June 4, 2014

Study: Best Online Checking Account - Ally vs Capital One 360 vs EverBank


Is convenience all you want in a checking account? Not really. You also want the kind of account that won't bog you down with annoying fees. But that's what brick-and-mortar banks fail to deliver when it comes to even the simplest of checking accounts. To avoid fee surprises, you're better off getting an account with an online bank.

These banks are extremely consumer-friendly. A few of them will even pay you interest – something that was once so hard to find with traditional checking accounts.

Here’s our list of the best online checking accounts currently being offered. Our search criteria evaluated the following:

  • FDIC Insurance: You should only trust your money to a bank insured by the Federal Deposit Insurance Corporation. This means up to $250,000 of your money is insured against a bank failure. All of the banks on our list are FDIC-insured.

  • Minimum Balances: The lower the minimum, the more flexibility you have in avoiding fees and doing with your money what you will. If you have to drain the account to pay off a debt, for example, you won’t have to worry about leaving a certain amount of cash behind. And if you’re more of a paycheck-to-paycheck person, you don’t want to feel rejected when you apply for an account and get turned away when the bank insists you deposit some crazy-high amount.

  • Fees: We read the fine print to make sense of these accounts for you. You don’t want to be surprised by hidden fees.

  • Website & Mobile App: To get the full benefit of banking with an online bank, you should be able to partake in the whole experience. You want access whenever you want it and you want it easy to understand, whether you’re looking at your account on your desktop computer or looking at your balance while waiting for your latte at the coffee shop.

Our List: Best Online Checking Account

1. Ally Bank

  • FDIC Insurance: Yes
  • Minimum Balance: None
  • Fees: No monthly fees, no ATM fees
  • Website & Mobile App: Easy peasy

If I told you Ally Bank is not really a new girl on the banking block, would that make you feel more comfortable around her? Ally is the new name of the General Motors Acceptance Corp. (GMAC), which rebranded in 2009. So even though it is an online bank, technically Ally has been doing business since 1919.

Why We Like Ally
Ally offers 24-hour live customer service. So if you’ve ever tried to deposit a check using your smartphone app and ran into an issue, say during last call at 2 a.m., having an instant connection to a human can be a lifesaver. Ally’s smartphone app is easy-to-use, as is the website, and it offers access to Popmoney, allowing you to send money to anyone else with a U.S. bank account using their email, mobile phone number or bank account info. Ally does not charge for using Popmoney, while more traditional banks do.

Even more important is the fact that there are no monthly fees to have an account, no minimum balance, and no ATM fees. In fact, Ally will reimburse any ATM fees you incur on a monthly basis. Frankly, that’s awesome when you consider the last time your anxiety peaked over the $5.50 fee to withdraw $20 at that hotel at the Jersey Shore.

Ally pays interest on checking accounts and doesn’t require a minimum balance to get it. The interest paid depends on much you carry in your account on a regular basis. Those who carry at least $15,000 every day get the higher rate. Either way, you’ll get more than your typical brick-and-mortar checking account that offers zilch in interest.

With so many perks and barely any fees, Ally tops our list for offering the best online checking account. Perhaps because of its legacy factor, Ally understands the consumer market better than its competition.

Its Drawbacks
A significant interest rate doesn’t kick in with daily account balances under $15,000. (See Ally.com for the most current rate.)

Who Ally Is Best For
Consumers who value a true, no-fee checking account scenario over the need for an interest rate.

2. Capital One

  • FDIC Insurance: Yes
  • Minimum Balance: None
  • Fees: No monthly fees, potential ATM fees if you go out of network
  • Website & Mobile App: Straightforward

Capital One is famous for its “What’s In Your Wallet” campaign, but what this bank really excels at is online checking at little to no cost to consumers.

Why We Like Capital One 360
The Capital One 360 Checking has no overdraft charges and no monthly fees. It will give you one checkbook of 50 checks for free, a tiny but nifty cost-saving measure for issues that require old-school payment methods (such as the deposit on an apartment). Furthermore you can earn a little bit of interest on balances as low as $1, and that interest rate increases for larger balances.

There are no ATM fees as long as you stay in Capital One’s network; transactions are free at 38,000 AllPoint ATMs and 2,000 Capital One ATMs. While Capital One 360 won’t charge you to go out of its ATM network, that ATM owner might.

The website is easy to navigate and not overly cluttered. You can also download your transactions into personal finance software like Quicken or perform a CSV download pretty easily. Its mobile app is also user-friendly. You can send money via email through its Person2Person payment system, as long as you have the recipient’s name, email address, and last four digits of his or her bank account number. There is no fee for using this system.

Its Drawbacks
A Capital One 360 account is indeed online only. You may think you can walk into one of the newer Capital One bank branches that have started to pop up for assistance, but the staff there will be unable to help with your online account. It turns out that’s okay because the online arm has customer service that is just a call away.

Who Capital One 360 Is Best For
Customers who value a no-fee scenario and are willing to map out their ATM network to ensure that happens.

3. EverBank

  • FDIC Insurance: Yes
  • Minimum Balance: $1,500
  • Fees: No monthly fee, ATM fees waived for accounts of $5,000 or more
  • Website & Mobile App: Excellent

The national average for checking account interest rates is about 0.06%. EverBank’s Yield Pledge Checking First-Year APY is 0.85% (as of June 2014 for balances of $0-$9,999), by far one of the most generous around. To attain this top-tier rate, you need a higher balance but the $1,500 minimum deposit required to open an account isn’t insurmountable to most households.

Why We Like EverBank
EverBank, we think, has the clearest and cleanest website of any bank on our list. It’s extremely easy to navigate, and a slew of PDFs are available for download. Its mobile app reflects a similar experience.

For an interest-bearing account, especially at such a high rate compared to its competition, the bank is competitive on fees. There is no monthly account fee, no online bill pay fee, and you can opt out of overdraft protection. The bank will reimburse you for ATM fees if you maintain an average daily balance of $5,000.

Its Drawbacks
While the bank offers a good deal to consumers, the two minimum balances requirements are what contribute to its rank further down on our list.

Who EverBank Is Best For
Consumers who are cognizant of their daily balances or are unlikely to see an account balance of less than $5,000 each month.

Honorable Mention: First Internet Bank

  • FDIC Insurance: Yes
  • Minimum Balance: $25
  • Fees: Yes
  • Website & Mobile App: Dated

As it name implies, First Internet Bank was one of the first online-only FDIC institutions, opening to the public, way back, in 1999. After its initial splash, the bank has maintained a reputable name for itself, but know that it puts a lot of downward pressure on its customers through its fees for online checking.

Why We Like First Internet Bank
At First Internet Bank, you can open an interest checking account with a $100 deposit or open a free checking account with a $25 deposit. Either type of checking account comes with a free first order of paper checks.

Its Drawback
If you’re going to carry a small balance, you’ll need to do some math. With an interest rate of roughly 0.55% (as of May 2014), it will generate just $2.75 on $500, but you also have to pay a $10 monthly maintenance fee on this type of account.

While it seems logical to stick with the free checking to avoid the monthly fee, there are other ways it pulls money out of your wallet. First Internet charges $4.95 per month for the option to use its online bill payment, and the bank does not rebate ATM surcharges with this type of account. Its interest checking option rebates your ATM fees, but only up to $10 per month. Yes, either type of checking account comes with a free first order of paper checks, but this fee structure wipes out any gain.

The bank ranked lowest on our list due to its fees and its website. It appears the company aims to splash everything it possibly can on its landing pages. It still touts text message banking and its mobile site for mobile banking in its demo, making it hard to find information about its smartphone banking app.

Who First Internet Bank Is Best For
The consumer who doesn’t do much online bill pay or who doesn’t mind paying fees for online banking.


Conclusion

Participation and satisfaction with online banking has risen significantly in recent years. A 2013 survey by ForeSee, which measures industry analytics, found a 12% gain in consumer satisfaction with online banking.

Spend the time to find an online checking account so your wallet is not picked over. Looking at our list, there are some enticing online checking account offers out there.

But you don’t have to end your quest for a better banking product with just an online checking account. Think about adding a savings account.

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