Save Money on Bank Fees with These Online-Only Banks
It’s no secret that many Americans have a complicated relationship with banks. In many ways, they may just seem like a necessary evil people put up with for convenience sake. As a result, consumers tend to grin and bare it with the various fees they’re charged on a monthly basis. However, when we talk about fees and frustrations, we’re mostly talking about brick and mortar banks. Meanwhile, online-only institutions may not only offer lower fees but may even pay you to keep your money with them.
Online-only banks may not be quite as convenient as banks with branch locations, but technology is quickly closing the gap. Plus, while some might worry about turning over their cash to unproven startups, all of the accounts discussed below are FDIC insured. So if you’re looking to save money by ditching your too-big-too-fail bank, these eight online-banks — four of which I personally use myself — are some smart alternatives.
Note: All information including APY rates was accurate as of March 13%th, 2020
4 Online-Only Banks I Personally Use
Not only was Discover Bank the first online-only bank I joined but it also is the one I use most. Admittedly, I was initially drawn to them mostly just because I already had a Discover credit card. However, I quickly learned Discover offers a number of perks without many of the fees that big banks charge.
There are many things I enjoy about my Discover accounts, starting with the current 1.5% APY on savings. I also use the checking account frequently, using the free checks that came with my account to pay rent each month. Of course, speaking of rent, there was that one time when I learned a hard lesson about postdated checks and ended up accidentally overdrafting my account. It was then that I was thankful for Discover’s First Fee Forgiveness program that reversed the penalty I incurred. Since then, Discover has actually done away with many of its fees altogether, ending the need for Fee Forgiveness in the first place.
Overall, I think Discover Bank is a good option for those looking for a solid online-only bank but are still looking for a name brand that’s been around a while. I should also note that their checking account comes with a debit card that earns 1% cash back on up to $3,000 in purchases per month. So, while it may not have the absolute highest APY on the market, Discover can still help consumers save and earn money versus a traditional bank.
Aspiration is unlike any other bank on this list. That’s because they not only put an emphasis on doing well with your finances but also on doing good in the world. To help with that goal, the company allows customers to voluntary select how much they pay per month (even if that fee is $0) and donates 10% of those fees to charity. Also interesting is their cash back debit card that pays users .5% back on purchases from companies with high positive impact scores and bonuses of up to 5% on purchases from a few Conscious Coalition members while still paying 0.05% back on all other purchases.
As I wrote about back when it happened, Aspiration made some sizeable changes to their accounts earlier this year and continues to make adjustments — for better or worse. First, instead of operating a single account they called Aspiration Summit, there are now Aspiration Spend and Aspiration Save accounts. That change came with the ability to earn up to 2% APY on savings. However, this rate has not only been cut to .5% now but also requires you to deposit at least $2,000 into either Aspiration account each month, have a balance of at least $10,000 for any day during the month, or sign-up for the company’s Planet Protection program. Alternatively, you can also earn 1.5% APY on balances up to $10,000 if you have deposit at least $2,000 a month and join Planet Protection. FYI Planet Protection costs $5.99 a month or $59 a year. If you don’t meet any of these requirements, you get nothing (good day, sir!).
While the high-interest rate may no longer be so easy to attain or even that great overall, another perk that caught my attention was the ability to use any ATM in the world for free. This is achieved by reimbursing users for any ATM fees they may incur. I actually had the chance to try out this feature on recent trips to Hong Kong, Paris, and Toronto and, in each case, it worked like a charm. Prior to this, I had to pay $5 each time I wanted to pull out cash from my Wells Fargo account overseas, so this was quite the upgrade. Of course, Aspiration has now limited this benefit to five reimbursements per month.
In my full review of Aspiration, I noted that transfers to the bank did seem to take a bit longer than normal and that they lacked line by line balance data. Luckily, the latter issue has since been corrected. On the other hand, the changes they’ve made to how you earn interest have honestly made me fall out of love with this option. In fact, every subsequent change they make seems to be a little bit worst in my humble opinion.
Marcus by Goldman Sachs
While a Marcus by Goldman Sachs account can be opened on their website as you’d expect, that’s actually not how I was brought to them. Instead, my Marcus account came about after their bank purchased one of my favorite personal finance apps, Clarity Money. Sometime after the purchase, Clarity rolled out the option for users to upgrade their automated savings account to Marcus accounts. With a current APY of 1.7%, I think you can guess why I opted into that offer.
Since I use my Marcus account exclusively through Clarity Money and only make automated transfers, there’s not much else to say. Then again, it doesn’t seem that Marcus has a checking component, so this one isn’t so much about saving money on fees as it is about making money on interest. If that still sounds good to you, it may be worth a shot.
Finally, my newest online-only bank account comes from SoFi Money. Incidentally, they’re also pretty new themselves. Although they started as a loan company, SoFi has expanded their offerings in recent months — including, of course, the introduction of SoFi Money.
Like Aspiration, one of the biggest perks of SoFi Money is the ability to use any ATM in the world for free. What’s also cool is the account is a hybrid checking and savings accounts, providing account holders with a snazzy debit card. Plus, said debit card can be used overseas without any foreign transaction fees. Add in a 1.1% APY and I think you can see what attracted me to SoFi Money in the first place.
After using SoFi Money over the past few months, I can say I’ve really come to appreciate it. In fact, following the disappointing Aspiration news, I’ve ended up moving more money over to SoFi.
4 More Online-Only Banks to Consider
Before I ultimately landed on a Discover Bank account, I considered Ally merely because it was one of the few online-only banks I had heard of before. With no maintenance fees or minimum balance fees, Ally did make a compelling case for itself. Oh, and it also carries one of the best APYs, currently paying 1.50% on savings.
In terms of checking, Ally also has an interesting set-up as it pays 0.1% APY on checking balances under $15,000 and 0.5% on balances over $15,000 (of course I don’t know why you’d keep $15k in a checking account if the savings has 1.5%). Checking accounts also come with a debit card you can use at more than 43,000 in-network ATMs for free or get reimbursed up to $10 in ATM fees per statement cycle. So, while I ultimately choose Discover over Ally because of my previous ties to the former, there are good reasons why Ally remains a popular choice for many.
If you’ve ever looked at lists of high-yield savings accounts, you’ve probably seen Synchrony near the top. That’s because the bank regularly pays one the highest APYs in the space. For example, they’re currently offering 1.7% APY with no minimum balance. The only problem is, that’s about all they have.
I was somewhat surprised to find that Synchrony doesn’t offer any kind of checking account (although they do have money markets if that’s something you’re interested in). It should also be noted that, while Synchrony’s APY is impressive, it’s no longer unheard of as competition increases. For those reasons, while Synchrony still gets strong reviews, those looking for a more of an all-around banking solution instead of just high-yield savings might want to look elsewhere.
Just as SoFi Money is a relatively new entry, so is the similarly named T-Mobile Money. In case you’re wondering, yes, this comes from T-Mobile, as in the telecom service provider T-Mobile. That said, you don’t need to be a T-Mobile customer to open one of these accounts.
First the good news: like many others on this list, T-Mobile Money doesn’t charge any fees. As for the bad news, T-Mobile Money’s standard APY is lower than most (although much higher than most regular banks), sitting at 1%. But wait — if you’re a T-Mobile customer, that APY could skyrocket thanks to a unique perk. Currently, T-Mobile post-paid customers who deposit at least $200 a month to their T-Mobile Money accounts can earn a whopping 4% APY on balances up to $3,000. For balances over that amount, you’ll still earn 4% on the first $3k but get 1% on everything else.
Having just switched to T-Mobile a few months back, if I were to open yet another online-only bank account, this would probably be it. However, given the limited amount of time this offering has been available, in-depth reviews aren’t very plentiful. Because of that, I’d say that T-Mobile users willing to take a chance should give this one a shot, while others might want to give it some time.
Lately, I’ve been seeing a lot of commercials for Chime, so I figured I should include them on this list. Looking into them more, I was a bit surprised by one thing: they only pay 0.01% APY on savings. While that’s disappointing, the good news is that the bank doesn’t charge many of the fees traditional institutions do, such as maintenance fees, service fees, or minimum balance fees.
Perhaps Chime’s biggest claim to fame (at least if their advertisements are any indication) is the ability to get direct deposit payroll funds up to two days early. Although the bank isn’t the only one to offer such a perk, there’s no doubt that it could be a nice feature for some. Is it cool enough to forgo much interest on savings, though? I’m inclined to say “no,” but that’s really up to you.
With their various fees and low APYs, chances are your brick and mortar bank account isn’t treating you right. If that’s the case, it may be time you looked online instead. Whether you’re just looking for respite from maintenance and monthly fees, want to earn cash back on debit card purchases, or want to help your savings grow even better thanks to high interest rates, these online-banks and many others may just offer the perfect solution.
Also published on Medium.