Tired of banking the traditional way, having to run to a local branch to deposit a check, or dealing with too many fees and minimum requirements? Then opening an online checking account could be your solution.
Most online banks offer checking accounts with little to no minimums, and little to no fees to worry about. They also have some of the best mobile apps, making banking on-the-go easier than ever.
While you shouldn’t be keeping a ton of money in your checking account, online accounts offer great annual percentage yields (APY), especially when compared with regular savings accounts.
These are the five best online checking accounts available in 2016:
1. Charles Schwab – High Yield Investor Checking Account (unlimited free ATMs)
We recommend Charles Schwab’s High Yield Investor Checking Account to those that enjoy traveling, as there are no foreign fees associated with this account. You’re free to use your debit card anywhere in the world without worrying about being charged. Any fees incurred from an ATM are reimbursed.
This account offers 0.10% APY, and there are no minimums or monthly service fees.
You do need to get overdraft protection; otherwise you’ll get hit with a $25 fee (maximum of $100 in fees per day) each time you try to charge something without having the funds in your account.
Another account that rivals Schwab with no ATM fees worldwide is the Aspiration Summit account. However the mobile app is still in development, there is no bill pay feature, and you can’t yet open a joint account.
2. Bank of Internet USA – Rewards Checking (good rate, free ATMs)
Bank of Internet USA’s Rewards Checking Account also offers a completely free checking account: there are no overdraft fees and no monthly maintenance fees. It also has one of the best mobile apps we’ve seen, and all ATM fees in the U.S. are reimbursed.
There is a $100 minimum required to open a rewards checking account.
Its rewards system is a bit different than the typical checking account, as there’s a tiered structure to the APY. The maximum APY available is 1.25%, higher than what most banks offer.
The bank’s site explains tiered interest like this: “This is a tiered, interest earning variable rate account. All daily collected balances up to and including $150,000 will earn interest based on the combined rate rewards. All daily collected balances greater than $150,000 will not earn interest. Your interest rate can be as high as 1.25% based on the following combined rate rewards: direct deposits totaling $1,000 or more will earn .4166%; at least ten (10) debit card purchases will earn .4166% and fifteen (15) or more debit card purchases will earn an additional .4166%.”
3 Ally – Interest Checking Account
Ally is a great all-around online bank with no fees for a transfer from savings to checking and no minimums. The Interest Checking Account is completely free if you opt to have overdraft protection, and Ally also offers an excellent savings account if you want to keep your accounts with the same institution.
It offers 0.10% APY on balances less than $15,000, and .060% APY on balances of over $15,000.
Banking with Ally also gives you 24/7 access to customer service, which is just a phone call or chat session away.
4. Fidelity Cash Management Account
Fidelity’s Cash Management Account is great for those that have larger balances, as there is a $1,250,000 insurance limit, but there is no minimum balance required.
Similar to Charles Schwab, there are no ATM fees to worry about – they’ll reimburse you the same day if you’re charged. There are also no monthly or overdraft fees to worry about.
Fidelity currently offers 0.07% APY, but it is a brokerage account rather than a “regular” checking account. They offer cash management tools so you can set up custom alerts when you reach a certain balance that will remind you it’s time to invest.
Unfortunately, there’s no option to open a line of credit – you have to link a savings or brokerage account to your Fidelity account in case you overdraft and want items to clear.
5. Capital One 360
Capital One 360’s checking account does offer a line of credit, and there are no minimums and no monthly fees.
Instead of worrying about overdraft fees, you’ll be responsible for paying interest on the money borrowed if you charge anything over your available balance.
If you’re not fully sold on the convenience of online checking accounts, Capital One 360 is allowing certain Capital One ATMs to accept cash deposits. (Typically, Capital One 360 is an Internet-only bank and separate from Capital One branches.)
The downside is that they don’t reimburse ATM fees, though there are a host of Allpoint Network ATMs available to use throughout the United States.
On balances of $49,999.99 or less, they offer 0.20% APY; on balances ranging from $50,000 – $99,999.99, they offer 0.75% APY; and on balances of $100,000.00 or more, they offer 0.90% APY.
Why You Shouldn’t Hoard Money in a Checking Account
There are two main reasons your money would be better off not sitting in checking.
1) Interest Rates
Interest rates on checking accounts are typically pretty pitiful and even when they seem high (perhaps 0.60% or even 1.000%) there are often a lot of hoops to jump through in order to secure that interest rate. Instead, you can jump through zero hoops and just put the bulk of your money that’s in the bank into savings instead of checking. There it can earn 1.00% or more and you don’t have to worry about making a certain amount of charges to a debit card or keeping a minimum in the account.
Fraud is another reason you want a minimal amount in checking. Credit card fraud is so prevalent you’ll likely get smacked by it at some point, but it isn’t as worrisome because the money charged to a credit card isn’t coming directly out of your bank account. Debit card fraud means a crook gains direct access to your money and can be draining your actual funds. You’ll reduce the damage a thief can do by not keeping a ton of money in checking. Even if you bank reimburses you for the funds, it’s still a hassle to go through not having the money for a period of time.
It’s Probably Time to Ditch Your Bank
Ditch your brick-and-mortar bank in favor of fewer fees, less hassle, more convenience, and higher interest rates. All of these banks offer mobile apps that let you deposit checks by taking a photo, so you don’t have to worry about running out to a local branch. These apps also make it easier to transfer money between your accounts, pay bills online, or send money to family and friends in a pinch.
If you want your money to do more for you with less maintenance, online checking is the way to go.