When reviewing your finances, you might be wondering how to choose the best online bank. You’re sick of getting little to nothing for your savings and getting hit with random fees. I am right there with you, it’s time for a change! With the fintech space shaking things up! The banking industry is changing more than ever, making “online-only banks” a top banking choice . They offer you high-interest rates for your savings, paid 2 days early, no random fees, and so much more. Which puts traditional brick and mortar banks in the hot seat and leaves you benefiting from these services. Now as a tech-savvy society, how do we become smarter with our money and where to bank it?
Review Your Banking Needs
Before choosing an online bank, it’s important to first list out all of your potential banking needs. At this point, list out what you don’t like about your current bank and what you’re looking for in your new bank. This can be like a pros and cons list that you do on a spare sheet of paper. Some of the popular cons are bank fees, like ATM fees, overdraft fees, and maintenance fees. A few other cons that you don’t want to miss, are the minimum transactions and minimum account balance. These small details will cause you to get hit with more fees than necessary.
Research Highly Rated Online Banks
When you do your research online, definitely look at the customer service ratings. I do this by going on blogs, YouTube, Twitter, Reddit, and Facebook groups. Yes, you read that right! You want to get holistic banking critiques from real customers. I am telling you, I’ve learned more about banks from Facebook comments and boards than from their own bank’s website. These communities aren’t paid to fake their real experiences. I know when looking at so many banks, all of them might seem to blend together. But the truth about how these banks function and treat their customers will only come from real customers. Take your time and take this extra step when doing your research.
Review the Fine Details
When reviewing online banks, here are a list of all the fine details you do not want to ignore. Most of these are non-negotiable like FDIC insurance. Other criteria can be based on your banking needs like ATM locations. When picking the best online bank always focus on what is realistic and valuable to you and your banking routine.
I also want to note, that when comparing online banks to traditional brick-and-mortar banks you want to be cautious of their differences. The reason I say this is because brick-and-mortar banks have a larger overhead compared to online-only banks. Making it easier for online banks to save a lot of money and be able to pass those savings on to you.
Making sure online banks have FDIC insurance is a big deal! The FDIC (Federal Deposit Insurance Corporation) is an independent agency of the United States government. This insurance protects bank depositors against losing their deposits in the event that a bank closes. Offering you protection up to $250K per bank account for individual accounts and $500K for joint accounts. A lot of online banks either have FDIC insurance directly or work with brick-and-mortar bank that is FDIC insured. Both of these options are common in the fintech space and safe. You just want to make sure that the online bank is FDIC insured and that you don’t carry more than the insured limit.
Annual Percentage Yields
Annual Percentage Yield is noted as APY. This is pretty much the interest you will be earning on your account. Keep in mind that this yield is calculated on a monthly basis depending on how much money you have in your account. The APY is also open to going up or down at any time during the year, don’t stress this too much. Things change and this yield is no different. It fluctuates with the economy and the need the banks have for your savings. Most online banks do offer high-yield checking accounts and savings accounts with a high APY. This can be very beneficial for many and should be something to take advantage of.
For most online banks the minimum deposit is around $0-$1. As a side note, this is very different than what we’re used to from our big banks. The lower the amount, the more flexibility you have to start banking with these online banks as soon as possible. One thing to note is that if no money is deposited within 60ish days, your account could be closed. This is pretty typical for most empty accounts.
For most online banking you can expect a minimum balance of $0-$15,000 depending on the bank. Most of the good ones have a minimum balance of $0. This is something you want to keep a close eye on, as every bank is different. Especially when you’re using a savings account for an emergency fund or a savings goal that will go to zero at one point. This allows you to have an empty account for a while without getting penalized.
Take note of the ATM network if you usually pull cash from ATMs or plan on traveling. A lot of online banks have sister ATM sites like local credit unions, 7-11s, and big retailers. Where you can withdraw money for free or get a reimbursement for the ATM fees. You also want to be aware of how you deposit money into your account. You can either through transferring from your primary bank, direct deposit, or cash. I’ve noticed with a few fintech app banks that charge you to deposit cash.
* Bonus: Online Bank Options
I wanted to share some highly-rated online bank options that have changed how many people manage their money. The top three options outside of brick-and-mortar big banks and credit unions are listed below in more detail.
- Online Banks
- Credit Card Companies
- Financial Services Companies
- Financial Technology Companies
These banks offer great benefits that traditional banks can’t offer with no fees or minimum requirements. These banks are solely online and don’t have a physical location. Here are some great online banks to compare:
Credit Card Companies
Another option many people don’t know about is that credit card companies offer amazing banking options. Some credit card companies to compare are:
Financial Service Companies
Many financial service companies offer cash management accounts that offer debit cards and money market accounts. If investing is your goal, then this can be a great option if you need money in hand to invest. Some financial service companies to compare are:
Lastly, a new way to get access to great checking, savings, and financial resources is with financial technology companies. These new companies work with you to offer unique benefits like getting paid 2 days early or investment accounts. Here are some popular financial technology companies that are changing the game:
I want to make sure you have a good list of to-dos before choosing the best online bank for you. It is so important to re-evaluate your current banking system and what perks would benefit you. The banking industry is changing and it is time for us to take advantage of the changes that are available. Good luck with your research and hopefully one of these online banking options are a good fit.