Banking online helps you earn more interest, and it's convenient, but which internet bank account is right for you? Luckily, it's hard to go wrong. Most online banks offer a great product. That said, there's a difference between avoiding a bad choice and finding the perfect fit. As you start shopping for a new account, it would be wise to review some of the most important things to consider.
Defining an Internet Bank Account
For our purposes, an internet bank account is one that's only offered online. That doesn't necessarily exclude traditional banks. A bank with physical branches may also offer internet bank accounts exclusively to online users. However, many banks that operate exclusively online offer better perks by avoiding the overhead costs associated with traditional banking (rent for the branch location, staff to fill the building during working hours, etc.).
Aside from the ability to bank in your bathrobe, what are the major advantages of internet bank accounts? The answer is simple: a better annual percentage yield (APY). By conducting your transactions online, you save the bank money, which it ideally passes on to you in the form of higher savings rates.
When shopping around, focus on the features below, and put extra weight on the things that are most important to you. Except for ensuring proper security, none of these considerations is a necessity. Some banks shine in a few of these areas, while others don't even offer some of these features.
- APY: Usually the most important attraction for rate shoppers, this determines how much money you'll earn for keeping your money in an account.
- Access to money: If you want to take money out and spend it, how much work do you have to do? How long is the processing delay?
- The number of linked accounts: Can you set up a network of accounts and zap money back and forth depending on your needs?
- Additional products and services: Can you buy CDs, get a mortgage, or pay bills online? Do you receive a debit card for spending money? A traditional bank typically offers a wide range of services, but online banks may instead focus on only one or two services.
- Leverage of existing banking relationships: If an institution that you already deal with has an internet bank account, you may qualify for some extra perks by keeping all of your business in one place.
- Customer service options: How easy will it be to get questions answered? Do they operate during hours that work with your schedule? Read a couple of user reviews for the bank you're considering to get a sense of the bank's customer service reputation.
- Automatic savings plans: Can you put it on auto-pilot and let the money accumulate automatically?
- User-friendliness of website or app: How intuitive is the app or website for this account? Is it buggy or glitchy? Since you'll be interacting with this account entirely online, it's important to feel comfortable with the user interface.
- Safety and security: Is the bank FDIC insured? Do you trust their security process?
It's important to understand the benefit to all these features, but the perfect blend of features depends on your banking style. Compare the features of various internet bank accounts, then decide which one best serves your financial goals.
For example, you may decide that maximizing your interest earnings is more important than anything else. Therefore, you wouldn’t care about many of the features above—you’d just pick the bank with the highest APY. Others, who like to frequently move money around or take out cash from the ATM, may instead emphasize the access to money.
Getting Started With Your Search
Here you’ll find some of the most popular internet bank accounts. This is not an exhaustive list—it’s just to get you started and provide some information for doing your own research. These are some of the more popular online bank accounts, which should give you a basic sense of what these kinds of accounts should offer. It's also worthwhile to consider reasons to avoid online bank accounts before you make the leap into the world of digital banking.
- Capital One 360’s Internet Bank Account
- Ally Bank
- EmigrantDirect’s Internet Bank Account