Are you looking for somewhere to park your cash? You can avoid traditional bank fees (and possibly earn more interest) when you open an online bank savings account. Each of the following banking options offers different perks that cater to your needs.
Whether you want mobile check deposit, rewards debit cards, or something in between like tracking spending, consider opening an online account to save your money for a rainy day.
Open a Free Online Bank Savings Account
There are plenty of online banking options, but you may like these first. I use a couple of these platforms for my own personal banking. Each recommendation includes a brief summary and highlights of the key perks.
I stash some of my cash at CIT Bank because they have one of the highest interest rates. They offer high-yield savings accounts, money market accounts, and CDs.
Below are the current interest rates for their three best savings accounts:
- Savings Builder: 1.75% APY (with monthly $100 deposit or daily $25,000 account balance)
- Money Market: 1.80% APY
- Premier High-Yield Savings: 1.55% APY
You will need a $100 initial deposit for all three account types. There are no monthly account fees or other hidden fees. If you don’t want to commit to a minimum $100 deposit, the Money Market is the best option at the moment. It earns a competitive interest rate.
Why Use CIT Bank
- No monthly fees
- Competitive interest rates
- $100 opening deposit
Capital One 360
I’ve been a Cap One 360 customer from before ING Direct merged. Of their various banking options, I recommend the 360 Performance Savings. Their 360 Checking account is a good fee-free online-only checking option. There are no monthly fees or account minimums.
Open a 360 Performance Savings or Checking account with this link to get $25 bonus cash.
You may like this option if you want savings, checking, and credit card accounts all in one place. The 360 Performance Savings currently earns 1.50% APY on all deposits. Checking account deposits earn 0.20% APY on the first 0.20%, plus you get free ATM withdrawals at 39,000 Capital One and Allpoint ATMs.
All accounts are FDIC-insured.
Why Use Capital One 360
- Both 360 Performance Savings and 360 Checking accounts earn interest
- Mobile check deposit
- No account fees or minimums
Empower offers an interest checking account. Empower is free for the first 30 days. After 30 days, you pay $8 a month, but get to keep the full suite of money management tools in addition to the checking account. Current yields are 0.25% APY* on your account balance which earns you more interest than a brick and mortar bank.
You also get 3 ATM reimbursements each month.^
Other nifty features that Empower offers include:
- Automated savings tools (i.e., put your savings on auto-pilot)
- Personalized coaching for your money questions
- Bill negotiation (potentially lower your recurring subscriptions like cable TV or cell phone)
- Subscription management
- Budgeting tools to track spending 24/7
This checking account is FDIC-insured up to $250,000. You can do all of your banking from a mobile app, Empower can be a good option.
Why Use Empower
- 3 monthly ATM reimbursements^
- Deposits earn interest
- No account minimums
- Budgeting tools to track and/or reduce spending
* Banking services for new accounts provided by nbkc bank, Member FDIC. 0.25% Annual Percentage Yield (APY) may change at any time. APY as of July 29, 2020. Empower charges an auto-recurring subscription fee of $8 for access to the full suite of money management features offered on the platform after your first 30 days.
^ Reimbursement for up to 3 ATM fees per month, with a maximum reimbursement of $10 per ATM withdrawal.
Radius Bank can be your all-in-one solution for a fee-free savings and checking account. Their High-Yield Savings Account earns 1.20% APY with a minimum $2,500 balance.
There are no monthly account fees and you get unlimited free ATMs. Plus you can earn interest on your deposit and get 1% back on debit card purchases with $2,500 in monthly deposits or a $2,500 monthly balance.
By now you’ve realized Radius Bank requires you to open a Rewards Checking account for these perks. But, you get unlimited free ATM access worldwide. Not paying a $3 to $6 ATM fee several times a month can save you more money than you earn in interest.
No minimum balance is necessary, but you will need to make a $100 initial deposit.
Why Use Radius Bank
- No monthly fees
- No minimum account balance
- Free ATMs worldwide
- 1% back on debit card purchases
Having a $25,000 balance lets you earn 2.00% APY.
If you want mobile check deposit along with an FDIC-insured spending account and savings account in one place, Chime might be your option. It’s also possible to get your direct deposit payments up to two days early. Plus, there are more than 38,000 fee-free MoneyPass ATM locations.
Chime members don’t pay account fees or need to maintain a minimum balance.
Why Choose Chime
- Mobile check deposit
- Over 38,000 fee-free ATMs
- Free savings account and spending account with a Visa debit card
- Get paid up to 2 days early
Do you have at least $10,000 to deposit?
This is one of the highest deposit rates you can earn from an online bank savings account. There aren’t any maintenance fees or service fees. Although you may only be limited to six monthly withdrawals, this account also offers a free debit card.
To pair with the UFB Direct high yield savings account, you can also open an Axos Bank Rewards Checking account. It earns up to 1.25% APY when you enroll in direct deposit and use your debit card at least 15 times monthly. You also get unlimited domestic ATM fee reimbursements. And…no account fees or minimums.
Why Use UFB Direct or Axos
- Competitive interest rates
- Free debit card
- Mobile check deposit
- FDIC-insured up to $250,000
It’s cliche to say “it pays to discover” but this is another solid online banking option. Discover Bank has an online savings account that currently yields 1.90% APY and has a $0 minimum opening deposit, balance requirement, and monthly fee.
They also have a rewards checking account (it’s free too!) where you can earn 1% cash back on the first $3,000 in monthly debit card purchases. That’s up to $360 in cash rewards every year. Check out this Discover Bank review for a more in-depth look at everything Discover Bank offers.
Why Use Discover Bank
- $0 minimum balance requirement
- No monthly fees
- Mobile check deposit and easy bank transfers
Another highly-liked bank is Ally Bank. The online savings accounts currently earn an impressive 1.50% APY. There are no account minimums or maintenance fees. I have several personal friends that use Ally and like their platform and the amount of interest they earn.
To keep your money under roof, consider investing at Ally Invest. There is an automated investing service (think Betterment except it’s free!!), commission-free ETFs and individual stock.
Why Use Ally
- No fees or account minimums
- Deposits earn a whopping 1.50% APY
- 24/7 support (for Ally Bank only)
Ally Invest customer service hours are currently from 7 am to 10 pm Eastern Standard Time.
One of the highest yields belongs to Synchrony Bank. All deposits currently earn 1.70% APY for their high-yield savings account. There are no account fees.
If you also want to hedge against negative interest rates (or even falling rates), their 12-month CDs currently yield 2.25%. These accounts require a minimum $2,000 deposit.
Digit isn’t so much a bank as it is a micro-savings app. To be clear, Digit is free for the first 30 days then $5 monthly. If you’re already happy with your bank, Digit helps take your savings to the next level.
Each week, Digit analyzes your checking account spending and transfers a “safe-to-withdraw” amount to an interest-bearing FDIC-insured savings account. If Digit accidentally overdrafts, they cover the insufficient funds fee. Your deposits earn a 1.00% savings bonus every three months. Whether you’re already a millionaire or earn a small income, Digit can help you save more money.
You can create unlimited savings goals or pay off credit card debt. Users can also make unlimited withdrawals.
Why Use Digit
- Effortlessly save small amounts of money
- Earn 1% bonus every 3 months
- Free overdraft reimbursement
- Create unlimited savings goals or pay off credit card debt
- Unlimited free withdrawals and no balance minimums
Your Local Credit Union
My wife and I still keep a savings and checking account at a local credit union. We appreciate the convenience as we still deposit checks with our locally-owned business. This credit union (that I’ve been a member of for over 15 years!) also has an online-only high-yield savings account with no fees. Their yields are competitive with these national banks.
If you want to keep your money with a bank you already know, see if they have a similar option. Also, make sure you don’t have to use your debit card for multiple monthly purchases, enroll in direct deposit, and maintain a high monthly balance to earn a high rate. If you already do these activities it might not be a dealbreaker. But if you have to manufacture spending to earn a high rate, the ongoing pressure and potential passive income may not be worth it.
Online Bank Account FAQs
Maybe this whole online banking thing is new to you. This might be because you just now have enough cash where you can actually earn real money from the monthly interest. Or, you’re tired of paying bank fees just to have local access to your cash.
Below are a few questions (and answers) to help you pick the best online bank.
Is Online Banking Free?
Yes. For most banks.
One tradeoff is that you don’t have instant access to your cash like using a local bank. Some online bank accounts offer an ATM card. Otherwise, you will need to transfer money to your local checking account (and wait several days for the transfer to complete) before you can make a withdrawal.
Do Online Savings Accounts Earn More Interest Than Local Banks?
In most cases, yes. Although some online banks only award interest once your account balance reaches a certain amount. For instance, Empower currently awards 0.25% APY* on every dollar in your account. However, UFB Direct only awards interest when your account balance reaches $10,000.
Some common marketing talking points is that the best online savings accounts pay up to 20 times more interest than the national average. My personal advice is to only choose online banks that award at least 1% interest.
Do Online Savings Accounts Have Unlimited Withdrawals?
One tradeoff for having a high-yield online savings account is that you have limited monthly transactions. For most banks, you get six free withdrawals. You can make unlimited deposits.
Because of the withdrawal restrictions, you will still need a debit account for your daily spending. It’s a good idea to first deposit your monthly income into the checking account. Then transfer your extra cash into your savings account. It’s free to transfer money. Consider scheduling automatic transfers to avoid forgetting to make the monthly or daily transfer.
If you’re unsure how much to transfer, consider one of these strategies:
- Transfer 5% of your take-home pay
- Transfer $100 monthly
- Let a micro-savings app decide the best amount for you
As you get into a routine, consider increasing your savings amount. Also, don’t forget to consider investing some spare cash to potentially earn more passive income.
Are Online Bank Accounts FDIC-Insured?
All of the bank accounts recommended in this article are FDIC-insured. Most online banks are as well.
If you’re unsure, look for the FDIC-insured logo or certification on the bank website. If you don’t see this certification, it’s possible that banking product is an investment account instead of a savings account.
It’s easy to confuse online bank accounts, money market accounts, and money market funds at first glance. These three savings options all pay similar interest rates. Although there is one key difference for one of these account types.
Money Market Funds are not FDIC-insured and are technically investment accounts. Theoretically, you can invest in stocks, ETFs, or mutual funds using the same account. Savings accounts don’t double as stock market investing accounts.
Below are a few platforms that are not true online savings accounts:
- Betterment Smart Saver
- Robinhood (their Cash Management tool is coming soon)
These can be great investment platforms, but not an ideal place to keep your emergency fund or life savings. Put the cash you don’t want to invest (or need to spend this month) into an FDIC-insured savings account. You can sleep more peacefully at night.
All of these online banking options can help you save more money. Keeping your cash in a different account removes the temptation to accidentally spend. Plus these accounts help you avoid fees that cancel out any interest you might earn. After all, one purpose of savings accounts is for the bank to pay you instead of the other way around.
Where do you plan on stashing your cash? Drop a comment if you care to share.