8 Online Banks That Let You Skip the Fees, Enjoy the Interest
Thankfully, the Internet is good for something other than supplying us with funny cat videos and quizzes to tell you which type of fast food your personality is like. The Web is now a safe haven for consumers looking for low-cost banking options that still offer all the safety the comes from being backed by the Federal Deposit Insurance Corp.
Internet-only banks are able skip those ugly fees and still offer higher interest rates than their traditional peers because they don't have to deal with the costs of maintaining neighborhood branches.
"Most customers today don't go into a retail branch, so we never built them," says Kyle Kolsky, senior vice president of consumer deposits for Bank of Internet USA (BOFI). "We operate from one large headquartered office and give those savings back to our customers in superior products."
Some Internet-only banks are associated with well-known players like Charles Schwab (SCHW) and Capital One (COF). The institutions on the list below are the underdogs looking to revolutionize banking -- and help you keep more money in your pockets.
1. Bank of Internet USA: A No-Fee Account + 1.25 APY
Got $100? Then consider opening a Bank of Internet USA rewards checking account. It has no fees. Before you let cynicism set in, look at these account details:
- Unlimited domestic ATM reimbursements -– you'll be refunded for any fees by the end of the next business day.
- No monthly maintenance fee.
- No minimum monthly balance.
- No overdraft or non-sufficient funds fee –- you chose a line of credit on overdrafts or a link to your savings account at no charge to move the money.
- Cash back on debit card purchases.
- Direct deposits totaling $1,000 or more earn 0.4166 percent.
- At least ten debit card purchases earn 0.4166 percent.
- 15 or more debit card purchases earn an additional 0.4166.
Savings account: Bank of Internet USA's high-interest savings account earns 0.61 percent. While it offers the best deal we found for a checking account, you should take your savings elsewhere.
2. Bank5 Connect: No ATM Fees (to a Point)
Bank5 Connect offers a checking account with only a $10 minimum opening balance. It is a good option for people who don't regularly use an ATM. Any ATM fees charged by a terminal are reimbursed, but only up to $15 per statement cycle.
There are no monthly maintenance fees, and Bank5 Connect offers the first order of basic checks free. If you opt in for overdraft protection and link to a savings account, there is no charge on overdrafts. If you don't have overdraft protection, you'll pay $15 for an overdraft or non-sufficient funds charge.
Bank5 Connect offers 0.76 percent APY on balances over $100 -- without hoops to jump through.
Savings account: Bank5 Connect offers a 0.90 percent APY on savings accounts with balances over $100. This is a highly competitive rate.
3. Simple: No Overdraft Charges (and It'll Make Checks for You)
Simple, operated by The Bancorp Bank (TBBK), offers users a checking account with no minimums, no overdraft fees and no monthly maintenance fees.
If you've heard of Simple, it might be because it bought some customers pizza after an all-day outage impacted 10 percent of its clientele. It also threw in $50 cash. Simple has also come under fire recently about technical glitches impacting the scheduled payment features on the site.
Need a check? Simple will print it, address and mail it at no cost to you.
Simple uses STARsf ATMs for fee-free cash withdrawals. If you're charged a fee by an in-network ATM, Simple will reimburse you. Simple won't reimburse the charge from outside the network.
Simple is not particularly competitive on interest rates. In its FAQ section, Simple states: "Our bank partner's interest rates are generally comparable to those of other banks for the type of account we offer. That said, they are fairly nominal at the moment. If you're looking for a high-yield savings account, Simple probably isn't the best option for you."
4. Moven: Pay Your Friends Via Text
Moven provides a similar feel to Simple. Branded as a "debit account that tracks all your money for you instantly," Moven is an app available on both Android and iOS devices. It only left its beta-testing period in early March, but it's backed by CBW Bank, which provides the FDIC insurance. The app works as a budgeting tool, allowing people to see real-time updates about their spending habits, receive alerts, and view analysis.
There are no fees associated with Moven (and yes, that does mean no overdraft fees), unlessyou use an ATM outside of the STARsf network. Then you're subject to fees from the ATM terminal, which Moven does not reimburse.
Similar to money transfer platforms like Chase (JPM) QuickPay or Venmo, Moven allows users to send money to friends via Facebook (FB), email or text message, even if the friend isn't a Moven user.
5. TIAA Direct: A Good Deal If You Have Overdraft Protection
TIAA Direct bank has the potential to be a fee-free account -- if you never overdraft it or have overdraft protection.
Only $25 is needed to open an account, and there are no monthly fees, no minimum balance, and no ATM fees if you stay within its large associated network. If you go overdraft without protection, it's a $25 charge per transaction with a maximum of $75 in a day. That's a very steep overdraft charge -- close to what you'd pay a big bank. However, TIAA Direct doesn't charge to transfer your money from savings to cover an overdraft. By comparison, Bank of America (BAC) charges $10 to transfer money from a customer's savings account to checking to cover an overdraft.
TIAA Direct also offers tiered interest on its checking account, with 0.15 percent being the maximum available to accounts with $25,000 or higher.
Savings account: It has an opening minimum of $25 with a 0.80 percent APY.
6. EverBank (EVER): Bonus Interest Rate, but ...
When you open an account with EverBank, you get a bonus interest rate of 1.40 percent on all balances under $100,000 for the first six months. After six months, interest drop to rates ranging from 0.85 to 0.98 percent for the first year, which are still high for a checking account; after the first year, APY drops to rates ranging from 0.30 percent to 0.61 percent.
Customers can only earn 0.61 percent on amounts from $100,000 to $10 million. And you should probably invest amounts that high someplace smarter.
Potential customers do need $1,500 on hand to open an account, which is quite steep compared to other Internet-only banks.
EverBank doesn't charge a fee to use ATMs, but will only reimburse ATM fees if you keep a minimum of $5,000 in your checking account.
Overdrafts cost $30 each with no cap on how many overdraft fees get charged per day. So you'd better have overdraft protection with this account, which is arranged through a credit line. The associated fees will depend on the APR of the account.
Savings: Its money market offers a first year APY of 1.01, with a 1.40 percent bonus on the first six months up to $50,000. Ongoing rates are 0.61 percent. The five-year CD offers 1.92 percent APY. A one-year CD earns0 .70 percent.
7. Gobank: The Sort-of-Fee-Free Account
Gobank claims that it's fee-free, but there are quite a few qualifiers hedging that statement. To avoid the $8.95 monthly membership, you must make direct deposits totaling at least $500 a month. Stay in-network for ATMS to avoid the $2.50 charge from GoBank on top of the ATM's fee.
Gobank charges $22.95 to open an account ($20 minimum deposit + $2.95 starter kit). It doesn't charge overdraft fees, non-sufficient fund fees or penalty fees. It doesn't even offer protection -- your purchases should be declined if you overdraft.
One of Gobank's advantages is the ability to deposit cash for free at participating stores, including Walmart (WMT).
Customer complaints include checks taking too long to clear, which you'll need to consider if you set up bills to be automatically paid via that checking account. You don't want to wind up in a delinquent bill situation because funds you've deposited don't clear in time.
8. Ally (ALLY) -- Minimal Fees and 24/7 Service
Ally is a top-contender in online banking. Among its selling points:
- No ATM fees (and it reimburses charges from ATM operators).
- No monthly fee.
- No maintenance fee.
- No overdraft fees with protection (There's a $9 overdraft fee without protection, but a maximum of one charge per day).
- 24/7 customer service.
Ditch, Switch and Save
MagnifyMoney.com (where I work) offers rankings of all these Internet-only checking and savings accounts, and more, plus customizable tools to see which one is best for your goals.
Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She is the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers. She is also the brand and content manager for MagnifyMoney.