As the cost of operating brick-and-mortar locations grows, traditional banks have ratcheted up fees in turn and kept their rates stubbornly low. Online bank offerings, meanwhile, have only gotten more enticing. Since they incur lower overhead costs, they can pass those savings on to consumers in the form of higher yields and lower fees.
Average savings account rates among online banks nearly doubled from 0.79% in June 2017 to 1.52% in December 2018. With the Fed predicted to raise rates several more times in 2019, rates will likely continue their ascent. Brick-and-mortar bank rates, on the other hand, have seen little growth. Over the last year, the average rate inched from 0.16% to just 0.26% as of this writing. Credit unions haven’t fared much better, with average rates rising from 0.18% to 0.23% over the same time period.
Needless to say, in today’s rising rate environment, online banks are often the best option for consumers looking for higher returns on their deposits. And yet, it can be daunting to make the switch from one bank to another. In our inaugural Best Online Banks roundup, we hope to make the choice a bit easier for those looking to make the switch.
Best bank for CDs
How we picked the top five: We chose the bank with the highest 1-year CD rate and consistently held a spot on MagnifyMoney’s Best CD Rates page for two years.
#1 Ally Bank– Winner
Minimum Account Balance to Earn APY
Ally Bank is the best bank for CDs thanks to its consistently high rates, especially on its 1-year account. Ken Tumin of DepositAccounts.com (both MagnifyMoney and DepositAccounts.com are owned by LendingTree) agreed, pointing out the bank’s No Penalty CD offering, which offers a competitive rate without penalizing account holders for early withdrawals. The bank’s competitive rates extend across its three different CD account types — the High Yield CD, Raise Your Rate CD and No Penalty CD. Each CD’s rate applies to all balances, except on the 18-month and 3-year High Yield CDs, where higher balances snag higher rates. This spread of products makes it easy for you to grow your savings in a number of ways.
Even better, Ally Bank doesn’t require a minimum deposit to open any of its CDs. This opens up the opportunity to grow savings at Ally’s high rates to a wider variety of customers who may not be able to reach the high minimums at other banks. Ally Bank CDs also don’t charge monthly fees, allowing your money to grow undisturbed by unnecessary charges.
#2 Synchrony Bank
With both standard and IRA CDs available, Synchrony Bank offers competitive rates across all its CDs. Its 1-year CD rate matches Ally’s (at time of writing), but Synchrony also requires at least $2,000 to open an account; this may place the accounts slightly out of reach for certain customers looking to save with CDs.
#3 Marcus by Goldman Sachs®
Previously known as Goldman Sachs Bank USA, Marcus by Goldman Sachs is the consumer bank arm of investing giant Goldman Sachs. Through Marcus, you can find a High Yield Savings account in addition to its High Yield CDs and No-Penalty CDs. At time of writing, its 1-year APY is only slightly smaller than Synchrony’s, though it has not been the most consistent over the years. You’ll also need at least $500 to open a Marcus CD.
With its London beginnings 300 years ago, investment bank Barclays has now made a big name for itself in the online banking space with its competitively high rates. Its 1-year CD rate matches the #3 entry on this top five list, ranking lower due to a lack of rate consistency over the past two years.
Barclays does fall short slightly in its total offerings, with only an Online Savings account and nine Online CD terms at the moment, while other banks often include a checking account or money market account.
#5 Capital One
Capital One 360 accounts are the standalone online bank offerings from Capital One. Capital One 360 accounts offer a convenient online banking experience with high-yield interest rates on its accounts. Its 1-year CD rate is on par with the top-ranked bank (its rates are just short of Ally’s and Synchrony’s) — still, you won’t need a minimum amount to deposit to open any Capital One 360 account, nor will you face monthly fees.
Best bank for savings accounts
How we chose the top five: We chose banks that had the highest savings account rate and consistently held a spot on MagnifyMoney’s Best Savings Account page for two years.
#1 Ally Bank – Winner
Minimum Account Balance to Earn APY
Ally Bank doesn’t come out top for CDs alone — it is also the best online bank for savings accounts. Its Online Savings Account has one of the highest industry rates and has consistently held a spot on MagnifyMoney’s Best Savings Account list for two years. Plus, you won’t need to worry about having a high balance to open or maintain this account, since Ally doesn’t require either.
In addition to its high rates, Ally Bank “excels in its online transfer capabilities, a feature that’s often overlooked by other banks,” according to Tumin. With its quick turnaround and zero to low fees, Ally’s transfer policies makes it much easier to access your money, especially in case of emergency.
Although its savings account rate is consistently on par, and sometimes higher than, Ally Bank’s, the Barclays Online Savings Account hasn’t quite held onto a consistent ranking on our Best Savings Account list over the years. You still 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 Marcus by Goldman Sachs
#4 Synchrony Bank
#5 Salem Five Direct
The only bank not in our top 5 banks for CDs, Salem Five Direct shows up big with its competitive eOne Savings rate. (If you’re lucky enough to have an account balance over $1 million, however, you’ll earn at a much lower rate.) You’ll need at least $100 to open the account; after that, you won’t face any other minimum requirements nor a monthly fee. The online bank has over 160 years under its belt through its parent bank, Salem Five.
Best Bank for Money Market Accounts
How we chose the top five: The winner of the best bank for money market accounts is the bank that had the highest money account rate and consistently held a spot on MagnifyMoney’s Best Money Market page for two years.
#1 Sallie Mae Bank– winner
Minimum Account Balance to Earn APY
Ending Ally’s winning streak, Sallie Mae Bank’s Money Market Account offers a rate well above the competition. The bank has had the highest money account rate and consistently held a spot on MagnifyMoney’s Best Money Market page for two years. While Sallie Mae is typically under associated with student loans, Sallie Mae Bank (under SLM Corporation) offers some great banking products designed to help you grow your savings efficiently.
Tumin noted that Sallie Mae’s “excellent money market rate is interestingly higher than the savings account,” whereas other online banks have chosen to focus more on their savings accounts. This Money Market Account doesn’t require a minimum balance, nor does it charge a monthly fee. Plus, it includes check-writing capabilities, a feature that Tumin considers crucial to a successful and true money market account.
#2 Capital One
The Capital One 360 Money Market account earns interest according to two balance tiers. Your balances below $10,000 will earn at a lower, less competitive rate. The account’s much higher interest rate on balances of $10,000 and over, however, earn the account the second spot here. The account doesn’t include check-writing abilities nor an ATM card, so you’ll have to make some electronic transfers to other ATM-accessible accounts if you need cash.
#3 Self-Help Credit Union
The first credit union in this roundup, Self-Help Credit Union is actually a group of member-owned, mission-driven credit unions, a nonprofit loan fund, and the Center for Responsible Learning. Growing from beginnings in North Carolina in 1980, the credit union now reaches over 145,000 members throughout the nation, with a solid branch presence in North Carolina, South Carolina, Florida, California and the Chicago metro area.
The Self-Help Credit Union Money Market Account’s high-yield interest rate comes at a bit of a cost. For starters, you’re required to deposit at least $500 to open the count. You’ll also need to maintain that balance to earn interest and waive the account’s monthly fee.
#4 Ally Bank
Ally Bank is so highly focused on its savings account that it might have allowed its money market account to dip slightly, as mentioned above. Still, the account, which earns interest based on balance tiers, offers solid rates consistently enough to make this list. You’ll earn at the higher rate if you maintain a balance of at least $25,000; any balances below that will earn at a rate only slightly lower. In addition, it does well in terms of service — there’s no minimum amount you need to open or maintain the account.
ableBanking, a division of Northeast Bank founded in 1872, is an online bank and community that offers a number of high-yield deposit accounts. Its Personal Money Market account stands out with its competitive rate that reaches past Ally’s current highest money market rate. You will need at least $250 to open the ableBanking Personal Money Market account.
Best Bank for Checking Accounts
How we chose the top five: Our best bank for checking accounts had to tick a few boxes — it had to charge no monthly maintenance fees, offer an out-of-network ATM fee refund, and consistently hold a spot on MagnifyMoney’s Best Checking Account page for two years.
#1 Ally Bank – winner
Minimum Account Balance to Earn APY
Earning the title as the best bank for checking accounts, Ally Bank’s Interest Checking account has no monthly fees, refunds up to $10 in third party ATM fees each month, and consistently held a spot on MagnifyMoney’s Best Checking Account page for two years. 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, Tumin noted that standard checking account rates are generally low everywhere. “Use Ally’s low fees, like their free overdraft transfers, to your advantage,” he says, to really get the most out of this kind of account.
#2 Charles Schwab Bank
A division of the bigger brokerage firm, Charles Schwab Bank was launched in 2003. It currently offers only two accounts: a savings account and a checking account. This Schwab Bank High Yield Investor Checking® account, launched in 2007, earns at a decent rate. Plus, it comes with no monthly fee or a minimum deposit or balance requirement. 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.
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 — it donates an industry-leading 10% of its revenue to charities.
Interestingly, Aspiration partly makes its revenue through Pay What is Fair Fees. Essentially, you get to choose how much you want to pay for the bank’s products. Account holders set their own fee on the account dashboard, which then gets debited monthly from their Aspiration account or another linked account. And while this opens up the door to paying $0, the bank hopes you won’t, since it works to operate on the basis of trust and fairness with its customers. You can change the amount you pay at any time. For extra services like wire transfers, the bank promises to charge only the cost of completing that service.
This particular account, the Aspiration Summit Account, doesn’t charge a monthly service fee at all and earns at a pretty high interest rate for a checking account. You can also benefit from the bank’s free access to every ATM in the world. The account doesn’t require a minimum deposit to open or balance to maintain.
#4 First Technology Federal Credit Union
The Dividend Rewards Checking account from First Technology Federal Credit Union offers some great perks to customers who meet a few requirements. You’ll need to use your debit card for a minimum of 12 purchases, set up direct deposit or one recurring ACH withdrawal and enroll in e-Statements each statement period. These actions will qualify you for ATM fee rebates and the chance to earn the highest interest rate in this category. You can snag the higher rate by keeping your account balance under $15,000. Otherwise, a larger balance will start earning at a much lower rate.
Without meeting these requirements, your balance will still earn interest, just at a minimal rate. The account will never charge a monthly fee, regardless of your requirement qualifications. You also won’t face a fee when you use any of the 30,000 CO-OP Network ATMs in the country. Note that your money here will be insured by the National Credit Union Administration, instead of by the FDIC.
BankPurely is a division of Flushing Bank, focused on pairing banking with ethical, environmental and social issues. Not only does the bank decrease its carbon footprint with its online-only presence, but it also plants a tree for every CheckingPurely account opened. You’ll need at least $1 to open this account, but there’s no minimum balance to maintain afterwards. You also get to avoid a monthly fee on this account while still earning interest at a pretty solid checking account rate.
Top online banks
How we chose the top five: The winners are the banks the showed up the most among the four categories.
#1 Ally Bank
From its 1919 beginnings as a financing division of GM, Ally Bank is now one of the biggest names in the online banking industry. It earns the title of Top Online Bank here because it showed up the most among the four above categories. In fact, it came out on top in every category except for Best Banks for Money Market Accounts — Tumin noted that its “savings account has been keeping competitive” while the money market account has seemingly fallen to the wayside, especially in the last year or two. Still, the account gets some credit for its check-writing abilities. Plus, the bank and its other products perform well with their consistently competitive interest rates and zero to low fees.
#2 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.
#3 Goldman Sachs Bank USA
Goldman Sachs Bank USA offers some of the highest rates in the industry. Like Synchrony before it, this bank ranked twice, making it into the top five banks for CDs and for savings accounts. At the time, these are the only kinds of accounts Goldman Sachs Bank USA offers. There is some variety with its High Yield CDs and No Penalty CDs, which offer the chance to make a withdrawal without facing a heavy penalty. While you don’t need a minimum deposit to open a savings account, you’ll need at least $500 for the CDs. They’re all still excellent accounts due to their high-earning rates and lack of monthly service fees.
Barclays is one of our top online banks thanks to its CDs and savings account, though 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 what amount you can set aside, and you won’t face monthly service fees for owning these accounts.
#5 Capital One
Changing it up slightly in this shortlist is Capital One, ranking as a top online bank for its money market account as well as its CDs. Its money market account didn’t make it to the top of that list, but it still offers a competitive interest rate for higher balances. Its CDs also continue to perform competitively, especially on its long-term accounts.
Best overall bank
How we chose the best overall bank: The best overall bank is the bank that ranked in the top five for all four categories — checking, savings, money markets and CDs.
Winner: Ally Bank
The best overall bank appeared in all four categories. In this case, Ally Bank dominated by placing first in each category, except for money market accounts, where it placed fourth. Ally continues to offer competitive rates across its savings, money market, checking and many CD accounts.
The 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. Certainly 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.
|APY||Account Name||Minimum Balance Amount to Earn APY|
|2.20%||Online Savings Account||$0|
|2.55%||High Yield 12-Month CD||$0|
|0.10%||Interest Checking Account||$0|
|0.90%||Money Market Account||$0|
Best new online bank
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.
Winner: Vio Bank
Less than a year old and boasting an incredibly competitive interest rate on its High Yield Online Savings account Vio Bank certainly fits the bill for best new online bank, with. “They’ve got promise and potential with no monthly fee and no balance requirement,” Tumin said.
While there is no balance requirement to maintain the account and earn interest, you will need to open the account with at least $100. This is a pretty high requirement, especially for an online savings account.
LEARN MORE: Online vs. traditional bank accounts
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 is that they have no physical branch locations to deposit cash or talk to a bank representative 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, get more comfortable and then you can 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 great! 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 quite need a full service branch, 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 down 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 typically won’t get you the highest returns. Even if you just want to set some money aside, why not set it aside in an account that will earn you 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 only be growing your money, not losing any to unnecessary fees.
Choosing a CD account: Finding a certificate of deposit, or CD, 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 into opening a CD, always check the account’s minimum deposit requirement. Banks will typically require anywhere from $500 to $10,000 to open a CD. Many online banks don’t require any minimum. 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 mix between a savings and a checking account. For starters, you’ll want to find one with a high-earning interest rate. Some banks may offer higher interest rates on their money market accounts than 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 experience, 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 outgoing transactions per statement cycle.)
Choosing a checking account: Finally, choosing the right checking account might be the most important 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.