What is an online checking account?
An online checking account is a type of bank account that allows you to manage your account using an internet connection and a computer or mobile device. These accounts are typically convenient, low cost and secure.
Online checking accounts offer account access at any time from a computer, tablet or smartphone. Using online banking tools, you can handle the same checking account tasks in your online account that you would in person at a traditional bank. For example, you can make mobile check deposits with your phone’s camera and use online bill pay to schedule and pay bills.
You can generally expect online checking accounts to offer lower fees and higher interest rates than accounts at traditional banks. Without traditional bank branches, online banks typically have lower overhead costs, which can translate to lower fees for customers. You can also expect advanced security measures, including two-factor authentication, encryption and fraud monitoring.
Pros and cons of online checking accounts
PROS
- 24/7 access to funds: The bank never closes. You’ll have access to your checking wherever you have an internet connection.
- Low fees: Online checking accounts typically have low or no account maintenance fees. You can usually use in-network ATMs for free, and some online banks reimburse out-of-network ATM fees.
- Online banking tools: Advanced banking tools, including mobile check deposit, online bill pay and digital budgeting tools, are typical of online banking accounts.
- Interest earnings: Some online checking accounts earn interest on your balance, allowing you to grow your money even as you spend it.
CONS
- No bank branches: You may find an online bank account lacking if you frequently need to make cash deposits or want in-person assistance.
- Fewer services: Brick-and-mortar banks may offer services that online banks don’t, such as safe deposit boxes and notary services.
- ATM fees: You’ll need to use an in-network ATM to get cash without fees. Many banks have extensive ATM networks, but you could end up paying a fee if you can’t find an ATM nearby.
Online vs. traditional banks
The biggest difference between online and traditional banks is the ability to bank in person. If personal attention is your priority and you want access to branch services, then traditional banking is the way to go. An online bank may be a better choice, however, if you want low costs and online conveniences.
When to choose an online bank: You want to minimize fees, access higher interest rates and manage your account at any time with an electronic device. You’ll need to make sure you’re comfortable using digital banking tools and that you have access to in-network ATMs for cash withdrawals.
When to choose a traditional bank: You need a wide range of financial services that may not be available on digital platforms. That could include cash deposits, money orders, safe deposit boxes, investments and more. A traditional bank can also make sense if you value relationship banking to handle complex or specialized financial situations.
| Feature | Online Banks | Traditional Banks |
| Account Access | 24/7 online | Within branch hours |
| Fees | Typically limited | May have higher fees |
| Cash Deposits | Typically limited | Yes |
| Interest Rates | Generally higher | Generally lower |
| In-person services | No | Yes |
How to open an online checking account
Follow these steps to open an online checking account.
- Choose a bank. Compare online banks and account features, read reviews and research a bank’s reputation before deciding to open an account.
- Find the bank's online application. Visit the bank’s website, and find the section for online checking accounts. Navigate to the online application for new accounts.
- Complete the application. Fill out the online application with your personal information, including your name, address, birthdate and Social Security number.
- Provide documentation. You’ll need to verify your identity with documentation, generally by uploading a copy of your driver’s license or state ID card.
- Add funds to your account. Some banks require a minimum initial deposit. You’ll choose your deposit amount, usually transferring money from another bank account.
- Register for online banking. If you don’t have an account with the institution yet, you’ll establish online banking by creating a username and password and setting up security features.
- Apply. Wait for approval.
- Use your account. Once approved, you can log in to online banking to use your account and set up features such as direct deposit and online bill pay.
How to deposit and withdraw cash with an online checking account
If you need to deposit or withdraw cash from your online checking account, you have a few options: You can visit an ATM or a retail partner or move money from a traditional bank account.
ATM: Your online checking account will usually give you access to a large ATM network for cash withdrawals. In-network ATMs are generally free to use, and you may be reimbursed for out-of-network ATM fees. Some online banks also allow cash deposits at ATMs.
Retailer: Some banks have partnered with retailers such as CVS or Walgreens, where you can add cash to your account by visiting the store.
Bank-to-bank transfer: If you have a checking account at a traditional bank, you can link it to the online account and transfer funds between accounts. You can move cash to the brick-and-mortar account and then withdraw cash at a branch or ATM.
Is an online bank safe?
An online bank can be as safe as a traditional bank, as long as you choose a federally insured institution and take steps to protect yourself while banking online.
To check whether your account is backed by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), use the BankFind Suite tool or the Credit Union Locator.
An online bank should also offer robust security measures to protect your account from cyber threats. Choose a bank that uses advanced security measures, including real-time fraud monitoring, to thwart unauthorized account access.
Your login should require a strong password and two-factor authentication, which requires you to prove your identity in two different ways. The site should use secure sockets layer (SSL) encryption; look for https in its URL instead of http.
Although the bank should monitor your account for fraud, you should regularly check your account for unauthorized transactions. Be cautious about phishing scams, including emails or messages that appear to be from your bank.
How to choose an online bank
If you’re trying to choose an online bank, you’ll want to consider certain factors, including fees, account features, online tools and customer service reviews. Make sure the institution is federally insured and employs strong security measures.
Review online checking account fees and rates, but don’t let them entirely drive your decision-making. You may be more interested in account features such as mobile check deposit, free online bill pay and financial management tools.
Check the bank’s ATM footprint and cash management options to ensure you can withdraw and deposit money without incurring too many fees. Look into other fees. The bank may not charge a monthly maintenance fee but may have other fees, such as overdraft fees. Make sure you know what to expect.
Before you commit to an online checking account, research the bank’s reputation and customer service. Look at consumer complaints and reviews. Find out how you’ll be able to access customer service and whether those options work for you.