How to Choose an Online Bank

edited November 2023 in Lifestyle

Thanks to the development of advanced options in fintech or financial technology, bank customers are no longer strictly limited to brick-and-mortar institutions which can leave you feeling overcharged and underserved. Due to the sheer number of online banks, the one you decide to save with must include several desirable features and services to avoid being dissatisfied with the result. Learn more about choosing an online bank and enjoy greater financial freedom and opportunities. 

Consider the Range of Services, Such as Investment Assistance and Useful Tools 

While there is no one-size-fits-all approach to selecting the best online bank since everyone has different financial needs and resources, there are some critical services and tools to look for when choosing a financial institution. Whether your online bank offers you access to money management apps, automatic savings and investment tools, goal-oriented savings plans, or complete financial planning with an actual person, the results can vary widely. If you are interested in services beyond a conventional checking or savings account, such as conveniently located fee-free ATMs, certificates of deposit or CDs, currency exchange, or money market accounts, this decision can have an enormous impact on your ability to save and invest as you desire. 

Depending on the online bank in question, you may not be able to obtain an ATM card if your only account with the institution is for online savings. Some banks are more focused on providing users with access to higher interest rates and APY (annual percentage yield), whereas others are better suited to accessing cash and having a record of your expenses. Should you decide to utilize any financial planning tools like using technology based around AI (artificial intelligence), a fintech app, or a human financial advisor, you should familiarize yourself with the pros and cons of any potential investment as a matter of course. You should also have a firm idea of the timeframe for your finances to mature, your general financial goals, and your comfort level regarding potentially risky investments. 

Be Aware of Any Fee Structure and That the FDIC insures the Bank 

For those unfamiliar with the FDIC (Federal Deposit Insurance Corporation) and its services, the FDIC assists bank customers by providing a financial guarantee of up to $250,000 per depositor and ownership category in the event of a run on the banks. While the vast majority of physical and online banks are members of the FDIC and provide you with the attendant benefits, it should be noted that this is not the case universally. Many banks will make efforts to plainly advertise their membership to help potential customers decide to open accounts, so you should take care to ensure that any online bank you are considering is FDIC-insured.  

Other important information to keep in mind when selecting online banks is the existence of any fee structure, which can eventually end up making a service cost more than it is worth. In addition to being able to access your account to withdraw funds via a debit card or ATM card without being charged an onerous fee, you should also look for features like monthly reimbursement on ATM charges accrued through using ATMs outside of your approved network. Other costs to watch out for include overdraft fees or fees for spending more money than your account contains, fees for “monthly maintenance,” receiving incoming wire transfers without cost, and low fees for foreign transactions or balance fees when transferring credit card debts. 

What are Some of the Best Online Banks, and What are Their Services Like? 

As mentioned earlier in the article, it is vital that you take the time to review online banking services and determine which is best for your current and future goals. Although there is no shortage of potential choices for you to start saving and investing, some options are better than others. Some prominent examples include Quontic Bank, which offers users access to checking, savings, MMAs, and CDs, with no fees for maintenance, ATM usage, or overdraft. In addition, you can use your card at over 90,000 ATMs across the United States. This bank is an excellent choice for those interested in savings options with higher APY and offers up to 1.10% for checking accounts, up to 3.20% for savings accounts, and up to 4.45% on CDS. 

Much like Quontic, Discover Bank offers online users relief from excessive fees and access to an impressive number of fee-free ATMs. Where Discover really excels is the APY on offer and some impressive cashback options. One great example is their Discover Cashback Debit Checking which offers you 1% cashback per month up to a maximum limit of $3,000, letting you earn $360 per year just by paying your expenses. Discover also provides users with access to IRA (individual retirement account) CDs and ROTH IRAs, each of which offers you investment vehicles to fund in different ways.  

Normal IRAs are built up using pre-tax income, and any earnings are tax-deferred, but you cannot withdraw funds before the age of 59 and ½ without incurring a financial loss. ROTH IRAs employ after-tax money, and while any contributions are still taxable, any profits are tax-free, and there is no penalty for early withdrawal.  

Before rushing out and signing up with the first online bank you encounter, take the time to review your options and decide to best serve your short- and long-term goals. Check our website for more information on technological and market trends that may influence potential investments. 

About Dan Martin: Daniel Martin is a technology researcher and writer with more than a decade of experience. He is a professional librarian and an experienced tech teacher, writer and blogger. Specializing in technology, Dan has taught courses in technology and writing at the college level, developed web pages for businesses and higher educational institutions, written on tech topics for leading national publications and created numerous how-to guides.



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