March 22, 2017

Top 5 Best Online Checking Accounts

The best online checking accounts are free, have minimum fees, and even offer interest. Find the best high interest online checking accounts to consider.

Banking should be free. Period.

These days, online checking accounts offer much better benefits than those from traditional banks. No one likes paying a monthly fee to use a checking account. And yet, so many traditional banks refuse to get rid of them.

Not only are online banking accounts free to use, some of them even pay interest! The interest isn't high at all, but it's at least more compared to traditional banks.

So if you're thinking of making a change, here are the top 5 online free checking accounts.

What to Look for in a Checking Account

Before we get into the recommendations, there are a few things to consider when deciding on an online checking account:

  1. Security. Is it safe to store your money with something completely virtual? No worries - the ones on this list are all FDIC insured, which means that if the bank defaults, the government will pay you back everything you had in the account (up to $250,000).

  2. Fees. You don't want to have to pay a monthly service fee for using it. All the checking accounts on this list are free to use. And if there are other common fees, we list it out for you.

  3. Minimum balance requirement. See what the requirement is and if you're comfortable with it. The lower the minimum, the more flexibility you have in using your money. What if you need to drain the account for an emergency? You want to be able to do so without paying a fee. Our top 5 recommendations all have no account minimum.

  4. Website & Mobile App. You want to be able to access your account whenever and wherever you want. And since this is an online bank, there are no physical locations. So you want to be able to easily deposit checks and transfer money.

Best Free Online Checking Accounts

Here are the top 5 online checking accounts with good yields.

Note: Information including interest rates, benefits and fees was obtained on March 9, 2017 from published websites and are believed to be accurate, but not guaranteed.

Memory Bank: Best high-yield checking

1.50% APY, $50 to open:
At 1.50% APY, Memory Bank gives the highest introductory rate to new users for 12 months. After that, the on-going rate drops to 1.0%, which is still higher than most banks. However, to get these rates, you must have: 1 direct deposit a month, 5 debit card transactions (ATMs don't count), and receive online statements. This isn't very hard to do. If you don't meet these activity requirements, you'll only earn 0.05% interest.

You must have $50 to open the account, but there is no monthly service fee. You also get free debit card, bill pay, free person-to-person payments with Popmoney, and ATM use (though you may be charged a fee by the out-of-network owner). However, be careful of check or ATM overdrafts as the fee is quite high.

FNBO Direct: Best checking with no fees

0.65% APY, $1 to open:
FNBO doesn't offer the highest APY, but it's still respectable and we like all the benefits it offers.

There is no service fee and no minimum balance requirement. You just need $1 to open the account. You get free online banking, free debit card, free bill pay, and free person-to-person payments with Popmoney. You also get free incoming wires and free stop payments. And one of the nicest perks is one Overdraft Forgiveness every 12 months (if your account is in good standing).

There is also free access to over 2 million FNBO ATMs worldwide, so you can get free cash withdrawals almost wherever you are. It also doesn't charge a fee on out-of-network ATMs, though the owner might.

Bank of Internet USA: Best checking with cash back

Up to 1.25% APY, $0 account minimum:
You can get up to 1.25% interest, broken down as follows:

  • 0.4166% when you receive monthly direct deposits totaling $1,000 or more
  • 0.4166% when you use the Rewards Checking Visa debit card more than 10x a month
  • 0.4166% when you use the Rewards Checking Visa debit card more than 15x a month

Another special feature about their Rewards Checking Visa debit card is that you get cash back. You activate cash back offers at stores you like to shop at. Then when you pay with your card at those stores, you'll automatically receive cash back deposits at the end of the next month.

The Bank of Internet USA has no fees, no account minimums, no overdraft fee, and unlimited reimbursements for U.S. ATMs.

Charles Schwab: Best checking for travelers

0.10% APY, $0 account minimum:
The interest is practically nothing, but this is the best checking account if you travel a lot. Even if you don't use this as your primary checking, you probably want to open one anyway.

Charles Schwab charges no foreign transaction fees on debit card purchases made outside of the U.S. But the best part is that it gives unlimited rebates on ALL ATM fees worldwide. So you can withdraw money abroad from any ATM and you'll get all the fees back (trust me, those add up very fast!). So even if you just use it for travel, it's well worth it.

Besides those major benefits, Charles Schwab has no service fees, no account minimum, free bill pay, free standard checks and debit card, and mobile check deposit.

Capital One 360: Best checking for young adults

0.20% APY, $0 account minimum:
The interest isn't so high (you can get 0.90% if your balance is over $100k), but we like Capital One 360 for their easy, no-fuss banking and probably the best mobile app. There's no service charge, no minimum balance requirement to open or maintain the account, and no ATM fees as long as you stay within the network. Bill pay and Person2Person payments are also free.

One great thing about Capital One 360 is that there is no overdraft fee. Most banks charge a $35+ overdraft fee, but Capital One offers an Overdraft Line of Credit, which only charges interest on the amount you overdraw (or borrow).

You can also add a joint account holder to your account, which is great for young adults (or those still in school). This is an easy way for a parent to transfer money if needed. All you have to do is link up an external account.

Other Online Checking Accounts to Consider

Here are a few more to consider if you need more options:

  • Everbank (1.11% APY): Everbank is offering 1.11% introductory APY for the first year. And then it drops to an ongoing APY of 0.25% if you have less than $10k (the highest tier is 0.61% if you have over $100k). Everbank promises that the yield on your account will stay in the top 5% of similar accounts offered in the U.S. banking market.

    However, you need $5,000 to open the account, but there is no account minimum or service fee after that. If you do keep your balance at $5,000, you get unlimited ATM reimbursements from any ATM.

  • Ally Bank (0.10% APY): Ally Bank has a strong reputation (as they were previously General Motors Acceptance Corp.) for its user-friendliness and great customer service. A real human is available to help 24/7 if you run into issues.

    The interest is 0.10% if you have a balance under $15,000 (0.60% for balances over $15,000). There is no service fee and no account minimum (but you must fund the account within 30 days of opening). You get free bill pay, debit card, checks, e-deposits, and person-to-person payments with Popmoney. All Ally Bank's ATM's are free to use, and you'll also get reimbursed up to $10 every month for ATM charges outside of the network.

  • Fidelity: Fidelity's Cash Management Account only earns a variable interest rate (currently just 0.07%), but it's still a solid choice. It's great if you have a larger balance, because it's FDIC-insured for up to $1,250,000 (5x the normal amount).

    There's no account minimum and no service fee, free checks, and free mobile deposits. You also get unlimited ATM reimbursements within the U.S. The other awesome thing is that you can connect it to your Fidelity brokerage account.

Other Accounts to Compare

Purpose of a Checking Account

A checking account is a safe and convenient place from which you can freely access your money. You can get direct deposits from your employer, pay bills, use debit card for transactions, and make ATM withdrawals if you need cash.

But a checking account shouldn't be used to store your money long-term. Most traditional banks offer no interest at all on checking accounts. These online banks are able to offer higher interest because they have less overhead. But don't expect to build wealth out of it.

And if you do somehow fall victim to debit card fraud, leaving all your money in a checking account makes it very easy for the fraudster to steal everything you have. So ideally, only leave what you need for day-to-day expenses.

If you do have cash that you're trying to put aside for goals (such as buying a house), keep it in a savings account. You'll get more interest. And plus, you won't accidentally spend it. Here is our list of top 5 online savings accounts.

Is an Online Checking Account Right for You?

Before you open up an online banking account, consider the following:

  • Are you ready to ditch your bank? Is your current bank charging you a monthly service fee if you don't maintain a certain balance? Are you getting zero interest on your checking? If so, you may want to consider moving over to an online bank.

  • Are you comfortable with web banking? Completely web-based banking means that there's no physical location where you can just stroll in and ask questions, make a deposit, withdraw money, etc. What if you're trying to make a check deposit by phone, and somehow it doesn't work? It may take more hassle to straighten it out. You also lose having a relationship with your local bank.

  • Do you need any other financial services? Online banks usually only offer banking services (checking, savings, CD). Unlike traditional banks, they don't have other features like insurance, mortgage, or brokerage services. Only very few do, like Charles Schwab, where you get a linked Schwab One brokerage account.

Bottom Line

Online banks these days have all the convenience - and maybe even more - of traditional banks. They have great mobile apps that allow you to do banking wherever you are. And the best part is the very low fees. The interest is just a bonus, really. Consider one of these online checking accounts if you're not getting much benefit out of your current one. Online checking gives back more and takes less.

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