Online banks can help you earn a high rate of interest or APY (annual percentage yield) while keeping fees low. They also tend to provide user-friendly apps and tools that make it easy to manage your finances. But that doesn’t mean you need to abandon brick-and-mortar banks and credit unions if you don’t want to. You can always have the best of both worlds: Tap into the strengths of online banks while keeping an account open at a local institution.
Whether you’re looking for a single online bank to handle your needs or you just want to open a high-yield savings account, you’ve got plenty of options. But don’t let the range of choices overwhelm you. We’ve identified some of the best online banks with a reputation for keeping costs low while still insuring your deposits up to federal limits.
Best Online Banks of 2021
- Charles Schwab: Best Overall, Best for Frequent Travelers
- Discover Bank: Runner-Up
- Capital One: Best for Students
- First Foundation Bank: Best for High Rate on Savings
- Paramount Bank: Best for Interest Checking
- Truist: Best for Mobile App
We partnered with the following banks to bring you the savings account offers in the table below. Under that, you'll find additional details on our editors' picks for the best online banks and why we chose them. All of the banks and credit unions listed are insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA).
Charles Schwab: Best Overall, Best for Frequent Travelers
Charles Schwab Bank won the top spot in the J.D. Power 2020 U.S. Direct Banking Satisfaction Study for the second year in a row. Schwab Bank’s checking account offers unlimited ATM rebates within the U.S. and abroad, has no foreign transaction fee when using other currencies, and pays a small amount of interest on your deposits.
Otherwise, Schwab Bank’s online offerings are pretty straightforward. The checking account has no monthly fee and no minimum balance requirement. The same is true of the savings account, though the interest rate is unimpressive for an online bank. The main draw to Schwab Bank probably isn’t the interest you earn, though—it’s the advantages you get with a Schwab debit card. Whether you’re traveling overseas or around town, it’s wise to consider Charles Schwab Bank.
Unlimited ATM rebates
No foreign transaction charges
No monthly fees
Must open a brokerage account to use the checking account
Interest rate is unimpressive
Discover Bank: Runner-Up
Discover Bank offers a broad range of banking services, making it a decent option for one-stop shopping. You can open checking, savings, and money market accounts, and you can use Discover’s CDs for longer-term goals—all with no monthly maintenance fees. Discover’s Cashback Debit account provides a cash-back reward that’s rare to find in a checking account: You can earn 1% cash back on up to $3,000 of qualifying monthly debit card purchases.
Discover does have minimum balance requirements, though, such as a $2,500 minimum to open a CD. The money market account, which has that same $2,500 minimum, pays a respectable rate while allowing you to spend money from your account. Still, if you have the funds to take advantage of these offerings, Discover enables you to keep multiple accounts under one umbrella.
Cash back for debit spending
Competitive money market account rate
No monthly fees
$2,500 minimum for some products
Checking cash-back reward limited to $30 per month
Capital One: Best for Students
Capital One’s online banking products include high-yield savings accounts, checking accounts, and more. Online savings and checking accounts have no monthly fees and no minimum deposit required to open an account. Capital One scores well on consumer surveys, taking fourth place overall in the J.D. Power 2020 U.S. Direct Banking Satisfaction Study.
Parents can also open accounts for minors, allowing them to handle and learn about money while an adult oversees the account. Children can get a checking account with a debit card as early as age 8 at Capital One. That’s a remarkably young age to begin managing an account (whether or not that’s too young is for parents to decide).
With Capital One, students could use the same bank from childhood, through college, and into adulthood.
No minimums to open an account
No monthly fees
Checking accounts available for children
Higher rates available at other online banks
First Foundation Bank: Best for High Rate on Savings
If you value high rates on savings accounts, First Foundation bank paid 0.60% APY in its Online Savings account at the time of publication. This is one of the higher rates currently available, and you can get that rate with a $1,000 initial deposit.
Some banks require you to deposit substantially more or meet other cumbersome requirements to earn high rates. First Foundation makes it easy to qualify, there are no monthly maintenance charges, and you can draw down your balance without losing access to this rate.
ATM card available on request
No monthly fees or ongoing minimum balance requirements
Branch locations limited to California, Nevada, and Hawaii
$1,000 minimum may be a hurdle for some savers
Paramount Bank: Best for Interest Checking
Paramount Bank makes it easy to get an attractive rate on your checking account balance. Unlike “rewards checking” accounts that require you to jump through hoops for a high rate, Paramount Bank simply pays a competitive rate on large and small account balances.
To sweeten the deal, you get rebates on up to 20 third-party ATM fees each month, which should be enough for most people. The account requires $100 to open, and as long as you keep at least $1 in your account, Paramount Bank waives the $3 monthly maintenance fee.
Competitive rate for a checking (or savings) account
No stringent requirements to earn the high rate
Limited customer service hours (although self-service is available 24/7)
Truist: Best for Mobile App
Truist, the result of a merger between BB&T and SunTrust, has the highest-rated national bank app in J.D. Power’s 2020 U.S. Banking and Credit Card Mobile App Satisfaction Study. The app goes beyond standard features like online bill pay, transfers, and mobile deposits. You can also see your credit score, view balances without logging in to your account, and get a high-level view of your finances with the U app.
While Truist has physical branches, you can work with the bank remotely if the award-winning app motivates you to open an account. The bank offers a full range of services for individuals and businesses. However, savings account rates at Truist are not competitive with online banks. If you want to earn more without sacrificing the quality of your mobile banking experience, consider Capital One (that app captured second place in the J.D. Power study).
Robust mobile banking app
Numerous account choices
Higher rates available at other online banks
Potential monthly fees in checking accounts
What Is an Online Bank?
Online banks are banks and credit unions that operate primarily without brick-and-mortar branches. As a result, they may have relatively low overhead costs, and they may be able to get up and running quickly—without the need to build and outfit branches.
Online banks have a reputation for offering high interest rates on deposits and keeping fees low. That makes them ideal for building up your savings without worrying about getting nickel-and-dimed. But they also offer convenience: If you don’t enjoy driving to a branch or waiting for an employee to complete basic tasks for you, you might like the self-service aspect of online banking.
Is My Money Safe in an Online Bank?
Online banks can be just as safe as traditional banks and credit unions. When an institution is federally insured, your money is protected against bank failures up to $250,000 per account, per institution. With banks, that coverage comes from the FDIC. Federally insured credit unions receive equivalent coverage through the NCUA.
With any financial account, whether it’s at an online bank or not, there are fraud risks. It’s critical to monitor your accounts, and that’s especially easy when you set up account activity alerts. Most banks, whether strictly online or not, can notify you about transactions and account changes with text messages and email. Staying in the loop on account activity can help you detect problems quickly.
That said, online banks may make it easier to protect your accounts. Because they tend to invest in technology and offer a broad range of features, you might have additional tools available that traditional banks have not yet adopted. For example, online banks might allow you to temporarily lock your debit card, which can make it harder for thieves to drain your checking account. While that’s not exclusive to online banks, some financial institutions offer fewer tools for managing your accounts.
Federal regulations may offer additional peace of mind, whether you have accounts at an online bank or a traditional institution. For example, you’re often protected against fraud and errors, but you need to act fast to benefit from the highest levels of protection.
When banking online, keep your devices up-to-date, and be vigilant about any communication you receive—whether by mail, email, text message, or other means. If you have questions, call the bank at a number you know is legitimate, and discuss your concerns with customer service. Don’t click on links or provide sensitive information just because someone reached out and said they work at your bank. Always take the time to verify requests through channels that you trust.
How Do I Access Money in an Online Account?
There may be several ways to spend money from your account, but the details vary from bank to bank. For example, you might receive an ATM card you can use to withdraw cash or make purchases. Some banks also provide checking accounts, which enable you to write checks, spend with a debit card, or pay bills through online bill pay.
At most online banks, you establish an electronic link to an external account you hold at another bank, and you can transfer funds into and out of the online bank on demand. That external account is often a checking account at a brick-and-mortar bank or credit union.
Do I Need a ‘Traditional’ Bank?
Online banks can offer all of the services you need, but it’s smart to also keep an account open with a local institution. Local banks and credit unions can provide additional benefits like instant cashier’s checks, notary services, in-person advice, and more. Plus, those institutions might contribute to the community you live in. If you go 100% online, you may occasionally face wait times of several days for checks to move through the mail, and you may feel powerless if your bank’s website ever goes down.
Schwab Bank. "Online Checking Account with Free Checks and ATM Fee Rebates." Accessed Jan. 11, 2021.
Discover. "Discover Online Banking." Accessed Jan. 11, 2021.
Discover Bank. "Certificate of Deposit." Accessed Jan. 11, 2021.
Capital One. "Why Bank With Capital One?" Accessed Jan. 11, 2021.
First Foundation Bank. "Online Savings Account." Accessed Jan. 11, 2021.