The Best Online Bank

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Don’t need a teller? You can slash fees and boost yields by banking online. Only 29% of traditional banks have low-cost checking accounts that pay interest (average yield: 0.08%), compared with 70% of the online banks analyzed—which pay an average 0.14%. Because online banks don’t have their own ATMs, reimbursement of other banks’ surcharges is critical. —Megan Leonhardt and Alicia Adamczyk

Bank of the Internet USA

WHY IT WINS: Easy-to-use web and mobile tools, the highest interest rate on checking among online banks (up to 1.25%), and an absence of overdraft fees on its Rewards, Platinum, and Essential checking accounts pushed BofI USA to the top this year, edging out longtime winner Ally Bank. BofI USA also refunds all outside ATM surcharges on three of its five checking accounts.

CAVEAT: You’ll need both direct deposit and regular debit card use (15 transactions a month) to get the 1.25% rate; direct deposit alone nets you only 0.42%. Also, two of BofI USA’s accounts (Platinum and Golden Checking) don’t cover all surcharges by other ATM providers.

KEY FACTORS:

•In addition to paying interest on checking, BofI USA has a no-fee money market account with a 0.75% yield—above average even among online banks (although slightly below Ally’s).

•BofI USA’s mobile iOS and Android apps score an average of 4.3 (out of a possible five stars) from users, and its website was named “best in class” by the Interactive Media Council in May.


Honorable Mention: Ally Bank

Ally won this category for the past five years and is a close contender overall. Its limited ATM reimbursements (capped at $10 a month) helped push it out of the top spot, but Ally customers can easily avoid surcharges by using the 43,000 Allpoint ATMs in the U.S. And Ally beats BofI USA on savings, paying 1% with no minimum.

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