What’s the Deal with Online-Only Bank Accounts?

Online Banks

From keeping in touch with friends to purchasing groceries, the Internet is changing the way we complete day-to-day tasks. But will online tools eventually replace the traditional bank branch?

A 2012 study from Javelin Strategy shows that of those who are banked, about 11% say they would like to switch financial institutions at some point within the coming year. One relatively new alternative is online-only banking, which, as the name implies, is a bank account without the traditional brick and mortar element. Major banks and newcomers alike are offering these online-only options for both checking and savings accounts.

While some online-only account users are happy with this option, at the end of the day, this modern take on banking is not for everyone. Let’s run through some basic considerations to help you decide whether an online account is right for you.

Higher interest rates

According to Bankrate.com, the average interest rate for a standard checking account is 0.51%. Since they don’t have the overhead of a physical location, many online-only banks are able to offer higher interest rates for both checking and savings accounts, in some cases up to 1%.

Mobile-friendly Tools

Since they are native to the digital space, many of the online-only banks offer well-designed mobile sites and applications. Simple, for one, is known for its sleek and easy-to-use mobile app with financial management tools built right in.

Automated Savings

David Weliver, publisher at MoneyUnder30.com, recommends online-only banks to those who have trouble saving money. “You can set up automatic deposits and then forget it’s there – ideal for anybody who tends to tap savings too frequently,” he says.

Customer Service

If you value being able to walk into a branch and talk to someone, online-only banking probably isn’t for you. Even if you don’t frequent your bank’s physical location, when something goes awry with your account (say you lose your debit card or discover fraudulent charges), speaking with a real person can make a big difference.

On the other hand, if you are of the “Internet Generation,” many online banks have good reputations for digital customer assistance including chat features and quick email response time. The right option depends entirely on your personal preferences for customer service.

ATM Fees & Availability

The availability and charges for ATMs will vary depending on the financial institution you select as well as your physical location. Some Internet banks cover any and all ATM transaction charges, while others require customers to use ATMs within a given network. You’ll want to conduct thorough research for this step to avoid unnecessary fees, especially if you need to withdrawal cash frequently.


Since online banks do not have physical branches, these accounts work best if you can arrange for direct deposit for your paychecks. If direct deposit is not a possibility, you’ll need to deposit checks via mobile photos (snap a picture of the check to deposit), snail mail or via ATM, depending on the options your bank offers.

Spending & Withdrawal Limits

Before signing on for an account, check out whether the bank has limitations for monthly transactions. You’ll want be sure that you can spend, withdraw, and transfer money as often as your needs require.

Research, Research, Research

At the end of the day, the most important step in this decision process is to determine your own banking priorities and then conduct thorough research for any account you are considering. Whether you’re looking at a brick and mortar bank or online-only options, be sure to look at fees, customer service reputation and any account limitations before making your final decision.


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