Personal Finance

How to Choose the Right Online Bank

My guess is that you are not 70 years old, and you likely already do most of your banking online. If you’re doing that banking with a big bank (you know, the ones with more locations than McDonald’s), you should consider making the switch to an online-only bank who can offer you better interest rates on your money and won’t charge you ridiculous fees. Even if you decide to keep your checking in a bank with an actual location, moving your savings to an online bank can be a great way to keep it a little out of reach so it’s not easily transferred into your shoe collection. Just make sure you check the following things first to make sure you choose the right online bank for you.

1. Make sure the bank is FDIC insured

Every bank should have this seal on their website. It means that your money is protected for up to $250k if the institution fails. Even if they have the seal on the website, if it’s a very small bank that is a little suspicious (ie: Joe’s Bank for Winners) – go to the FDIC website and double check that they are covered. You can do a background check for any bank on their site here.

2. Get the best rates and no fees

Online banks can offer their customers better interest rates on your money since they don’t have the high costs associated to having actual locations. Make sure you choose one offering a very competitive interest rate – you can check with to see the highest ranking online banks along with their rates and reviews. Online banks generally also do not charge BS maintenance fees or have minimum deposit requirements.

Just so you have an idea of what saving rates are like right now, Nerdwallet provided the following list of the highest grossing accounts as of February 18. Keep in mind that sometimes checking accounts at online banks may actually offer slightly higher rates (but they’re all really sad right now).

best online banks

2. Make sure you can use ATM’s

Most online banks work with a network of ATM’s that their customers can have access to. If this isn’t offered, make sure that they re-imburse you for ATM fees, and there is either a high cap on how much you can withdraw or no cap at all. For deposits, see if they offer the service where you can take a pic of paper checks with your smartphone as opposed to having to mail them in. Make sure you read the small print so you get all the rules and details.

3. Security

You want to make sure there there are multiple layers of security for your account. Make sure the bank prompts you to authenticate your information when you’re logging in from a different computer other than your own. You should also see if they offer alerts for when transactions are completed above a certain dollar amount or if there is ever suspicious behavior. Fraud protection is also a feature that a good bank will offer – so you can rest assured your money is safer than it would be in that shoebox in your closet.

4. Customer service

Make sure that you can reach someone 24/7. Good online banks will offer fast customer service by phone or with online chat for any questions you have. There is nothing more frustrating than not being able to get ahold of someone to help you – especially when it has to do with your money.


I personally have my CD with Ally because they were offering the best rates. My savings is currently with ING, but since they were taken over by Capital One, I’m considering moving that money to a smaller institution with better rates. Check out why I personally made my online bank choices in my post on Why I Believe in Online Banks.



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  3. Out of curiosity which online bank do you use and does it also work in Canada?

    Thanks in advance!

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