Online only banks often offer savings accounts that are, for the most part, much better than their brick and mortar peers.

Since online banks don’t have as much overhead, such as rent for local branches, they can take the savings to develop better products and offer higher interest rates on their savings accounts.

Whether you’re looking to open your first savings account or you want to switch to a better savings account, you should definitely consider online savings accounts. Here’s why.

Online banks offer better interest rates

Interest rates for online savings accounts are often multiple times higher than their brick and mortar counterparts. When you’re just getting started saving, this may not seem like a big deal. However, the differences in interest rates matter even more as your savings account grows.

For instance, here’s a comparison of how much money you could be leaving on the table in terms of interest if you use a large national bank’s savings account versus an online bank’s savings account.

Bank balance National Bank (0.03% interest) Online bank (1.75% interest) Lost interest in one year
$1,000 $0.30 $17.50 $17.20
$10,000 $3.00 $175.00 $172.00
$25,000 $7.50 $437.50 $430.00

Online banks have fewer fees

Brick and mortar banks have some fees

While savings accounts don’t usually have a ton of fees, sometimes brick and mortar banks still try to make some money from savings accounts.

Typically, you’ll see some brick and mortar banks charge a monthly maintenance fee that’s a few dollars a month and can be waived by meeting certain requirements such as maintaining a minimum balance or opening a checking account with the institution.

Brick and mortar and online banks have withdrawal limits

Regardless of where you open your savings account, federal regulations limit savings accounts to six withdrawals per month with the exception of in person withdrawals (which aren’t possible with online only banks), ATM withdrawals, and mail withdrawals.

If you exceed the six withdrawal limit, your bank may charge you a fee, close your account or convert your account to a checking account. Sadly, many online banks charge a fee for withdrawals in excess of the federal limit.

Brick and mortar banks have ATM fees

Other fees to look out for in both online and brick and mortar banks include ATM fees, paper statement copy fees, insufficient funds fees, wire transfer fees, and deposited item returned fees.

Compare these fees between brick and mortar banks and their online competitors if you anticipate paying these fees.

Online banks make it easy to transfer money

Many people worry accessing their money will be difficult with online only banks, but it usually isn’t a problem. When you set up most online savings accounts, you do so by linking an external bank account and transferring money from the external bank account to your new savings account.

Most banks keep that linked bank account in case you want to transfer more money into your savings account, such as after you get your paychecks. You could also request a wire transfer or a bank check but these services may come with a fee depending on your bank.

Since online only banks don’t have bank branches people can use, they focus their customer service efforts on their technology and banking apps. While each online bank is different, the technology and apps of online banks usually beat out local banks that don’t have much of a technological presence.

An app will allow you to take care of your banking needs all in one place

You should expect an app that allows you to take care of all of your mobile banking needs including the ability transfer money between accounts and make mobile check deposits for free.

Online banks offer longer customer service hours

In addition to better technology and apps, online banks tend to offer longer customer service hours than their traditional brick and mortar counterparts. Some banks even offer 24/7 customer support by telephone or online chat.

Our favorite online savings accounts

If you’re looking for an online savings account, we’ve got you covered. Here are three of our favorite online savings accounts.

Discover Online Savings

Currently, the Discover Online Savings Account offers APY with no minimum balance requirements. While other banks may require you to hold $25,000 to get the best interest rates, Discover Online Savings Account doesn’t.

Other key features of Discover’s Online Savings Accounts include:

  • Daily compounded interest applied monthly
  • No minimum balance requirement
  • No monthly maintenance fees
  • 24/7 customer service
  • FDIC insured

See bank details/open an account or read our full Discover Online Savings Account review.

CIT Savings Builder

CIT is offering one of the highest APY rates on the market today – . In order to get that rate, you need to either:

  • Have more than $25,000 in your account
  • Commit to depositing $100 or more into your account each month

That’s where the “builder” in CIT Savings Builder kicks in. For those of us who might struggle to put $25,000 in an account, depositing $100 a month might be more realistic. It will encourage you to save, and you’ll be rewarded for it.

See bank details/apply


Choosing the right online savings account will depend on your goals. If you plan on moving money in and out of your account often, you may want to choose a bank that makes initiating transfers easy.

However, if you’re just looking for a place to park your emergency fund, you’ll probably be best off by choosing a bank with no fees and the highest APY you can find.

Read more

  • A Penny A Day: 5 Accounts That Help You Save Automatically
  • The Best Place For Short-Term Savings