Online banks may branchless or only maintain a small number of physical locations, but they also frequently offer simple online and mobile banking services, as well as responsive and approachable customer care. Online banking offers a convenient and secure way for customers to manage their finances from anywhere with an internet connection. By selecting the best online banks, you can reduce your out-of-pocket expenses and increase your savings. Find out more about online banks below.
What is Online Banks ?
Online banks, also known as internet banks, are financial institutions that provide banking services through digital channels such as websites, mobile apps, and online portals. These banks typically do not have physical branch locations and offer services such as deposit accounts, loans, credit cards, and investment options through their online platforms.
Online banks operate entirely in the virtual space, allowing customers to conduct transactions and manage their finances entirely online. This means that customers can perform tasks such as checking their account balances, transferring money, and paying bills without having to visit a physical branch or interact with a bank representative in person.
Online banks have gained popularity in recent years due to their convenience, accessibility, and often, lower fees. They offer 24/7 access to banking services from anywhere with an internet connection, making it easier for customers to manage their finances on their own time.
How Does Online Banking Work ?
Online banks are financial institutions that operate primarily or even solely online. Online banking works by allowing customers to access their bank account and conduct financial transactions through a digital platform, such as a website or mobile app.
Even if you leave your balance at zero, the online banks only charge minimal or no fees. Additionally, you should be offered a wide range of products, generous rates on savings accounts, secure mobile banking, and convenient add-ons like budgeting and savings tools. Here is a general overview of how online banking works :
1) Sign-up and Verification:
Customers create an account with the online bank and go through a verification process to confirm their identity.
2) Account Access:
Once verified, customers can log into their account using a username and password or biometric authentication, such as fingerprint or facial recognition.
3) Account Management:
Customers can view their account balances, transaction history, and other account details. They can also manage their account by setting up automatic payments, transferring money between accounts, and updating personal information.
4) Financial Transactions:
Customers can perform various financial transactions, such as paying bills, depositing checks, sending money to other accounts, and applying for loans or credit cards.
5) Security:
Online banking platforms typically use encryption and multi-factor authentication to ensure the security of customer information and transactions.
Who Are Online Banks Best For ?
Online banks can be a good fit for a wide range of individuals, but they are particularly well-suited for those who prefer a convenient and low-cost banking experience. Here are some groups of people who may benefit from using online banks:
1) Tech-Savvy Customers:
Online banks require customers to be comfortable using technology and navigating digital platforms. Customers who are comfortable using computers, mobile devices, and the internet may find online banking to be an easy and convenient way to manage their finances.
2) Mobile Customers:
Many online banks have mobile apps that allow customers to access their accounts and perform transactions on-the-go. Customers who prefer to do their banking through their smartphone or tablet may find online banking to be a convenient option.
3) Busy Customers:
Online banking allows customers to manage their finances without having to visit a physical branch. This can be a time-saver for busy individuals who don't have the time to go to a bank during regular business hours.
4) Cost-Conscious Customers:
Online banks typically have lower fees and higher interest rates than traditional banks. Customers who want to save money on banking fees and earn higher interest on their deposits may find online banks to be a good fit.
5) Customers Who Don't Need Personal Service:
Online banking doesn't offer the same level of personal service as traditional banks. Customers who are comfortable managing their finances on their own and don't require a lot of guidance or support from bank representatives may find online banking to be a good fit.
Overall, online banks can be a good fit for customers who are comfortable with technology, prefer a convenient and low-cost banking experience, and don't require a lot of personal service from bank representatives.
Best Online Banks of 2023
There are many online banks in the United States, and the best one for you will depend on your specific needs and preferences. However, here are some of the top list of online banks in USA based on features, benefits, and customer satisfaction :
1) Ally Bank :
Offers a high-yield savings account, checking account with no monthly maintenance fees, and 24/7 customer service.
2) Chime :
Offers a no-fee checking account, early payday feature, and automatic savings features.
3) Discover Bank :
Offers a high-yield savings account, checking account with no monthly fees, and cashback rewards on debit card purchases.
4) Capital One 360 :
Offers a high-yield savings account, checking account with no monthly fees, and access to over 39,000 ATMs.
5) Schwab Bank :
Offers a high-yield checking account, free bill pay, and unlimited ATM fee rebates.
6) Axos Bank :
The bank offers a range of financial products and services, including checking accounts, savings accounts, money market accounts, CDs, mortgages, personal loans, and business banking services. Axos Bank is FDIC-insured, which means that deposits up to $250,000 are insured by the government.
How to Choose an Right Online Bank ?
Choosing the right online bank can be overwhelming, as there are many options to choose from. Here are some factors to consider when choosing an online bank :
1) Fees :
Online banks typically have lower fees than traditional banks, but it's still important to check for any fees that may apply, such as maintenance fees, ATM fees, and transaction fees.
2) Interest Rates :
Look for an online bank that offers competitive interest rates on deposit accounts, such as savings accounts and certificates of deposit (CDs).
3) Security :
Make sure the online bank uses encryption and multi-factor authentication to protect your personal and financial information.
4) Customer Service :
Look for an online bank that offers good customer service, such as a 24/7 customer support line or chatbot, and has a responsive and helpful customer support team.
5) Mobile App :
Check if the online bank has a user-friendly mobile app that allows you to manage your accounts and perform transactions on-the-go.
6) ATM Network :
Some online banks have partnerships with ATM networks, which can provide access to fee-free ATMs for cash withdrawals and deposits.
7) Account Types :
Make sure the online bank offers the types of accounts you need, such as checking accounts, savings accounts, and CDs.
8) Deposit Limits :
Check for any minimum deposit requirements and deposit limits that may apply to the online bank's accounts.
9) Reputation :
Look for an online bank with a good reputation, by checking reviews from other customers and doing research on the bank's history and track record.
Overall, it's important to do your research and compare different online banks before making a decision. Consider your banking needs and priorities, and choose an online bank that best fits those needs.
What Services does Online Banks Provide ?
Online banks provide a wide range of financial services, which are similar to traditional brick-and-mortar banks, but with the added convenience of online access. Some of the services that online banks typically offer include :
1) Checking and savings accounts:
Online banks offer a variety of checking and savings account options, often with higher interest rates than traditional banks.
2) Debit and credit cards:
Online banks also offer debit and credit cards that can be used for purchases and ATM withdrawals.
3) Loans:
Online banks provide personal loans, home loans, and car loans with competitive rates and easy online applications.
4) Investment accounts:
Online banks offer investment accounts, such as brokerage accounts and individual retirement accounts (IRAs).
5) Mobile banking:
Online banks have mobile apps that allow customers to check account balances, transfer funds, pay bills, and deposit checks.
6) 24/7 customer service:
Online banks provide customer service through various channels, including email, phone, and chat, 24 hours a day, seven days a week.
7) Online bill pay:
Online banks offer online bill pay services that allow customers to pay bills from their accounts.
8) Money management tools:
Online banks provide financial management tools to help customers manage their money, create budgets, and track spending.
Overall, online banks offer a convenient and comprehensive range of financial services that make banking easier and more accessible for customers.
How to Open a Bank Account Online ?
Opening an online bank account is generally a straightforward process that can usually be done entirely online. Here are the general steps you can follow to open an online bank account :
1) Choose an Online Bank :
Research different online banks and choose one that fits your needs and priorities.
2) Gather Your Information :
Gather the necessary information you'll need to open an account, such as your name, address, Social Security number, and employment information.
3) Fill Out an Application :
Go to the online bank's website or download their mobile app and fill out the account application form. You'll be asked to provide your personal and financial information.
4) Verify Your Identity :
The online bank will verify your identity by asking you to provide a copy of your government-issued ID, such as a driver's license or passport.
5) Fund Your Account :
Depending on the bank, you may be able to fund your account by transferring money from an existing bank account, setting up direct deposit, or mailing in a check.
6) Review the Terms and Conditions :
Before finalizing your account, make sure you carefully read and understand the terms and conditions of the account, including any fees and interest rates.
7) Submit Your Application :
Once you've filled out the application and provided the necessary information, submit it to the online bank for review.
8) Wait for Approval :
The online bank will review your application and may contact you if additional information is needed. Once approved, you will receive confirmation that your account has been opened.
9) Set Up Online Banking :
Once your account is open, set up online banking by creating a username and password or using biometric authentication. You'll be able to access your account and manage your finances online.
Make sure you have all the necessary information and carefully review the terms and conditions of the account before submitting your application.
What Do You Need To Open a Online Bank Account ?
To open a bank account online, you'll typically need the following information:
1) Personal Information :
This includes your full name, date of birth, Social Security number, and contact information such as your address and phone number.
2) Government-Issued ID :
You'll need to provide a copy of your government-issued ID such as a driver's license, passport, or state ID.
3) Employment Information :
You may need to provide information about your employment, such as your employer's name and contact information, your job title, and your annual income.
4) Funding Information :
You'll need to provide information on how you plan to fund your account. This can be done through a transfer from an existing bank account, a direct deposit from your employer, or by mailing in a check.
5) Electronic Signature :
You'll need to provide an electronic signature to confirm that you agree to the bank's terms and conditions.
6) Mobile or Computer :
You'll need access to a mobile device or computer to access the bank's website or mobile app and complete the online account opening process.
It's important to note that the specific information required to open an online bank account may vary depending on the bank and the type of account you're opening. Be sure to check the bank's website or contact their customer service if you have any questions about what information is needed to open an account.
Benefits of Online Banks
Online banks offer many benefits over traditional brick-and-mortar banks. Here are some of the most common benefits :
1) Convenience :
Online banks allow you to access your account information and perform banking transactions from anywhere, at any time, as long as you have an internet connection.
2) Lower Fees :
Online banks generally have lower overhead costs than traditional banks, which allows them to offer lower fees and higher interest rates on accounts.
3) Higher Interest Rates :
Many online banks offer higher interest rates on savings accounts and CDs compared to traditional banks.
4) Mobile Banking :
Online banks often have mobile apps that allow you to manage your accounts and perform transactions from your smartphone or tablet.
5) Enhanced Security :
Online banks use advanced security measures to protect your personal and financial information, such as two-factor authentication and encryption.
6) Easy Account Opening :
With online banks, you can open and fund an account within minutes from your computer or mobile device, without having to visit a branch in person.
7) 24/7 Customer Support :
Many online banks offer 24/7 customer support via phone, email, or chat, which can be more convenient than traditional bank's limited customer service hours.
Drawbacks of Online Banks
While there are many benefits of online banks, there are also some potential drawbacks that should be considered :
1) Limited Physical Access :
Online banks don't have physical branches, which means you can't visit a physical location to speak with a banker or deposit cash or checks. This can be an inconvenience for some people.
2) Limited Services :
Online banks may not offer all of the services that traditional banks do, such as safe deposit boxes or cashier's checks.
3) No In-Person Support :
Since there are no physical branches, you can't get in-person help from a banker if you have a problem or need assistance with your account.
4) Technology Dependence :
Online banks rely on technology to manage and protect your accounts, which means there is a risk of cyber threats such as hacking or phishing.
5) Deposit Limitations :
Online banks may have limitations on the amount of money you can deposit into your account, which could be a problem if you have large deposits to make.
6) ATM Fees :
While online banks may have partnerships with ATM networks to offer fee-free access, some online banks may charge fees for using out-of-network ATMs.
Frequently Asked Questions
Are online banks safe?
Yes, online banks are generally safe as they use encryption and multi-factor authentication to protect your personal and financial information. However, it's important to choose a reputable online bank and take necessary precautions to keep your account information secure.
Can I deposit cash at an online bank?
Some online banks allow you to deposit cash at certain ATMs or by mailing in a check, but not all banks offer this option. Check with the online bank to see if cash deposits are accepted and what the process is.
Can I use an online bank for business accounts?
Yes, some online banks offer business accounts in addition to personal accounts. Check with the bank to see what types of business accounts they offer and what the requirements are.
How do I access my account with an online bank?
You can access your account with an online bank through their website or mobile app. You'll typically need to create a username and password or use biometric authentication to log in.
Can I get a loan or credit card from an online bank?
Yes, some online banks offer loans and credit cards. Check with the bank to see what types of lending products they offer and what the requirements are.
Can I transfer money to and from other banks with an online bank account?
Yes, most online banks allow you to transfer money to and from other banks. Check with the bank to see what the process is for setting up transfers.
Are there fees associated with online banks?
Some online banks may charge fees for certain services, such as overdrafts or wire transfers. However, online banks generally have lower fees than traditional banks. Check with the bank to see what fees may apply.