Barclays vs. Ally Bank: Which Online Bank is Better?

Online banking is now the main way that Americans handle their money. In a 2017 survey for the American Bankers Association, roughly two-thirds of respondents said they do most of their banking online or through their mobile device, while only 18% said they most often rely on an actual bank branch.

Due to this change in demand, there are now online banks that don’t have physical locations. This allows banks to lower costs and offer higher deposit rates. Barclays and Ally Bank are two of the top online banks out there, and both offer many benefits for their customers. If you’re trying to decide between Barclays vs. Ally Bank, we’ve reviewed all of the key deposit account details so you can decide which is better for your money.

Barclays vs. Ally Bank: An overview of both online banks

Barclays and Ally Bank are both older banks that switched over to the online market. Ally Bank was originally called GMAC, and it started out as a division of General Motors. It began by offering auto financing through GM dealers and then moved into other banking services over time.

In 2009, the bank decided to close its branches and become an online-only bank. That’s when it changed its name to Ally Bank. Today, Ally Bank is one of the leading online financial institutions and regularly wins awards, including being named the best internet bank of 2019 by Kiplinger’s Personal Finance.

Even though Ally Bank does not have any branches, it still provides convenient ATM access. You can make free withdrawals from the 43,000 Allpoint ATMs nationwide, and Ally Bank also refunds up to $10 per statement cycle for charges from using out-of-network ATMs. For help with your bank account, Ally Bank has a live chat option and a 24/7 customer service phone line.

BBarclays is an even older bank, as it launched back in 1690 in London. It has since expanded into an international financial institution with more than 48 million customers worldwide. To reach the American market, Barclays created Barclays Online Banking.

Still, since Barclays is based out of the U.K., its American operations are not quite as developed as Ally Bank’s. Barclays currently only offers two banking products in the United States: savings accounts and CDs. It does not offer loans or any other products.

Barclays also does not provide ATM access. If you want to take money out, you need to either transfer the amount to another bank account or call a customer service line to request a check. Barclays’ phone customer service line is open seven days a week, from 8 a.m. to 8 p.m. EST.

Barclays vs. Ally Bank: Account options

For day-to-day access to your money, Ally Bank is the better choice because it offers a checking account while Barclays does not. There is no minimum opening deposit requirement for the Ally Bank checking account, and it earns interest on all balances. You’ll also get convenient ATM access, as account holders can use Allpoint ATMs for free. If you use an out-of-network ATM, Ally Bank will refund up to $10 per month for charges from the ATM owners.

Barclays and Ally Bank both offer one type of online savings account with a high interest rate and no minimum opening deposit requirement.

Both banks also offer certificates of deposit (CDs), though Ally Bank has a greater variety to choose from. While Barclays provides a decent choice of short- and long-term CDs, ranging from three months up to 60 months, it only offers standard, fixed-rate CDs.

Ally Bank not only has a variety of short- and long-term regular CDs, it also has two specialty options. The Raise Your Rate CD lets you adjust to a higher payout if market rates increase after you sign up. There’s also the No Penalty CD, which lets you withdraw your deposit before the maturity date without a fee.

There is no minimum opening deposit for either the Barclays or Ally Bank CDs, though Ally Bank does pay a higher rate for larger deposits on some of its CD terms.

Finally, Ally Bank has a money market account while Barclays does not. Once again, there is no minimum opening deposit requirement. However, this account earns 1% interest, compared to 1.90% (as of September 17, 2019) on the Ally Bank savings account.

Barclays vs. Ally Bank: Rates

*Rates accurate as of September 17, 2019

Barclays does not offer a checking account but Ally Bank does. Ally Bank’s checking account rates are generous if you have a large account balance of at least $15,000. In this case, Ally Bank outearns both the national and online bank average significantly. If you have a low balance, you’ll still earn interest but at a below-average rate.

For savings accounts, both Barclays and Ally Bank pay an excellent rate, well above the national and online bank averages. Barclays pays a moderately higher rate than Ally Bank.

For CDs, both Barclays and Ally Bank are much better than the national average and competitive with the high online bank averages. As of August 2019, their rates for 1-year and 5-year CDs were very similar. However, both banks' rates have changed in September 2019, so if you are looking for a different time frame, be sure to compare both banks because there are some CD terms in which Barclays currently pays a higher rate and vice versa.

Barclays vs. Ally Bank: Fees

Neither Barclays nor Ally Bank charges a monthly maintenance fee for its deposit accounts, and there is no minimum balance requirement needed to avoid a fee. On the other hand, the typical bank with physical branches may charge a monthly fee of around $10 unless you keep a balance of $1,000 or higher.

Barclays does not include ATM access for its accounts. Ally Bank does, and once again, its fees are impressively low. You can make unlimited free withdrawals from any Allpoint ATM. If you use another ATM, Ally Bank will not charge its own fee and will refund up to $10 per month in charges from the ATM owner. With large national banks, you’ll typically pay the bank between $1 to $2 for each out-of-network transaction on top of the ATM owner fee.

As far as overdraft fees, both banks charge a below-average fee, as the national average is around $30. In this category, Barclays is much lower than Ally Bank, with a $5 fee per item versus a $25 fee.

Who should bank with Barclays?

• You want the highest possible savings account rate. While Ally Bank pays a generous rate for its savings account, the Barclays savings account beats it by a fair amount.
• You don’t need ATM access. The Barclays deposit accounts do not come with a debit card. To take out money, you’ll either need to request a check or transfer funds over to another bank account that does have ATM access.
• You’re worried about overdraft fees. If you’ve ever overdrawn an account, you understand how expensive this can get. Barclays only charges $5 per overdraft, which is much lower than the typical bank and better than Ally Bank.

Who should bank with Ally Bank?

• You want convenient ATM access. Ally Bank is excellent for ATM access. It allows unlimited free withdrawals from any Allpoint ATM and also refunds up to $10 a month in charges from out-of-network ATMs.
• You want a full-service bank, on top of great deposit rates. Ally Bank not only offers a full range of deposit accounts, it also offers auto loans, home loans, retirement accounts and investments.
• You’d like extra CD variety. Besides regular fixed-term CDs, Ally Bank also has a Raise Your Rate CD and another option that allows penalty-free early withdrawals.

Final word: Is Barclays or Ally Bank a better online bank?

Even though the Barclays has some attractive benefits, we think Ally Bank looks like the better overall internet bank. Ally Bank has more options to choose from, its rates are for the most part as good if not better than Barclays and it provides free access to a large network of ATMs.

A lack of ATM access is perhaps the biggest drawback at Barclays. The only way to take your money out is by scheduling a bank transfer or by requesting a check by mail, which can take a few days. Even though Barclays’ accounts are meant for long-term savings, that delay could be problematic for some customers.

However, there are a few situations where Barclays pays a higher interest rate, particularly with its savings account. If your goal is to earn as much interest as possible and you don’t need to make ATM withdrawals, it may be worth comparing the current rates at Barclays versus Ally Bank before deciding. But in the end, we think that the overall package at Ally Bank makes it the better online bank.