3 Top Online Banks and 8 Banking Security Tips
Money Girl reviews her 3 favorite online bank accounts – see how yours stacks up! Plus, she offers 8 tips for staying safe when dealing with money online.
It’s hard to imagine a world without online access to your bank account. Making a deposit or simple transfer used to entail making a trip to the bank during weekday “banker’s hours,” filling out a paper slip, and waiting impatiently in line.
Whew, I’m glad those days are over! Now, thanks to banking technology, you can complete just about any transaction remotely, whenever you want.
In this episode, I’ll review several of the best online bank accounts—plus, give you 8 tips for staying safe when you’re banking online.
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Trends in Online Banking
Although online banking began in the mid-1990s, it really didn’t catch on until after 2000. Now, it’s so widespread that many banks exist only online, and have no brick and mortar locations for customers to visit.
Not only is online banking more convenient for customers, it cuts overhead costs for banks. That’s a win-win, because online banks can offer higher interest rates and lower fees to customers, and still remain profitable.
Resource: Online Bank Comparison Chart (PDF) free download
And now, the trend is moving from desktop to mobile banking. According to a 2014 Federal Reserve surveyopens PDF file , 61% of the U.S. adult population has a smartphone, and 51% used mobile banking in the past 12 months, up from 48% a year earlier.
According to a 2014 Federal Reserve survey, 61% of the U.S. adult population has a smartphone and 51% used mobile banking in the past 12 months, up from 48% a year earlier.
The most common mobile banking activities were viewing account balances and transferring money between accounts. The number of smartphone owners who made remote deposits (by snapping photos of paper checks) was 38%, up from 21% the prior year. However, the number of smartphone owners who made mobile payments remained flat from 2013 to 2014, at 24%.
The survey found that consumers who haven’t made the switch to mobile banking said it was because their banking needs were already being met, they saw limited benefits to mobile banking, or they had concerns about security.
At the end of this article, I’ll cover 8 tips for staying safe when you’re banking online.
Review of the Best Online Banks
Since banks have so many different features and services, it can be difficult to know how they really stack up. I created the Online Bank Comparison Chart (PDF) to give you a detailed, a side-by-side comparison of 7 of the best online banks. It’s a free, one-page download that will really help you make a fair comparison.
Here’s a summary of 3 top online banks that are leading the pack with terrific benefits and innovative features:
Online Bank #1: USAA
USAA is a financial services company that serves the U.S. military and their immediate family members. It offers a wide range of insurance, investment, and banking products to qualified members.
Its banking division, the Federal Savings Bank, was established in 1983, and is FDIC insured. The headquarters, which is located in San Antonio, Texas, is the company’s only full-service banking lobby—so it’s primarily an online bank.
I have a USAA membership because my father-in-law was in the military. I originally became interested in the company because of their renowned mobile app, which was one of the first to give users the ability to make remote deposits by simply taking a photo of a paper check using their iPhone.
Now, photo deposit is a standard feature on banking apps, no matter what type of smartphone you have; USAA even offers it on the iPad. They’ve also teamed up with The UPS Store so you can deposit a check at select locations nationwide.
Making remote deposits is definitely my favorite part of mobile banking because it saves so much time. Snap a photo of the front of your check, the back, and click the deposit button, then, boom – your money is in the bank, and you can shred the paper check.
Another free standard feature that I use frequently is sending automatic payments. Let’s say I want to reimburse a friend or make a mortgage payment; I simply enter the amount on my USAA app, click a button, and an electronic payment or a paper check is sent for free to any person or company with a U.S. postal address.
USAA also reimburses ATM fees up to $15 per month, has no minimum balance requirement, no monthly service fees, free transfers, and works with Apple Pay.
The downside to USAA is that not everyone qualifies for membership because you may not have a personal or family connection to the military. Also, their interest rates on checking and savings are low when compared to some of the other options that I’ll cover.
See also: Smart Moves to Manage Your Money Online
Online Bank #2: Ally
Ally offers a variety of financial services, including car loans and online banking. In 2009 they launched Ally Bank, which is FDIC insured.
Where Ally really shines is with competitive interest rates. Right now, they offer up to 0.6% for checking deposits and up to 0.99% on savings. That’s 2 to 3 times more interest than most online checking accounts, and is similar to the top online savings rates.
Ally offers many free features, no matter what kind of smartphone you use, including photo deposits, automatic payments, and transfers. Although they don’t work with Apple Pay, they have no service fees, no minimum balance requirement, and reimburse all ATM fees nationwide. That’s a nice feature if you’re a cash withdrawal junkie.
Where Ally really shines is with competitive interest rates. Right now, they offer up to 0.6% for checking deposits and up to 0.99% on savings. That’s 2 to 3 times more interest than most online checking accounts, and is similar to the top online savings rates.
Online Bank #3: GoBank
GoBank launched in 2013 as a brand of Green Dot Bank, which is FDIC insured. It’s an award-winning checking account that was featured as “Best New App” in iTunes.
GoBank says they’re the perfect solution for customers who want to say goodbye to big banks and their big fees. They pride themselves on being completely fee free. That’s right, they don’t charge any penalty fees—not even a insufficient funds fee!
A 2013 Consumer Financial Protection Bureau reportopens PDF file showed that overdraft and insufficient funds fees cost the average consumer approximately $225 per year. So if you slipped up in the past and got burned by costly overdraft fees, GoBank would have your back if it happened again.
If you have qualifying total deposits that exceed $500 per month, you won’t pay a penny in fees. If your deposits are less than that, GoBank charges $8.95 in monthly service fees.
They offer free photo deposits, automatic payments, and transfers. And cash withdrawals are free within their large ATM network. A unique feature of GoBank is that you can make cash deposits into your account at the register of participating Walmart stores nationwide.
If you’ve been turned down for a checking account in the past, GoBank may be a terrific option for you. You can open your account by visiting GoBank.com, by downloading the GoBank app, or by getting a starter kit at Walmart stores (which includes a debit card) for $2.95.
8 Tips to Prevent Identity Theft When Banking Online
If you follow some common sense guidelines, it’s safer to bank online than to use traditional paper-based systems. Just remember these 8 tips to create a more secure online environment and prevent identity theft:
- Use a strong account password that contains letters, numbers, and symbols.
- Never share your account username and password with anyone.
- Log out of your account after each session.
- Don’t access your account from an unsecured wireless connection.
- Sign up for account alerts so you’re aware of any suspicious activity.
- Make sure that sites where you provide financial information are secure and have a URL that begins with “https.”
- Access your account from your own computer or smartphone and never from Internet kiosks, which are not as secure as your own devices.
- Turn on all wireless networking security features, such as WPA encryption, and change the default password and SSID on your router.
Using the best bank for your situation is key for keeping your personal finances organized, and saving time and money. For a complete review of 7 of the best online banks, download the free Online Bank Comparison Chart (PDF) and make the switch to a better bank.
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About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.
