Online only banks - Looking for the best one?

Wise
01.02.20
6 minute read

Online only banks are increasingly popular with customers looking for low fees, flexible accounts, and smart ways to manage their money on the go.

Here’s what we’ll cover:

Online only banks - a list

If you want to learn more about online banks, you’re in the right place.

Let’s review some of the best online banks and alternative account services out there.

Here are the providers we’ll look at:

Ally Bank

With an impressive 100 year history in financial services, Ally started out in auto financing, before adding extra products and going digital. Bank, invest, take a loan or set up a mortgage.

Ally Bank offers online savings and checking accounts, CDs, auto financing and investment services. You won’t be able to use your Ally account to send money to friends and family based overseas, as there are no international wire services available.

Cost type Ally Bank fees (Interest Checking Account)¹ ² ³
Opening and maintaining an account No charge
ATM use Free if you use Allpoint ATMs in the US Up to $10/month reimbursed to cover other ATM fees
International wire fee International wire transfers are not available
Foreign transaction fee Up to 1% fee for transactions in a foreign currency

Wise Mastercard with balances

Wise balances

Wise is not a bank. But the Wise multi-currency account has many similar features to the other accounts highlighted here. It’s also worth a mention as a supplement account to do all your international payments with. The linked free debit Mastercard has no foreign transaction fee and lets you spend with low fees online and while travelling.


With the borderless account you can hold dozens of different currencies all in one place, and switch between them using the mid-market rate whenever you need to. Top up your account in dollars and convert to any other currency you might need for a low fee - avoiding foreign transaction fees.

Business customers can get a borderless account for business, which can help them save time as well as money. Both business and personal users will get local account details for the US, UK, Australia, New Zealand and the euro area, to receive payments there for free.

Cost type Wise fees (Borderless Account)⁴
Opening and maintaining an account No charge
ATM use Free to withdraw up to $250 every 30 days. 2% fee after that.
International wire fee Low fees for currency conversion, based on the currency - typically 0.35% - 3% plus a small flat fee.*
Foreign transaction fee There is no charge to spend a currency you hold in your account

Tip: When comparing provider fees, be sure to compare how much foreign currency you end up getting for the same amount of dollars from each. Providers sometimes claim low or zero fees, but actually cost you more due to the added markup on the exchange rate.

Get free access to 40+ currencies and bank details to use as a local for US, Australia, New Zealand, Europe and UK with Wise

Simple

Deposit, save and spend with a Simple account. All services are FDIC insured, and Simple partners with European bank BBVA.

Simple provides online banking with lots of tools to help you save. You can round up spending amounts and add the extra to your virtual change jar, and mark spending so you always know where your money is going. You can’t send wire transfers with this account.

Cost type Simple fees ⁵ ⁶
Opening and maintaining an account No charge
ATM use No charge
International wire fee It is not possible to send outgoing wire transfers, locally or internationally
Foreign transaction fee Visa add a 1% charge for international card use

Axos

Formerly the Bank of Internet - Axos is one of the first digital only banks ever set up. Get checking and savings accounts as a personal or business customer.

Axos has a range of products including 5 different checking accounts for different customer types, savings accounts, CDs and investment options. Many regular transactions like ATM usage are fee free, but there are relatively high charges for transfers and for other specialist services.

Cost type Axos fees (Essential checking account)⁷ ⁸
Opening and maintaining an account No charge
ATM use No charge
International wire fee $45
Foreign transaction fee Visa add a 1% charge for international card use

Chime

Chime was set up in 2013 and has some 6.5 million accounts operating today, making it one of the fastest growing banks in the US.

Spend and save, with both checking and savings accounts. Chime is also known for enabling early paycheck payments - you could get your money 2 days earlier than your colleagues if you bank with Chime. Unfortunately, Chime isn’t set up to work with international payments - they recommend using Wise if you need to send or receive money from overseas.

Cost type Chime fees ⁹ ¹⁰ ¹¹
Opening and maintaining an account No charge
ATM use Free to use MoneyPass ATMs, $2.50 for other ATMs
International wire fee Transfers with Chime use the ‘Pay Friends’ system - which means you need to sign up for a Chime account to access your payment. This effectively means you can’t send money internationally as Chime accounts are only available in the US.[11] Chime recommends using Wise as an alternative way to send international payments
Foreign transaction fee Foreign currency purchases are converted into dollars using the Visa exchange rate

Online only savings accounts

You can also open savings accounts with many online banks - here are a few to consider.

Account APY (Annual percentage yield) Minimum balance to earn APY
Ally - Online savings ¹² 1.6% (Rate is variable and may change after the account is opened) $0.01
Simple - High yield account ¹³ 1.75% - 1.9% $0.01
Axos - High yield savings account ¹⁴ 1.30% $0.01 - there’s also a $250 minimum balance to open an account

*APY and other information correct at 1st January 2020


Why do people choose an online only bank?

Not sure if it’s for you? Here are some points to consider if you’re thinking about moving to online only banking.

Convenience

Online only banks don’t have physical branches. Which means no standing in line or making appointments to visit and discuss your finances. Online banks tend to have convenient apps, and often offer top quality service via email, chat and phone.

Costs

Without the overheads of brick and mortar branches, and with investment in smart technology, digital banks typically have lower fees for standard services. You’ll usually also find low interest rates for loans - but do watch out as the costs for less common services, like international transfers, can be high. If you want to send money overseas, choose a specialist like Wise.

CTA balances

Product choice

Online banks have only become popular relatively recently, but offer an innovative and broad range of products which have driven customer interest. Many banks have checking, saving and investment accounts, as well as other products like loans and mortgages.

Security

Online banks are often FDIC insured and have the same digital security in place that regular banks would. That means your money should be safe.


Online only banks - the possible downsides

Of course, digital banks aren’t for everyone. If you prefer to talk face to face with a member of your bank team, you’ll not enjoy the digital customer service experience. And because cash deposits aren’t usually possible, online banks might not work if you’re typically paid in cash.


It’s also worth noting that some accounts don’t offer all of the features you might expect from a brick and mortar bank - such as international payments. A good choice in this case might be to have a digital account to supplement your traditional bank account, so you can use the one which has the cheapest fees for the different services you need.


How do online only banks work?

Digital banks are a relatively new phenomenon, but they’re changing the way people around the world manage their money.

What is the difference between online banking and online banks?

Online banks don’t have a physical branch presence. They are run online only - which often cuts the costs and allows them to offer lower fees. A traditional bank is different because it has a branch network, even if you often use the online banking option it provides.


How can I open an account with an online bank?

Online banks have their own processes for opening accounts. You’ll usually need to provide your personal details, including a proof of ID and address, and you might need to add an opening deposit to get started. Usually you’ll be able to use a wire transfer to add funds to your account, and can then spend using your linked debit card.


Can I use an ATM with an online bank account?

Online accounts usually come with linked debit cards which can be used in ATMs. Check the account terms - some accounts offer free withdrawals from selected ATM networks, or reimburse ATM charges.


How secure are online banks?

Online banks take security seriously, and usually use the same systems as traditional banks to keep your account safe.

When you’re choosing an online bank, it’s worth selecting one which is FDIC regulated to make sure your money is safe in case the institution were to fail. You’ll also need to take extra care to make sure you account details, log in information and passwords are all kept secret - just like with any other online banking service.


Digital banking - and online only banks - offer great options for customers looking for convenient, low cost ways to manage their money. All accounts are different, with varying features and fees. When you’re doing your research, be sure to check out alternative account types like the Wise borderless account, to help you find the right one for your needs.


Sources:

  1. Ally
  2. Ally - Product guide
  3. Ally - FAQ - International wire
  4. Transferwise - Pricing
  5. Simple - Wire transfers
  6. Simple - Fee schedule
  7. Axos
  8. Axos - Personal Deposit Account Agreement and Schedule of Fees
  9. Chime - What are the fees
  10. Chime - Deposit Account Agreement
  11. Chime - How do I use Pay Friends to send money
  12. Ally - Online Savings Account
  13. Simple - High Yield Account
  14. Axos - High-yield savings account

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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