Credit card reviews
Best credit cards 2020
Best rewards credit cards
Best cash back credit cards
Best airline credit cards
Best small business credit cards
Best 0% APR cards
Best balance transfer cards
Best student credit cards
Best starter credit cards
The best online brokerages for beginners
The best investment apps
The best stock trading apps
Best robo advisors
Average stock market return
Car insurance
Life insurance
Best cheap car insurance
Best life insurance companies
Best homeowners insurance
The best renters insurance
Average cost of car insurance
Average cost of life insurance
Average cost of home insurance
How to shop for car insurance
Best savings accounts
Best checking accounts
Best CD rates
Best money-market accounts
Best high-yield savings accounts
Best bank account bonuses
Best online bank
American Express Savings review
Average bank interest rates
Average 401(k) balance
How to retire early
How to open an IRA
IRA CD rates
Best ways to save for retirement
Best mortgage lenders
Best mortgage refinance lenders
30-year mortgage rates
Average refinance closing costs
Average mortgage rates
Average mortgage payment
Average closing costs
Student Loans
Best personal loans
Best debt consolidation loans
SoFi Personal Loans Review
OneMain Financial Loans Review
Best private student loans
Average student loan debt
Average college tuition
How to choose a student loan
How to pick financial aid
Best tax software
Best small business tax software
TurboTax review
H&R Block review
TurboTax vs H&R Block
TaxAct review
Credit Karma Tax vs TurboTax
What tax bracket am I in?
Best online financial advisors
Do I need a financial planner?
How much is a financial advisor?
Questions to ask a financial advisor
Fee-only vs. commission financial advisor
Average credit score
Average net worth
How to increase your credit score
How to increase your net worth
Morsa Images/Getty Images
Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.
An online bank is an institution that operates mostly or solely online.Your money is safe at an online bank as long as the company is federally insured by the FDIC.Online banks don’t have as many overhead expenses as traditional banks, so they can afford to pay higher rates and charge lower fees.Depositing cash at online banks can be tricky, but most institutions do let you deposit paper checks digitally.See Business Insider’s picks for the best online banks »Online banks are institutions that work mostly or exclusively online.
Many brick-and-mortar banks (meaning banks with physical branches you can visit) allow you to access your accounts through their websites or mobile apps — but with an online bank, everything happens online. Some online banks do have a few physical locations, but they still operate digitally for the most part.
In short, yes, online banks are safe.
The most important part of shopping for a bank is choosing one that is insured by the FDIC, or Federal Deposit Insurance Corporation. (If you’re using a credit union, it should be insured by the NCUA, or National Credit Union Administration.) A bank should publicize that it’s FDIC insured on its website, or you can search for an institution on the FDIC site.
FDIC insurance works similarly to other types of insurance. If you have renters insurance and your home is damaged in a natural disaster, your insurance will cover the costs of damages up to a certain dollar amount. If your bank has FDIC insurance and shuts down, the FDIC will give you the money you stored in the account, up to $250,000 for an individual account and $500,000 for a joint account.
Maybe you’re considering using an online banking platform, such as Wealthfront or Chime. These companies aren’t technically banks, but they’re backed by banks that provide FDIC insurance, so your money is still safe.
As far as security goes, online banks are just as safe as brick-and-mortar banks. But you should practice the same safety measures you would use with any other sensitive information you access online. Here are some tips:
Don’t log into your bank account on a public Wi-Fi networkChange your password on a regular basisConsider using a VPN when you check your bank information onlineThe pros and cons of online bankingThe pros of opening an online bank accountHigher interest rates. Online banks save money by not having brick-and-mortar locations. As a result, they can afford to pay higher interest rates than traditional banks on your savings, CDs, and money market accounts. Lower fees. Brick-and-mortar banks can offset some of their costs by charging you service fees. Most online banks don’t charge monthly fees, though, and other fees tend to be lower, too. For example, some traditional banks offer overdraft protection in case you take too much money out of your account, but they still charge you a fee for using overdraft protection. It’s rare for online banks to impose these sorts of fees.Large ATM networks. Few online banks have their own ATMs like Chase and Wells Fargo do. Instead, they use a network, such as Allpoint or MoneyPass, which gives you free access to tens of thousands more ATMs around the US than if you used a traditional bank.The cons of opening an online bank accountNo in-person banking. With the exception of a couple banks, such as Capital One, most online banks don’t have any physical locations. If you like speaking to a banker face-to-face, you might not like online banking.Difficulty depositing cash. Most online banks let you deposit paper checks using their mobile apps, but online banking probably isn’t for you if you need to regularly put cash in the bank. Some online banks don’t accept cash deposits at all. Others let you deposit cash through Green Dot locations, which you can find at places like Kroger and CVS, but you’ll pay a fee each time.If you want to earn higher rates and pay lower fees, you might like online banking. But if you like the comfort of walking into a physical branch location or need to deposit cash, you may be better off with a brick-and-mortar bank.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
Loading
Something is loading.
More:
Online Bank
Online Banking
FDIC
Wealthfront
Chevron icon
It indicates an expandable section or menu, or sometimes previous / next navigation options.