Online banking: Choices for higher interest rates and increased security

In its July 2009 issue, Consumer Reports Money Adviser published a brief overview of the best online banking options according to their research. “Online banking, despite a rocky start, is becoming the rule rather than the exception,” the article says, noting that online banking can net savers better interest rates and increased security.

I'd love to be able to point you to an online version of this article, but none exists. And I'm not about to reproduce large chunks of the text here. (Consumer Reports doesn't like that.) But I can highlight their main points about online banking, as well as list the results of my own research into online banks.

Some of the article's main points:

  • Traditional banks that have moved into online banking (such as Bank of America and Wells Fargo) generally offer lower rates and impose higher fees than established online banks like Capital One 360 and HSBC Direct.
  • If you're worried about bank failures, remember that the FDIC currently insures deposits of up to $250,000. (This limit has been extended through the end of 2013.) You can research the financial safety of online banks (and traditional institutions) using BauerFinancial's bank safety ratings.
  • The biggest thing that holds people back from online banking is concern over security. Via Twitter yesterday, @thenonconsumer told me, “My husband is very skeptical about using an online bank like ING Direct (now Capital One 360) for savings.” He's not alone. But according to Consumer Reports Money Adviser, online banking can be safer than traditional methods because there's less of a paper trail, and your transactions are digitally encrypted.

Here's a table of current interest rates, updated weekly. Below that is a list of online banking options I originally compiled in four hours of research but these have become out of date and I unfortunately don't have the ability to update them regularly, so the table will let you see some of the most current rates. You can also see a full list of over 200 banks' savings rates and an almost-as-long list of certificate of deposit returns by following the links.

I haven't tried to be comprehensive here (a comprehensive list would be huge), but have based my research on my own interests and the requests of my Twitter followers. I've made no attempt to rank these banks. They are listed in alphabetical order. Rates are annual percentage yields (APY). All accounts are FDIC insured.

Online Savings12-month CDMoney marketBill-pay
1.45%1.05%0.85%
Notes: No fees, no minimums. Money-market account appears to act as a checking account and has no ATM fee. Ally Bank is the renamed GMAC Bank. Rates as of December 11, 2016.
Savings12-month CDCheckingBill-pay
0.75%1.25%0.75%Free
Notes: No fees. There is a $500 minimum balance for certificate of deposit accounts. You can open the 360 Checking account with no minimum balance, there are no monthly service fees and the APY is for balances from $50,000 up to $100,000. Capital One does not charge for ATM withdrawals or balance inquiries, but the owner of the ATM may. Rates collected within: 10025 (NY). Rates as of December 11, 2016.
Savings12-month CDCheckingBill-pay
0.01%0.15%0.01%Free
Notes: $500 minimum deposit for certificate of deposit and no minimum deposit for checking. Savings Plus, below $10,000 tier. ATM access for checking. Citibank rates may vary by state, rate collected within NY. Rates as of December 11, 2016.
Savings12-month CDCheckingBill-pay
0.55%
Notes: No fees. $1000 minimum. No ATM. DollarSavingsDirect is an online banking division of Emigrant Bank. Rates as of December 11, 2016.
Savings16-month CDCheckingBill-pay
0.50%
Notes: No fees, no minimums for savings account. $1000 minimum for certificate of deposit. No ATM. Sibling to Dollar Savings Direct. Rates as of December 11, 2016.
Savings12-month CDCheckingBill-pay
0.01% – 0.05%Free
Notes: Checking Rates as of December 11, 2016.
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Janette
Janette
11 years ago

My hesitation for using HSBC and ING is that they are foreign banks. Are they fully insured by FDIC since we are US citizens? I watched HSBC fall apart when living overseas in the early 90’s. That, alone, has me hesitating big time.

Dylan
Dylan
11 years ago

There is a pretty good and current list of the “Best Nationally Available High APY Liquid Accounts” maintained at the Fat Wallet Forums, http://www.fatwallet.com/forums/finance/783099

It’s not comprehensive but it’s the closest I’ve found.

Also, check community banks, some are very competitive and have direct online offerings as well. The decision makers at these smaller banks often set savings rates specifically to compete with larger direct online banks.

@Janette, they are foreign based companies but they (for the U.S. based deposit programs) are not foreign banks. They are FDIC-insured, federally chartered savings banks.

Douglas Jenkins
Douglas Jenkins
11 years ago

A comprehensive list of online savings options can be found at SavingAdvice, http://www.savingadvice.com/forums/investing-banking/19240-online-savings-accounts-current-rates.html

Michael
Michael
11 years ago

So, i’ve been using online banking at my various banks for over 20 years now. I certainly don’t need to be convinced about that. However, i always bank locally and then use their online services. The ‘sub-account’ features at ING sound pretty interesting (Thanks to Ramit’s proselytizing there!), but how do you end up actually posting your money? Automatic deposit on your paycheck? That’s only one source of income, and it seems that the hipper banks get to online stuff, the more they decide to charge for easy stuff like EFT. Do you mail your checks to ING for deposit?… Read more »

ben
ben
11 years ago

I have an account with bank-of-america that I opened online two years ago. When visiting the local branch to do some face-to-face business, I was treated like I did not belong to bank-of-america, but an outside institution. I kept hearing, oh, you opened that account on-line…you won’t be able to do that here at this office. This happened at two locations.
Wouldn’t you think that all the account holders, no matter where they opened the accounts would be treated the same?

Aniruddha
Aniruddha
11 years ago

This post seems to be clearing some clouds for anyone surveying high yield savings accounts currently. Nice work JD 🙂 I recently started banking with Ally. One thing I would like to share is: if you have access to your credit reports or know for sure how your mailing address appears on your reports then remember to enter your address exactly in the similar fashion. Simply shortening “Avenue” to “Ave.” or “Apartment” to “Apt.” etc. may delay your account opening process unneccesarily. I did this mistake and it took almost close to 25 days to open my account in Ally.… Read more »

Chris
Chris
11 years ago

@Michael Typically (at least with ING) you setup a “Link” which allows you to transfer money from your local/”brick and mortar” to ING and transfer the funds. If it’s a savings account remember the limit of 6 withdrawals per month (federal regulation). You can also direct deposit or mail your checks in. I heard USAA allows you to scan your checks and send them in digitally. I sent a request to ING for this. They don’t have it yet but I imagine it’s a matter of time until most banks pick up this form of deposit. I’ve never mailed a… Read more »

Sam
Sam
11 years ago

Regarding the security concerns, do these folks do any online banking, online transactions, etc. I can understand that concern if they do all their banking in person at a branch. We use ING for our emergency fund (savings account and CD ladder) and ING for all our other short term and mid term savings (our escrow accounts, our travel/vacation, holiday gift, home improvement/furniture, etc. accounts) and it is super easy to create different accounts. I set up one auto transfer from my day to day banking account (Wachovia) to my ING emergency fund account and then I have auto transfers… Read more »

Danielle
Danielle
11 years ago
Jacob
Jacob
11 years ago

No props for DollarSavings Direct? APY is at 2.00, 5 year CD is 3%, 16 month is 2.25%. I’ve used them since about January when their rates were at 4% but started to drop rapidly as they received the funds they needed. Been at 2.00 for 2 months now and the UI is easy to use, but the site doesn’t have any extras like calculators etc, but you can find those everywhere.

Randy
Randy
11 years ago

Good luck if you try to use Ally. I called and went through the setup of an online savings account. They must have checked my credit to verify who I am. And they said they would have to have someone call me to allow me to open a savings account. They found out I have 2 bankruptcies. The first one was 25 years ago!! (farm hailed out) The other in 2004.(wifes illness) Since then I have borrowed money many times. Just in March I refinanced a couple of vheicles and got the AA rate at the credit union!! This brings… Read more »

Diaba
Diaba
11 years ago

I don’t see any mention of the fees charged to get your money out of ATMs. If you are only using an online bank there would be a charge to withdraw cash from another bank’s ATM. I know you can get cash back at various stores, but that is not always the best option.

Cherie
Cherie
11 years ago

Why does no one ever mention ZionsBank (http://zionsbank.com) in any of these lists? Currently 1.92% for their Internet Money Market account (which works just like a savings account, at least for my purposes) and 1.92% also for their Internet Savings account (which I’ve never tried). (Or 1.87% if you click the links… Ok, someone needs to update one of their pages. :-p) I found them on bankrate.com years back (2001, actually) when I was looking for a place to stick my savings and they had the highest rate at the time. (I glanced through my statements and the highest rate… Read more »

Terese
Terese
11 years ago

I my quest for ever higher interest rates I have tried both ING and Ally. I found both to have similar features but Ally has won out for now because of the higher interest rate. I originally had GMAC Demand Notes (paying 3.73% as of May 11)but transferred my money out because of it not being FDIC which is important to me. I have found both accounts are very easy to transfer money from one account to another by setting up a link between the accounts.

Good luck and happy, safe saving.

J.D.
J.D.
11 years ago

Adding Dollar Savings Direct! Adding info about ATM fees! Don’t give me too much work here… 🙂

Jake
Jake
11 years ago

I currently use the Charles Schwab checking account – in response to Diaba’s question – at the end of every month Schwab reimburses you for any ATM fees you incurred in the past 30 days.

Another nice thing is that this is a real checking account – you get a visa debit card, bill pay, and paper checks.

My one major complaint is that I find the Schwab banking website to be somewhat difficult to use – there was certainly a learning curve to figure out all of it’s quirks and once I had everything learned, they redesigned.

Jay
Jay
11 years ago

Many of these accounts say No Minimum, but I am just starting out and don’t have much I can spare. Does it make any sense to get a CD with $500? Will anyone take that?

DA
DA
11 years ago

I used to use FNBO because their rates used to always top the list. Recently they not even close to the top. I started using Smartypig.com, which is currently at 3.05% APY for a savings account — higher than anything on this list.

Todd @ The Personal Finance Playbook
Todd @ The Personal Finance Playbook
11 years ago

We use online banking and have what would have been considered a “high yield” savings account. We use this account as our emergency fund. It’s with Citigroup, and I don’t feel they do a very good job of making the funds accessible quickly and easily when you do need them. We’re in the process of closing the account. We’re going to try opening up another account and keeping the money there. This list is a good place to start.

Michael
Michael
11 years ago

@Jay

ING really has a no minimum on CDs. While building a CD ladder last year, I started with CDs as low as $100 (then added to them as they renewed).

J.D.
J.D.
11 years ago

@Cherie (#13)
I added Zions Bank for you! 🙂

Michael
Michael
11 years ago

I have been using ING Direct since 2003, way before it became popular. After getting over not having a brick and mortar, it’s by far my best experience with banking. I never had to incur sneakiness of a bank trying to profit from the insane fees they charge.

I love ING, but looking at some of the more attractive rates. I would consider switching my savings account if can have subaccounts like at ING. Does Ally do subaccounts?

Ross
Ross
11 years ago

Thanks for the list JD. FNBO Direct’s BillPay account (kinda like an electronic checking acct) is currently at 1.25%. I couldn’t find this anywhere on the site, except when I was logged in to my savings acct, so maybe you have to have a savings acct setup first??

LizB
LizB
11 years ago

My daughter, 16, has $500 stashed to buy a US savings bond toward college. This article has me wondering if a high-yield savings or CD would be better. (We’re desperately trying to teach her not to make our mistakes of using credit cards, not saving, etc.) Is there a resource to compare savings types, so we know what will work best? Any advice from readers?

J.D.
J.D.
11 years ago

@Ross (#23)
Thank you. The FNBO site has sparse information for non-customers. I couldn’t find any reference to the BillPay account. I’ll add it to the list.

TR
TR
11 years ago

FYI, there’s a mix up on the listed eTrade rates. You have them reversed.
12 month CDs are at 0.70, MM Checking at 0.40 APY.
They are not the best rates in your list (they used to be higher), but I like the total package I have with them incl brokerage. They are very quick on transfers and have good customer service.

Linear Girl
Linear Girl
11 years ago

For those eligible, USAA has great on-line banking. It’s associated with the military and their families and has free, interest bearing checking, 0.5% returned from debit card purchases, free bill-pay and deposits from home, and reimbursement of ATM fess charged by other institutions. Savings at 0.6 – 0.9%, one year CD 1.5%. The on-line interface is the best of all my banks, but I haven’t used the other banks you mention in your article. Customer service is consistently excellent and was just ranked No. 1 in MSN Money’s 2009 Customer Service Hall of Fame study.

KC
KC
11 years ago

Check with your Credit Union. Mine gives me 2% on Money MArket with a $250 minimum and I can get the money immediately at my local branch. Credit Unions are great deal.

Jas
Jas
11 years ago

I have both BofA and HSBC accounts. While I love the interest rates offered by HSBC, I love the tools that the B of A website provides. I think that once you are logged into your account, BofA’s website is much more intuitive, robust and useful than HSBC’s. I also have to give props to BofA’s financial planning and budgeting tools. As a result, I use BofA for all of the day-to-day bill expenses and reserve HSBC for savings.

Starving Artist
Starving Artist
11 years ago

I do my online banking with Wells Fargo. I have no idea what the interest rates are (I’m sure they’re under 1%), but I love the interface with their Bill-pay, which I get for free because I signed up for their Complete Advantage checking account and a savings account, and I make one $75 deposit a month to the savings. I swapped to a credit union for a while, which had no-strings-attached free Bill-pay, but I had to stop using it because they weren’t consistent as to when they would pull money out of my account when I sent a… Read more »

Kristin @ klingtocash
Kristin @ klingtocash
11 years ago

I’ve had an INGDirect savings account since 2001. I love the fact that my money is earning a much higher interest rate than it would at my local bank, plus it’s out of site, out of mind so I’m not tempted to spend it. I use that account for my emergency savings account. I recently opened an Electric Orange checking account with ING to put all my short term savings. I use that account for things like property taxes, christmas savings, quarterly bills (like water and life insurance), home and car repair money, etc. I like the Electronic Orange account… Read more »

Ryan
Ryan
11 years ago

Helpful article. I recently had a discussion with one of my friends regarding his online banking account which he links to his brokerage account. After I had a short discussion with him, he changed his brokerage account from a “margin” account to a “cash” account. He didn’t realize this… in a “margin” account your broker registers your securities in his name. Your broker is then free to lend them out to short sellers or as collateral for loans he needs. In this situation, if something goes wrong and your securities can not be located, you become a general claimant with… Read more »

Heather
Heather
11 years ago

I’d like to mention also Shorebank in Chicago which has an online only option you can sign up for from anywhere. They are one of the few socially-oriented banks I’ve seen out there (unless you are lucky enough to live near a good credit union) that also has competitive savings rates. Currently 2.05 APY on the high yield savings, no fees. I’ve had an account there for about the last year and their rates have tracked pretty consistently over that time period. Transfer time between there and my other accounts is about 2 days, also pretty standard. Their online banking… Read more »

Bear
Bear
11 years ago

This chart is not an apples to apples comparison – people need to be careful about using this info. Just one quick example, Everbank’s 3%MMA rate – this is a teaser 3 month rate only and that’s only on the first $50,000 anything above that and you’re only getting 1.64%!!! They also tier some rates, since I get the impression many of your readers may not have $50,000 to toss into savings they will actually find much lower rates in the smaller tiers. Read the fine print folks! Calculate the actual effect of teaser rates, you may decide the minimal… Read more »

quinsy
quinsy
11 years ago

hey:

most online banks refund all ATM transactions so that is not a problem.

I echo the recommendation for USAA, even though the interest rates are not great but the bank and online interface are really nice, love the customer service.

Busy Mom @ Single Mom Financial Help
Busy Mom @ Single Mom Financial Help
9 years ago
Reply to  quinsy

I completely agree with you. USAA has the best customer service of any bank out there. I can’t say enough good things about them.

Brent
Brent
11 years ago

I use Dollar Savings Direct for my Savings (also started when it was 4%) and Checking with BoA because its so incredibly convenient. BoA has the online statements, bill pay, and I also have a credit card through them so paying it off happens automatically. I have never paid ANY fee, charge, or mistake with this setup. I know I could be getting a rate with the checking, but honestly, having an ATM on the way to where ever I’m going is worth the dollar or two I miss.

Chris McDougall
Chris McDougall
11 years ago

It’s interesting how the percentage rates have changed remarkably. Part of the reason why I signed up with e trade was because last year their interest rates were higher than everyone else. Now they’re among the lowest.

Yaryna
Yaryna
11 years ago

I also echo the recommendation for USAA. Since I live abroad, I LOVE their option of being able to scan my checks and deposit them electronically rather than having to wait for ‘snail mail’ to get my check to them! Since I’m already waiting several weeks to get the darn checks (say an insurance refund, etc. that they will not direct deposit, but mail instead)this saves on time and frustration. No chance of it getting lost in the mail either!

kick_push
kick_push
11 years ago

i’m sticking w/ ING direct.. doesn’t make sense to switch from bank to bank just for an extra 1%.. unless you have six figures or more (which i definitely do not have lol)

KevC
KevC
11 years ago

Thanks for the great posts, JD!

I have an account with HSBC Direct and with ING and love them. I have considered switching out of my ING account to a higher rate online account and have realized the different in cents is not worth the SWEET sub account setup I have in ING. It makes it so much easier to keep money available for certain specified expenses. I keep my emergency funds in HSBC and use the ING account to save for inevitable expenses(eg. Property taxes, dentist visits etc.)

Danna
Danna
11 years ago

@ben
I have an HSBC online account and when I signed up for it I remember it saying I wasn’t allowed to use branch services. Also see Cherie’s comment(#13) for same info.
I picked HSBC at the time because I could use their ATM which is very near my work if I needed to access my cash more quickly than the online transfers allow, but I have never gone in to ask for help.

Marie
Marie
11 years ago

…there’s no electronic copy of an article about online-only banking.

*crickets*

kay
kay
11 years ago

I was turned down for a Malvern high interest checking account. It would be nice to know who does hard pulls, etc, so I don’t run into the same thing again.

J.D.
J.D.
11 years ago

@Bear (#34)
You’re right that this isn’t apples-to-apples. It’s difficult to make it so. But I have tried to point out some similarities and differences, including the tiered rates from EverBank. Did you not see that huge list of notes? 🙂

mwarden
mwarden
11 years ago

JD, it’s a good thing you published this article now, before the FDIC starts mandating lower interest rates: http://bankdeals.blogspot.com/2009/05/american-bankers-association-urges-fdic.html

This nonsense is why peer-to-peer lending is going to take off…

Jacob
Jacob
11 years ago

So what I have been wondering for a while: what is the real difference between Dollar Savings Direct and Emigrant Direct? Same bank, same site (basically), and a different interest rate. I guess the deeper question is why would you use Emigrant Direct when you can just use Dollar Savings Direct with a better interest rate.

Also, I am curious about the No Penalty CDs that Ally offers. It seems like a better deal than a savings account really. Any drawbacks or comments on this account?

@mwarden (#45)
huh… well… bugger

Bear
Bear
11 years ago

@JD (#44) Yes I did see the notes and realize you can only do so much in an article like this. Too many people don’t read the fine print – just check out how many people didn’t realize how their ARM’s really worked and today are losing their homes. We the consumers need to take responsibility for our actions and stop blaming the banks. No I’m not a banker, just someone who believes in people taking personal responsibility instead of always blaming others/gov’ts for their actions that lead to bad debt and even poorer real estate investments. @mwarden (#45) Don’t… Read more »

Carla
Carla
11 years ago

I would really really like a USAA account, but sadly I don’t qualify (when my husband was active duty it was for officers only)

I have been looking around because we have an 18-month CD coming due. It’s really depressing to realize we are going from 5+% interest down to 2.

mwarden
mwarden
11 years ago

@Jacob (#46):

The No-penalty CDs are fine. The only “catch” is that you cannot close them online. You have to call Ally. You used to be able to do it by secure message on the website, but not anymore. I have not tried closing one of these CDs, but I have heard others not have a problem with it. I would recommend opening a small one ($5 or so) and then trying to close it immediately by calling, if you’re concerned. These CDs have no minimum.

PP
PP
11 years ago

Correction about DollarSavingsDirect:

There is a minimum $1000 deposit for savings.

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