There is no single "best" online bank—the right one depends on what you do with your money

Online banks vary in what they charge, what they pay you, and what features matter to your daily life. Some have no monthly fees and high interest rates on savings. Others charge you to use certain services or pay almost nothing on deposits. Some let you deposit checks by phone camera; others require you to mail them in. The "best" bank is the one that costs you the least money and makes it easiest to do the things you actually do—not the things you might do someday.

Before you open an account, write down three things: what you pay in fees now, what interest rate you earn (if any), and which services you use most often. Then compare those specific numbers across banks instead of reading reviews that praise features you will never touch.

Key Takeaways

  • Online banks have lower overhead than brick-and-mortar banks, so they typically charge no monthly fees and pay higher interest on savings accounts.
  • The cheapest bank for you depends on whether you overdraft often, need to deposit checks, use ATMs frequently, or carry a balance you pay interest on.
  • Most online banks are insured by the FDIC up to $250,000 per account type, so your money is protected the same way it would be at a traditional bank.
  • Moving to a online bank takes one to three weeks because the bank must verify your identity and transfer money from your old account.
  • You can keep your old bank account open while you test an online bank, so there is no risk in trying one for a month.

What online banks charge and what they pay

Most online banks charge zero monthly maintenance fees, which is their main advantage over traditional banks. They can do this because they have no branches to staff and no tellers to pay. That savings gets passed to you.

Where online banks differ is in what they pay you on deposits. A high-yield savings account at an online bank might pay 4% to 5% annual interest, while a traditional bank might pay 0.01%. That difference matters: on $10,000, you earn $400 to $500 per year at an online bank versus $1 at a traditional bank. The rate changes when the Federal Reserve changes interest rates, so check the current rate before you open an account, not the rate you read three months ago.

Some online banks charge fees for things traditional banks do for free: overdrafts, wire transfers, or stopping a payment. Read the fee schedule on the bank's website before you open an account. If you overdraft your account once a month, a bank that charges $35 per overdraft will cost you $420 a year, which erases any interest you earn.

How to compare online banks by what you actually do

Start by listing the services you use: Do you deposit checks? How often? Do you need to withdraw cash from ATMs? Do you send wire transfers? Do you ever overdraft? Do you keep money in savings or do you move it all to checking?

Then check each bank's policy on those specific things. If you deposit checks by phone camera three times a month, a bank that does not allow mobile check deposit will frustrate you. If you never overdraft, a bank's overdraft fee does not matter. If you travel and need ATM access, check whether the bank reimburses ATM fees or has a network of free ATMs in the places you go.

Create a simple table: list the banks you are considering down the left side, and the services that matter to you across the top. Fill in the fees, interest rates, and policies for each one. The bank with the lowest total cost for your specific situation is the best choice for you, even if it is not the one with the highest advertised interest rate.

FDIC insurance and whether your money is safe

Online banks are insured by the Federal Deposit Insurance Corporation (FDIC) the same way traditional banks are. The FDIC guarantees that if the bank fails, you will get your money back up to $250,000 per account type per bank. A checking account and a savings account are separate account types, so you are covered up to $250,000 in each one.

Check the bank's FDIC insurance status on the FDIC's website (fdic.gov) before you open an account. Search for the bank by name. If it shows up with a green checkmark, your deposits are insured. If it does not show up, the bank is not FDIC-insured and your money is not protected if the bank fails.

Some online banks are not FDIC-insured because they are not technically banks—they are fintech companies that partner with banks. These are riskier. Stick with banks that are FDIC-insured unless you have a specific reason not to.

How long it takes to move your money and start using a new bank

Opening an online bank account takes 10 to 15 minutes. You provide your name, address, Social Security number, and driver's license number. The bank verifies your identity electronically, usually within a few minutes.

Moving money from your old bank to your new one takes longer. If you set up an ACH transfer (the standard way to move money between banks), it takes three to five business days. If you need the money faster, you can deposit a check by mail or mobile deposit, but that also takes several days. Some banks offer a faster option called a wire transfer, but they usually charge $15 to $30 for it.

You do not have to close your old bank account right away. Keep it open for at least a month while you make sure direct deposits and automatic payments work correctly at the new bank. Once you confirm everything is set up, you can close the old account. If something goes wrong, you still have access to your old account while you fix it.

When an online bank is not the right choice

Online banks work well if you mostly use your phone or computer to manage money. They do not work well if you need to deposit cash frequently, because most online banks do not have branches where you can hand over cash. Some online banks partner with retail stores like Walgreens or CVS to let you deposit cash, but not all do.

Online banks also do not work well if you need a loan. Traditional banks can approve a personal loan or line of credit in a day or two because they know you and can see your account history. Online banks take longer to approve loans, and some do not offer them at all. If you might need to borrow money soon, a traditional bank or credit union might be a better choice.

If you need to talk to a human being on the phone, online banks are slower. Most offer phone support during business hours, but not 24/7. Some have live chat during limited hours. If you panic easily or need immediate help, a traditional bank with a branch near you might be worth the higher fees.

Moving to an online bank without losing access to your money

The safest way to switch is to set up your new online bank account first, then gradually move money and services over. Start by setting up direct deposit at the new bank if you have one. Give your employer the new account number and routing number. Direct deposits usually start within one or two pay periods.

Next, move any automatic payments (utilities, insurance, subscriptions) to the new bank. Log into each company's website and update your bank account information. Do this a few days before the next payment is due, so you know the payment goes through before you close the old account.

Finally, transfer any remaining money from the old bank to the new one using an ACH transfer. Wait five business days to make sure the transfer completes, then close the old account. If you forget to move a payment and it bounces at the old bank, you can still access that account to cover it, as long as you have not closed it yet.

Frequently Asked Questions

Can I use an online bank if I do not have a computer?

Yes. Most online banks have mobile apps that work on any smartphone. You can deposit checks, transfer money, pay bills, and check your balance from your phone. If you do not have a smartphone, you can call the bank's phone number to do most of these things, though it takes longer.

What happens if I need to deposit cash?

Most online banks do not accept cash deposits directly. Some partner with retail stores or ATM networks where you can deposit cash into your account. Others require you to deposit cash at a traditional bank, then transfer it to your online bank account. Check the specific bank's policy before you open an account if you deposit cash regularly.

Do online banks offer checking accounts, or just savings?

Most online banks offer both checking and savings accounts. Checking accounts usually have no monthly fee and come with a debit card. Savings accounts pay interest. Some online banks also offer money market accounts and certificates of deposit (CDs), which pay higher interest if you agree to leave the money untouched for a set period.

Can I get a loan from an online bank?

Some online banks offer personal loans, but approval takes longer than at a traditional bank because they cannot see your account history. Credit unions and traditional banks usually approve personal loans faster. If you need a loan soon, check whether your online bank offers them and how long approval takes before you switch.

What if the online bank goes out of business?

Your money is protected by FDIC insurance up to $250,000 per account type. If the bank fails, the FDIC will transfer your money to another bank or send you a check. This process usually takes a few weeks. As long as the bank is FDIC-insured, your money is safe even if the bank closes.