The costs of operating brick-and-mortar bank branches are growing, which may explain why traditional financial institutions have ratcheted up fees and kept their rates stubbornly low. Meanwhile, online bank and credit union products have consistently offered lower fees and higher rates than those offered by conventional banks. Since online banks incur lower overhead costs, they can pass the savings on to consumers in the form of higher yields and lower fees.
Despite the decline in the federal funds rate in 2019 and the corresponding reductions in deposit yields at financial institutions nationwide, average savings account rates at online banks and credit unions are still well above those offered by their brick-and-mortar counterparts. As of January 2020, the yields paid on online savings deposits were averaging 1.75% APY, while savings accounts at brick-and-mortar banks were averaging a mere 0.27% APY.
Regardless of the rate environment, historical trends show that online banks outperform brick-and-mortar rates. It’s clear that online banks are the best option for consumers who want higher returns on their deposits. But for some consumers, it can still be daunting to make the switch to online banking. In the second edition of our Best Online Banks roundup, we hope to make the choice a bit easier for those looking to get an online account.
Best online banks for CDs
How we picked the top five: We chose banks with the highest 1-year CD rates that have consistently ranked in MagnifyMoney’s Best CD Rates page for the last two years.
#1 Goldman Sachs Bank USA — Winner
Goldman Sachs Bank USA, which operates the brand Marcus by Goldman Sachs®, is the consumer banking arm of financial industry giant Goldman Sachs. Goldman Sachs Bank USA has offered consistently high CD rates, and has been boosting their yields in a falling-rate climate — even as other competitors keep dialing back their own rates.
Ken Tumin, founder of LendingTree-owned DepositAccounts.com, lauds Goldman Sachs Bank USA for its rates and its product line. “The addition of No-Penalty CDs with competitive rates has helped make Goldman Sachs Bank USA one of the best online banks for CDs,” he said. No-Penalty CDs provide you with the flexibility to withdraw your full balance at any time, starting seven days after you fund the account.
Goldman Sachs Bank USA’s high-yield CDs each require a $500 minimum deposit. You have 30 days to fully fund your account after you open it, although your interest rate locks in whenever you reach the $500 minimum deposit level.
If you hit the $500 minimum deposit level within 10 days of opening your CD account, the bank’s 10-Day CD Rate Guarantee kicks in, ensuring you get the highest published interest rate and APY the bank offers for that term. This helps you avoid the possibility of a rate reduction after you open the account but before you fully fund it.
#2 Ally Bank
Last year’s winner, Ally Bank, offers competitive rates across three different CD account types: High Yield CDs, Raise Your Rate CDs and No Penalty CDs. Ally Bank’s No Penalty CDs are of particular interest in today’s rate climate, as they allow you to avoid paying the price for closing out your certificate in exchange for one with a higher rate.
Ally Bank CDs rank highly for their rates as well as their lack of a minimum deposit requirement, which lets savers with low balances benefit from Ally Bank’s products. Whether you have a low balance or a high balance, you can snag great rates on Ally Bank’s 18-month and 3-year High Yield CDs, as well as its No Penalty CD.
#3 Capital One
Currently, the highest Capital One 360 CD rates are concentrated on its mid-term accounts; on the whole, its rates are just short of those from Goldman Sachs Bank USA and Ally Bank. Capital One also features no minimum deposit requirement to open its CDs.
#4 Synchrony Bank
Offering both standard CDs and IRA CDs, Synchrony Bank has competitive rates across its entire line of CDs. However, Synchrony requires at least $2,000 to open an account, so this may place the accounts slightly out of reach for certain customers looking to save.
With its roots in London 300 years ago, Barclays has made a big name for itself in the U.S. with its online bank, which offers consistently competitive rates. Over the past two years, it has managed to ride the wave of rate changes in both directions, with its rates not falling far behind its predecessor on this list.
Barclays doesn’t offer as wide a variety of CD types and terms as some other competitors, matching most closely with Capital One 360’s lineup. Still, Barclays promises no hidden minimums or fees, making for a more straightforward savings experience.
Best online banks for savings accounts
How we picked the top five: We chose banks that have maintained the highest savings account rates and consistently ranked in MagnifyMoney’s Best Savings Account page for the last two years.
#1 Goldman Sachs Bank USA — Winner
Goldman Sachs Bank USA isn’t just the best choice for CDs — it is also the best online bank for its savings account. The Goldman Sachs Bank USA Online Savings Account has consistently held a spot on MagnifyMoney’s Best Savings Account list for two years, and has sustained leading rates amid falling industry yields over the past year.
Tumin calls out one user-friendly fee in particular as a reason for its rise. “Goldman Sachs Bank USA is one of the very few banks that does not charge a fee for sending a wire transfer,” he said. Free wire transfers allow you to send money quickly, safely, and inexpensively.
Marcus by Goldman Sachs doesn’t require a minimum deposit to open a new Online Savings Account, (although you’ll have to make some sort of deposit within 60 days of opening to avoid account closure), nor does the account require a minimum balance to start earning interest. You also won’t face transaction fees on your account, allowing your money to really grow.
Barclays Bank currently offers a savings rate that’s competitive with Goldman Sachs Bank USA. However, the Barclays Online Savings Account hasn’t quite held onto a consistent ranking on our Best Savings Account list over the years. Still, you won’t have to worry about meeting a minimum deposit amount or grappling with a monthly fee to benefit from this great rate, though.
#3 Synchrony Bank
Synchrony Bank’s High Yield Savings account certainly delivers on its name with a competitive interest rate on all balances, earning even more than Goldman and Barclays as of this writing. Plus, there’s no monthly fee.
As is the case with all savings accounts, you’re limited to six outgoing transactions per statement cycle. However, unlike most institutions, Synchrony doesn’t charge an extra fee on every additional transaction, though they could close your account if you keep it up.
#4 American Express National Bank
New to our list this year, American Express National Bank has often hovered among these competitors for a while, finally breaking through for 2020. It’s a simple account, with no minimum deposit or balance requirement, nor a monthly fee to worry about.
There’s no mobile banking app connected to American Express National Bank, which is the equally simple online bank offering from credit card giant American Express. You can access your American Express National Bank’s banking accounts online or over the phone, with some funding options available by mail, too.
#5 Ally Bank
Ally Bank has remained a constant presence on our best-of lists, especially for its competitive, user-friendly Online Savings Account. You won’t need to worry about having a high balance to open or maintain this account, since Ally doesn’t require either. It also doesn’t charge a monthly service fee.
In addition to its high rates, Ally Bank offers top of the line online transfer capabilities: it’s a feature that provides a more seamless banking experience, but is often overlooked by other banks. With its quick turnaround and zero to low fees, Ally’s transfer policies make it much easier to access your money, especially in case of emergency.
Best online banks for money market accounts
How we chose the top five: The winner of best bank for money market accounts is the institution that had the highest money account rate and consistently held a spot on MagnifyMoney’s Best Money Market page for two years.
#1 Premier Members Credit Union — Winner
Ending Goldman Bank USA’s winning streak, Premier Members Credit Union offers a special competitive money market account rate that has consistently ranked on MagnifyMoney’s Best Money Market page for two years.
“Premier Members Credit Union’s Money Market has a unique reversed tiered system that offers a big rate advantage for those with small balances,” said Tumin. As of this writing, this Money Market Account offers its top 3.00% APY on balances up to $2,000, while its top tier of $250,000 and over earns 0.25% to 0.30% APY. You only need $5 to open a new Money Market Account. Another plus is the account’s inclusion of paper checks for further convenient access.
Premier Members Credit Union began in 2015 as a merger between Boulder Valley Credit Union and Premier Members Federal Credit Union. Membership is open to residents and employees within select Colorado communities, employees and family members of select partner companies and relatives of current members. You can also become eligible by joining the Impact on Education charity.
#2 Virtual Bank
Virtual Bank’s competitive rate applies when you open a new eMoney Market account with at least $100 in new money. The interest rate applies to all balances of at least $0.01, and interest is paid monthly. There’s no minimum balance requirement, but keeping at least $100 in the account allows you to waive the $5 monthly fee.
Virtual Bank is an online division of IBERIABANK, which was founded in New Iberia, La., in 1887. Virtual Bank is available online and on mobile, through your browser and mobile app offerings.
#3 Sallie Mae Bank
Last year’s winner, Sallie Mae Bank still rocks the top three this year, offering a rate well above the competition on its Money Market Account. While the name Sallie Mae is typically associated with student loans, Sallie Mae Bank offers some great banking products designed to help you grow your savings efficiently.
Interestingly, Sallie Mae Bank’s money market rate is higher than its own savings account, whereas other online banks tend to focus more on their savings accounts. This account doesn’t require a minimum balance, nor does it charge a monthly fee. Plus, it includes check-writing capabilities, a feature that experts like Tumin consider the hallmark of a true money market account.
#4 Self-Help Credit Union
Founded in 1980, Self-Help Credit Union is based in Durham, N.C., with 29 branches total throughout North Carolina, South Carolina and Florida. In addition, there are other institutions under the Self-Help brand, including Self-Help Federal Credit Union, Center for Responsible Lending and Self-Help Ventures Fund.
The Self-Help Credit Union Money Market Account’s high-yield interest rate requires a $500 minimum deposit and maintained balance. Keeping at least that much in the account will also help you avoid the $5 monthly fee.
You can join Self-Help Credit Union if you live, work, worship or attend school in select eligible counties, meet family or employer affiliation criteria or are/become a member of the Center for Community Self-Help (requires a $5 fee).
#5 Ally Bank
With more of a focus on its other savings accounts, Ally Bank might have allowed its money market account to dip slightly. Still, the account offers a solid rate consistently enough to make this list. In addition, it does well in terms of service: There’s no minimum opening deposit amount or minimum balance amount needed to maintain the account. Plus, we give it credit for its check-writing abilities, which not many banks offer.
Best online banks for checking accounts
How we chose the top five: Our best online banks for checking needed to check off a few boxes: charge no monthly maintenance fees, offer out-of-network ATM fee refunds and consistently rank in MagnifyMoney’s Best Checking Account page for the last two years.
#1 Aspiration — Winner
If you’re looking for both a great checking account and a way to give back to your community, Aspiration is the bank for you, as it donates 10% of its revenue to charities.
The Aspiration Spend & Save Account is a cash management account that earns at a pretty high interest rate. Note that while the Save side of the account earns the high APY, the Spend side also earns cashback. You can earn up to 5% cashback at businesses part of Aspiration’s Conscience Coalition, which focus on “building a better world;” 0.5% at merchants with a high AIM (Aspiration Impact Measurement) score, which measures for sustainability; and 0.1% on all other purchases. It doesn’t require a minimum deposit to open or a minimum balance to maintain the account.
You get to save money when using ATMs, as Aspiration allows you free access to every ATM in the world, plus five ATM surcharge reimbursements each month. This user-friendly ATM policy is Tumin’s favorite of Aspiration’s features.
As for fees, Aspiration implements a Pay What Is Fair system. It works just like it sounds — essentially, you get to choose how much you want to pay for the bank’s products, even if it’s $0. Account holders set their own fee on the account dashboard, which then gets debited monthly from their Aspiration account or another linked account. Aspiration hopes and trusts its customers will agree to operate on a two-way basis of trust and fairness. For extra services like wire transfers, the bank promises to charge only the cost of completing that service.
Aspiration is not a bank; rather, it is a an SEC-registered broker-dealer, so the FDIC insurance is provided by partner banks. Aspiration keeps the cash you deposit in a Spend & Save account with multiple partner banks, which provide FDIC insurance of up to $2 million.
Another fintech cash management account takes the number two spot: Simple’s online checking account. This account includes a Simple Visa® Debit card, paper checks and built-in savings and budgeting features. There’s no monthly fee and no minimum balance requirement.
The interest-earning aspect at Simple comes from its savings feature, the Protected Goals account. The money you keep in Goals earns 1.90% APY if you have $10,000 or more, or 1.75% if you have less than that. Just keeping money in the checking account will accrue 0.01% APY.
Like Aspiration, Simple is not a bank, so it sweeps your deposits into accounts at BBVA USA, which provides FDIC insurance up to the legal limit. Founded in 2009, Simple is based in Portland and is accessible online, on mobile and over the phone.
#3 Consumers Credit Union
Consumers Credit Union’s free Rewards Checking account doesn’t quite earn interest outright; instead, you’re required to meet certain qualifications first to determine your rate on balances up to $10,000. Meeting the requirements also guarantees unlimited reimbursement for any and all ATM fees.
The starting 3.09% rate requires you to enroll in eDocuments, make at least 12 debit card purchases totaling at least $100 each month and receive direct deposits or ACH credit totaling at least $500 per month. Meet all those requirements, plus spend at least $500 in CCU Visa Credit Card purchases each month, to earn the 4.09% APY, or spend at least $1000 in CCU Visa Credit Card purchases each month to snag the top rate of 5.09% APY. If your balance surpasses $10,000, you will earn significantly lower rates.
Rewards Checking doesn’t charge a monthly fee and includes unlimited check-writing abilities. Consumers Credit Union provides members with access to over 30,000 ATMs and over 5,000 shared branches. Founded in 1930 and headquartered in Lake County, Ill., Consumers Credit Union opens membership up to anyone. All you have to do to join is become a member of the Consumers Cooperative Association with one-time $5 Membership fee.
#4 Ally Bank
Ally Bank’s Interest Checking account has no monthly fees and refunds up to $10 in third-party ATM fees each month. The account also earns interest, where your balance determines your rate. Balances of $15,000 and over can earn the account’s higher rate, although neither rate stands out too much.
Still, standard checking account rates are generally low everywhere. Ally’s Interest Checking account is better used for its low fees, like their free overdraft transfers, to really get the most out of this kind of account.
#5 Charles Schwab Bank
Charles Schwab Bank, a division of financial services giant Charles Schwab, was launched in 2003. It currently offers a savings account and a checking account, the Schwab Bank High Yield Investor Checking account, which earns at a decent rate. Plus, it comes with no monthly fees, minimum deposit requirements or minimum balance requirements. The account includes a Platinum Debit Card, which you can use at any ATM in the world. If you face any foreign ATM fees, Charles Schwab Bank provides unlimited ATM fee rebates.
When you open a High Yield Investor Checking account, you’ll be opening a linked Schwab One brokerage account at the same time, as well. These are two separate accounts, although accessible through the same Charles Schwab login.
Best online banks for checking accounts
How we chose the top five: The winners are the online banks that ranked best among the four categories above: checking, savings, money markets and CDs.
#1 Ally Bank
Ally Bank remains the Top Online Bank of 2020, having appeared in all of the categories above.
From its 1919 beginnings as a financing division of GM, Ally Bank is now one of the biggest names in the online banking industry. Its rates remain consistently competitive and its fees are consistently low to nonexistent. Further, Ally provides customers with user-friendly features and perks for a better overall banking experience.
“Ally offers easy online account management, which includes a solid ACH bank-to-bank transfer capability for all of their accounts” Tumin noted. He also praises Ally for “keeping competitive” on its savings account and maintaining ease for customers.
#2 Goldman Sachs Bank USA
Goldman Sachs Bank USA offers some of the highest rates in the industry, topping the lists twice for best CDs and best savings accounts. At the time, these are the only kinds of accounts Goldman Sachs Bank USA offers. Still, there is some variety with its high-yield CDs and no-penalty CDs, which allows one to make a withdrawal without facing a heavy penalty. Its CDs require a minimum deposit of $500, while the online savings account can be opened with any amount. They’re all excellent options thanks to their high yields and lack of monthly service fees.
Barclays is one of our top online banks thanks to its CDs and savings account. These are the only kinds of accounts available through Barclays U.S. bank division. Neither of these accounts require a minimum deposit to open, which allows you to start saving no matter which amount you can set aside, and you won’t face monthly service fees for owning these accounts.
#4 Synchrony Bank
Synchrony Bank appears twice in our roundup categories as one of the best banks for CDs and one of the best banks for savings accounts. These placements land the bank in the second spot for top online banks. Not only does this mean that Synchrony offers some of the highest rates, but it also signals that the bank has been consistent in its rates offerings.
In addition to those accounts, Synchrony also offers a money market account, IRA CDs and an IRA money market account; there is no checking account at this time. If you elect to get an ATM card from Synchrony, you can use any ATM displaying the Plus or Accel logos without being charged by Synchrony. You can also receive ATM rebates up to $5 per statement cycle.
#5 Capital One 360
Capital One 360 appears once on this list for its consistently competitive CD rates, where it placed third. Its CDs continue to perform competitively, especially on its 1-year and longer-term accounts. Capital One is also a solid CD choice for its lack of a minimum requirement. You are allowed to add up to 10 beneficiaries to your Capital One 360 CDs as well.
Best overall online bank
How we chose the best overall bank: The best overall online bank is the institution that averaged the top ranking in the four categories above: checking, savings, money markets and CDs.
Winner: Ally Bank
Ally Bank keeps its crown as the Best Overall Bank in 2020, offering a top-five account in all four categories above. “Ally Bank offers the best combination of savings account, checking account and CDs,” Tumin said of Ally’s win. “All of these accounts have a long history of competitive rates and features.”
Ally Bank’s vast spread of products makes it easy for you to grow your savings in a number of ways. Its CDs provide a variety of high-rate savings options. Its online savings account consistently offers a top rate, despite declining rates elsewhere. Its money market account and interest checking account offer much by way of accessibility and low fees.
Ally Bank started as GMAC in 1919, the financing division of GM and evolved over time to keep up with consumers’ needs and demands for a better bank. In 2009, GMAC became the online Ally Bank, focused on transparency with its customers and greater value on its accounts. Since then, Ally has grown its offerings to include not only auto financing, but also high-yield deposit accounts, credit cards, investment accounts and more. Plus, its existence as an online bank means greater returns for you and more convenient 24/7 access.
Best new online bank
How we chose the winner: To find the best new online bank, we found the bank that was launched within the last 12 months and has held the highest APY since it’s launch.
BrioDirect is a competitive new bank to keep your eye on. “BrioDirect has maintained one of the highest rates for a low-minimum online savings accounts since it was launched in the summer of 2019,” Tumin said.
The high-yield savings account highlighted requires a $25 minimum deposit and minimum balance to earn interest. There’s no monthly fee.
BrioDirect also offers a wide variety of high-rate CDs from 30-day to 60-month terms. As of writing, its short- and mid-term CDs fare better in today’s rate climate. These high-rate CDs require at least $500 to open.
BrioDirect is an online sub-brand of Sterling National Bank, so deposits are considered under one banking roof for FDIC insurance purposes.
Should I switch to an online bank account?
Switching to an online bank could be the right move if you’re really trying to boost your savings and you’re tired of the low yields a traditional bank provides. Online banks typically help you avoid high account fees and balance minimums, too. Certainly, a big difference is the lack of physical branches. Still, online banks offer user-friendly online and mobile interfaces for increased convenience.
Even if you’re not convinced it’s time to ditch your big bank in favor of one of our picks, you don’t have to take an all-or-nothing approach to online banking. Often the biggest deterrents when people consider moving their banking online are that they have no physical branch location to deposit cash and no bank representative to talk to in person.
But “it doesn’t need to be all or nothing,” Tumin said. “If you have a local bank, you can do most of your banking with an online bank and have a checking account with your favorite local bank.”
With this strategy, you can get a feel of how to transfer money online and then start transferring more money to the savings account, he added. You could also simply keep your accounts linked for the easier cash access. To really take advantage of an online bank’s high rates, you could keep the majority of your funds in a high-yield account to boost your savings more efficiently.
If you find that you’re comfortable with online banking, then you can either make the switch completely or split your money between your online and local bank depending on your preferences.
Choosing the right bank account
Choosing the right bank accounts depends entirely on you and what’s important to you. If having a physical branch location nearby is part of your ideal banking experience, then an online bank won’t be the right place to open all your accounts. Perhaps you don’t need full service branches, just easy ATM access. Maybe you’re all for the high-yield accounts, typically found at online banks. Determining these preferences and necessities will help you narrow your search.
Choosing a savings account: When looking for a savings account, it’s tempting to just plop your money into the easiest option at your local bank. Unfortunately, this approach to saving won’t typically get you the highest returns. Even if you just want to set money aside, why not set it aside in an account that will earn you more money with no extra work on your part? Look for a savings account that offers a high-earning interest rate. Even better, find one that doesn’t charge a monthly fee. That way, you’ll be growing your money, not losing it to unnecessary fees.
Choosing a CD account: Finding a certificate of deposit with a high interest rate is even more crucial. After you make your initial deposit, you won’t have access to that money until the CD term ends. You’ll want to make that deposit a worthwhile investment, especially if you open a CD that’s a year long or more. Before you rush to open a new CD, always check the account’s minimum deposit requirement. Banks will typically require a minimum deposit of anywhere from $500 to $10,000 to open a certificate. Many online banks don’t require a minimum opening deposit. Still, the larger your initial deposit, the more interest you’ll earn, especially since you cannot make additional deposits throughout the CD term.
Choosing a money market account: A money market account often works like a hybrid of a savings account and a checking account. For starters, you’ll want to find a money market account with a high yield. Some banks offer higher interest rates on their money market accounts than on their savings accounts, but that’s not always the case. Plus, you may need to fork over large amounts to open the account or earn at the best rate. To get the best money market account, find one that provides an ATM card. That way, you can access your account more easily than a regular savings account. (You’re still limited to six transactions per statement cycle.)
Choosing a checking account: Finally, choosing the right checking account may be the most important financial decision, since you’ll constantly be moving money in and out of your account. The best checking accounts are those that don’t charge a monthly fee. You shouldn’t have to pay a bank to keep your money safe and accessible. Even better, find a checking account that earns interest. That way, you can grow your money in all accounts, not just your savings.
Bank fees and fine print to watch out for
Traditional bank accounts are rife with fees. From monthly service fees to overdraft fees, paying bank fees like these can really cut into the savings you’re trying so hard to build. To avoid falling into this trap, it helps to start by finding bank accounts that don’t charge monthly fees. This is especially common at online banks.
You may have to search through the fine print and account disclosures for other potential bank fees. It’s important to look for fees charged for out-of-network ATM usage, excessive transactions, account inactivity and incoming and outgoing transfers, since you could easily run into them if you’re not careful. Some online banks may even charge you for paper statements.
Another big fee that you’ll want to avoid is an overdraft fee. You won’t want to overdraft your account in the first place, but always keep an eye on your balance so it doesn’t happen by accident. You can typically find these fees in an account’s fee schedule. Some banks may require you to call or visit a branch to learn more about their fees.