The ubiquity of the internet has completely reinvented how we manage our daily lives—from digitally checking the Yellow Pages to streaming music. But not surprisingly, many are still uneasy about the thought of online banking. After all, it’s one thing to turn to the World Wide Web for a restaurant review or the latest album release. It’s another thing entirely to entrust your finances to an institution that operates entirely on the web. Isn’t an online bank just a hacker’s paradise?
Thankfully, there’s no reason to fear. Online banking offers the same protections as traditional banking; it’s just a matter of finding the best place to manage your income. Keep reading to learn about the benefits of online banking and discover some of the top contenders in the industry.
Why Bank Online?
Online banks operate with very low overhead because they don’t have to pay the costs associated with managing physical branches. As a result, they’re able to offer some unique perks that you typically won’t find at a brick-and-mortar bank. They typically offer higher interest rates (i.e., more cash back) on the money you save, and they’re able to operate with lower monthly fees. Some online banks charge no fees at all.
Since they’re designed specifically for cyberspace, these banks tend to be extremely web- and mobile-friendly. They make it easy to manage funds, check your balance, and instantly transfer money—all from your computer or mobile device.
What Are the Drawbacks?
Once you get the hang of online banking, you’ll realize that the day-to-day experience isn’t much different from traditional banking. However, if you’re not banking with an ever-present institution like Wells Fargo or Bank of America, it may take more effort to find free ATMs. Just make sure to choose an online bank that offers a lot of free ATMs. The best online banks will give you access to between 40,000 and 100,000 free ATMs—if not more.
Is It Safe?
As long as you choose a reputable bank that’s backed by the FDIC or the National Credit Union Administration, your money is just as safe as it would be in a traditional bank. All FDIC-protected banks—online or otherwise—will protect you from losses of up to $250,000. Traditional banks also store their data online, so they’re no safer from hackers than money that’s managed by an online bank. Your funds are still in good hands.
The Best Online Banking Institutions
When choosing an online bank, make sure to check reviews and compare the fees and interest rates. Most importantly, make sure that your bank is backed by the FDIC or NCUA. Here are a few of the more reputable banks to get you started:
Aspiration: This FDIC-insured bank has no monthly fees and no minimum balance requirements. It also pays an annual percentage yield (APY) of 1% on balances above $2500.
Bank5 Connect: This online bank offers free ATMs and ATM reimbursement in addition to a generous 0.76% APY. You only need a $10 deposit to open an account, and you can start earning interest with just $100 in the bank.
Ally: Ally offers perks like low fees and thousands of fee-free ATMs, but its real claim to fame is its world-class customer service. Ally has live assistance 24 hours a day via phone and chat.
Radius Hybrid: Radius offers one of the best interest rates in the business (0.85% APY), and it’s one of the few banks—online or otherwise—that offers unlimited ATM fee reimbursements when you’re charged for using out-of-network ATMs.
Alliant: For those who prefer the credit union experience, Alliant is a federally protected credit union that offers 0.65% APY to qualifying customers in addition to low fees. Anyone can be approved for membership with just a $10 donation to a qualifying nonprofit organization.
Need a refresher? Read on to learn the difference between paying with debit or credit.