
Simple savings account
Customer service
Educational resources
Cons
Some account restrictions

Why we chose it

Simple savings account

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 2.2% 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.

Customer service

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.

When we reached out with questions about opening an account, we were told exactly where we were in the queue (third) and had our answers within a couple of minutes — no long hold times or tinny elevator music while being reminded that “our call was very important.”

Educational resources

Ally’s website also has a robust educational section that’s aimed at improving customers’ financial literacy. We like its Wallet Wise courses, which walk you through the basics of banking, budgeting, investing, and credit. When you’re ready to move beyond the basics, you can also check out Ally’s Do It Right community. It’s full of articles and discussion boards that share best financial practices for everything from college savings to estate planning. These tools empower customers to make smarter money decisions and help you get the most value from your Ally accounts.

Points to consider

Some account restrictions

Ally charges a $10 fee for too many transactions. Customers who treat their savings account like a checking account, be warned. You can make at most six transactions per statement cycle—a limit actually imposed by federal law for electronic and phone transfers. Ally’s fee structure holds you to it. If you repeatedly perform too much activity in your savings account, Ally will eventually either close the account or convert it to checking. Ally Bank will also close your account if no funds are deposited within the first 30 days of opening it. Ally also has restrictions on wire transfers. While domestic outgoing transfers will cost $20 each, international transfers aren’t allowed.

First Internet Bank

Best
Interest Rates on CDs

First Internet Bank
First Internet Bank
The widest network of ATMs among our finalists (over a million), plus CD rates starting at 2.81%.
Pros
Vast ATM network
High investment yields
Cons
Savings interest and international fee

Why we chose it

Vast ATM network

If you deal with cash frequently — cash tips, for example — then you might be worried about making the switch to an online bank. How are you supposed to deposit actual money without going into a branch? First Internet Bank has the answer. It’s part of the Visa Plus ATM network, which includes surcharge-free, deposit-accepting ATMs across the United States. On a larger scale, the Plus Network has more than two million ATMs in 200 countries, so you can access your accounts no matter where you go. To find deposit-friendly ATMs in your area, plug your zip code into First Internet Bank’s Global ATM Locator and filter for ‘Plus Shared Deposits.’

High investment yields

First Internet Bank offers excellent returns on certificates of deposit (CD) — fixed-term, high-yield savings accounts. CD rates, as with savings rates, can change, so it’s always worth double-checking close competitors like Ally and Capital One, but First IB has the highest CD interest rates we found. A one-year CD with just a $1,000 deposit will wrack up 2.81% interest. Other banks, including Ally, require deposits of $5,000 or more to qualify for rates above 2%.

Points to consider

Savings interest and international fee

We were less impressed with First Internet Bank’s savings options, which have a maximum interest below 1%–0.75%, depending on your balance. While it’s not totally out of the league of competitors, online banks including Ally and Discover offer savings account interest above 2%. That uptick can add up to a chunk of cash. If you have $5,000 in a savings account, a 1% simple interest will earn you $50, while a 2% earns you $100.

There’s also the international fee to consider, which at 2% on foreign purchases is double the standard fee — plus, a good number of banks don’t carry an international fee at all.

Discover

Best for
Frequent Travelers

Discover
Discover
A wide range of services, no international fees, and APY rates up to 2.10% for online savings accounts.
Pros
No international fees
Well-rounded services
Cons
Limited customer support

Why we chose it

No international fee

What we really love about Discover, is that it doesn’t charge international fees. By comparison, our other top picks will slap you with a surcharge of 1-2% 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 travel often 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.

Well-rounded services

Discover offers a range of services, including credit cards, loans, and IRAs. Like Ally, First Internet Bank, and Capital One, it has no minimum balance requirements for checking and savings accounts. It even rings in the second highest savings APY among our finalists (just behind Ally), at up to 2.10%.

Points to consider

Limited customer support

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. Discover does have 24/7 phone support, which we appreciate, but it lacks the variety of channels that are important for customer satisfaction.

Capital One

Best
Hybrid Online Bank

Capital One
Capital One
A solid online banking pick with physical locations and no international fees.
Pros
Access to brick-and-mortar branches
Accessible, high-value CD
No international fee
Cons
Low savings account interest

Why we chose it

Access to brick-and-mortar branches

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.

Accessible, high-value CD

There’s no minimum balance to invest in a certificate of deposit, and the interest rate is competitive. Invest as little as a few hundred dollars in a CD with Capital One and start accruing 2.7% interest—that’s hot on the heels of the rates offered by Ally and First Internet Bank, but those banks require $5,000 and $1,000 minimum deposit respectively.

No international fees

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 2% slap on the wrist.

Points to consider

Low savings account interest

At 1%, the interest rate of a savings account with Capital One is just above what you can expect with First Internet Bank (where the going rate is 0.75%), but well below what you could be earning with some of our other top picks. If an interest-garnering savings account is important to you in the search for an online bank, you may be better off with Ally or Discover.

Guide to Getting the Most From Online Banking

You don’t have to keep all your eggs in one basket

For brick-and-mortar banks, it makes sense to do all your banking in one place — traveling between different branches to manage separate accounts and investments can turn into a hassle. With direct banking, however, you can hand-select the best options from multiple institutions. Many experts even recommend it.

"Before you sign up for an account you should make sure you understand the fee structure. Hidden fees typically revolve around what your daily balance is, what ATM you use when you withdraw money, and whether or not you're overdrawn at any given time."

For example, you might open up a high-yield savings account at Ally, and invest in a CD from First Internet Bank, or maintain a checking account with Discover for your annual vacations. This doesn’t mean you need to go overboard (most people would probably still find it a hassle to maintain several separate bank accounts), but be aware that 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.

Read the fine print for fees and penalties

It’s important to understand your bank’s information in full before opening an account. Often, it’s the fine-print fees that can eat away at your balance, like that $30 penalty for accidentally overdrawing your Discover checking by $1. If you know about the fee ahead of time (and know that you tend to accidentally overdraw) then you can choose a bank like First Internet Bank instead — which offers free overdraft protection transfers in increments of $50. Here’s how a few common fees compare among our finalists:

Ally First Internet Bank Discover Capital One
Checking maintenance fee n/a n/a n/a n/a
Saving maintenance fee n/a n/a n/a n/a
Overdraft fee $25 $30 $30 $35
International fee 1% 2% n/a n/a

Online Banks FAQ

What’s the difference between interest rate and annual percentage yield (APY)?

“It’s important to understand the difference between interest rate and APY,” says Matthew Goldberg of Bankrate, “because comparing APYs – not interest rates – is going to give you an apples-to-apples comparison of yields on an annual basis.” The number of times per year that you are paid interest dictates the value of that interest. That’s the magic of compound interest (you earn more interest on more money, so you want those deposits to be frequent) and that’s the nuance that APY encompasses. APY is the amount you earn on your investments over the course of the year.

While we’re on the subject, what about APR? The annual percentage rate, commonly advertised by credit cards, is the interest you pay on bills that aren’t paid in full or on loans you’ve taken out from the bank.

What is the best way to save money?

The answer may be different for everyone, but we recommend you start by analyzing your current financial situation. Calculate your debt, income, and any other expenses. Create a monthly budget and intentionally set a portion of your remaining income (after bills and essential expenses) to savings. You can even automate a monthly amount of money to be transferred into your savings account.

Which credit union is best?

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. Nonetheless, credit unions offer every feature you’d need from a bank, including high CD rates and competitive APY.

The Best Online Banks: Summed Up

Ally Bank
Discover Bank
First Internet Bank
Capital One
Best Online Bank
Best Interest Rates on CDs
Best for Frequent Travelers
Best Hybrid Online Bank
>Minimum Checking Requirement
n/a
n/a
n/a
n/a
>Minimum Savings Requirement
n/a
n/a
n/a
n/a
Max interest rate saving account
2.20%
0.75%
2.10%
1.00%
One-year CD interest rate
2.75%
2.81%
2.65%
2.70%

Our Other Financial Service Reviews

Smart financial moves add up to more than a plump wallet — they bring peace of mind. Read up on other money-related subjects to help you achieve net nirvana.

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