Top 4 Reasons to Use an Online Bank

Making the Case for Using a Bank Online

Close up of senior woman buying online from home
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Online banks let you carry out transactions over the internet through your computer or a mobile device rather than in person. If you've never used an online bank, you may be wondering why so many people use them and how they differ from traditional brick-and-mortar banks.

There are plenty of similarities, but a few key differences make online banks attractive to web-savvy consumers. Identifying the main reasons to use an online bank can help you choose the right banking solution for your needs.

Free Checking

One of the top reasons to use an online bank is the potential for free checking, which is a checking account without the monthly maintenance fees that are usually imposed for having an account. 

Some brick-and-mortar banks and credit unions offer free checking, but they're typically smaller institutions. In general, it's hard to find this deal at traditional banks without strings attached. In most cases, you have to qualify for free checking at brick-and-mortar institutions by having your paycheck deposited into your account or keeping a large account balance.

That’s not the case at most online banks, which offer free checking accounts to anyone—often with no minimum opening deposit no minimum balance requirement. Additionally, you may be able to earn interest on cash in your checking account if you use an online bank. The interest rate is generally not as high as the rate on an online savings account, but it’s much higher than you can usually get at a traditional bank.

Higher Interest Rates

Online banks are known for paying higher annualized interest rates (APY) on savings accounts and certificates of deposit (CDs). The reason is that online banks don’t have to pay the overhead costs associated with building and maintaining a physical branch, so they can pay a little more to customers.

If you’re looking for the absolute highest interest rate available, an online bank is probably where you’ll fare best. Just don’t be disappointed if you find that another bank beats your rate. This is the reason some people open and use a number of online bank accounts and transfer money between accounts as rates change. This strategy can be rewarding, but it's important to pay attention to transfer periods during which your money is not in any account earning interest.


In general, interest doesn't start to accrue on a deposit in an interest-bearing account until the business day when the bank received the credit for the deposit.

Latest Technology

If you know your way around a computer, yet another reason to use online banks is that they generally lead the way in banking technology. Granted, some small banks and credit unions offer certain tech-forward features before even the largest online banks, but online banks generally offer new features before stodgier brick-and-mortar banks do. One such feature, mobile check deposit, is a good way to fund online bank accounts without having to mail in deposits (which means your money starts earning interest more quickly).

Online banks also allow you to get features you might not otherwise have access to. If your bank still doesn’t offer free online bill pay or person-to-person payments, there’s a good chance you can find an online bank that offers them. You might also enjoy a larger ATM network—depending on where you live—making it easier to make withdrawals for free.

No Trips to a Branch

Ultimately, online bank accounts save you the time (and gas money) of having to visit a branch during limited business hours. If you need help, most banks offer remote customer service—via chat, email, or toll-free phone lines. And, as the competition among banks increases, so does the quality and availability of customer service.

Also, people living in small communities may appreciate the anonymity that comes with an online bank—nobody in town will know about your financial transactions since they won't see you carrying them out.

Should You Use an Online or Traditional Bank?

The above reasons for using online banks make the case that they're a convenient option for web-savvy customers seeking affordable, high-interest accounts with advanced features. Overall, they're a viable addition to the banking world. But they're not perfect or for everyone.

If you prefer to transact with or get account guidance from agents in person, you may want to stick to a brick-and-mortar bank. The same is true if it brings you peace of mind knowing that you can physically access the bank that holds your deposits.

If you choose to bank at an online institution, you also need to comfort with using computers and a basic understanding of internet security. Online banking is generally regarded as a safe way to make transactions if you choose a legitimate bank that offers insurance on your deposits from the Federal Deposit Insurance Corporation (FDIC). But you'll need to keep your system current to avoid phishing scams, which you can fall victim to if a copycat website tricks you into providing your personal information or bank account details.

As with anything related to technology, from time to time, you may experience technical glitches. That said, for most people, the benefits of using an online bank outweigh the inconveniences.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
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  2. Ally. "The Ally Interest Checking Account."

  3. Navy Federal Credit Union. "Free Easy Checking."

  4. U.S. Bank. "Compare Checking Accounts."

  5. Fifth Third Bank. "Free Checking Account."

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  10. Ally. "ATMs & Withdrawals FAQs."

  11. Ally. "Contact."

  12. Federal Deposit Insurance Corporation. "Tips for Safe Banking Over the Internet," Page 1.

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