3 Unexpected Advantages of Online Banks Over Brick-and-Mortar Banks

I'm a millennial, and that means I have high standards for the companies I do business with. Plus, I've lived through plenty of supposedly once-in-a-lifetime financial calamities, meaning it's even more crucial that I choose great banks.

In 2022, I opened a high-yield savings account with an online-only bank. I then went on to add a checking account, and I even just opened my first-ever retirement account with the same bank. I've discovered a few unexpected advantages online banks have over their more traditional brick-and-mortar counterparts -- so here's a breakdown for you.

1. Excellent customer service -- but not in person

If your idea of bank customer service is face-to-face communication, I can respect that -- and will note that an online bank may not meet your needs. But if you relish the idea of being able to call customer service at 2 a.m. when you notice something awry with a withdrawal from your checking account, an online bank will let you do that.

There are no branches, but there's often excellent customer service over the phone, email, and potentially live chat. My online bank even has an estimated wait time for phone help on its website -- I love never hearing the words, "Call volume is higher than normal. We will answer your call in the order it was received," while intermittent tinny hold music plays in the background.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of January 9, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of January 9, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

2. Harder to tap your savings

OK, this one might be a bit weird, but stay with me here. Online banks can sometimes make it harder to access your money. Paradoxically, this gives them an advantage over brick-and-mortar banks, especially if you're using one to build and hold your savings.

If you're saving for a big goal, like buying a home, it might be hard to commit to leaving the cash alone. Life is full of shiny new things to buy, and delaying gratification can be difficult, especially if you view homeownership in more of a nebulous way. (Trust me, it's hard to comprehend how good it can feel before you do it.)

But if it would require transferring money to another bank to gain access to spend it, you might just be more likely to leave your savings in an online bank long enough to meet that huge (and very worthy) goal.

3. ATM fee reimbursement

If you deal in cash often or receive cash payments, an online bank could prove a difficult switch for you. Depositing cash in an online bank often requires an extra step -- namely, depositing it with a bank that allows cash deposits, then transferring the money to the online bank. This could be a dealbreaker for you, and I respect that.

But if you get paid via direct deposit and sometimes like to buy items with cash, you might be able to reap the benefits of an online bank anyway. Some of the best ones have robust ATM networks with tens of thousands of machines.

And some of them reimburse a certain dollar amount per month in ATM fees incurred by using out-of-network machines. My own online bank reimburses up to $10 in these fees per statement period, for example.

How can you choose the best online bank for you?

Have I convinced you that online banks are worth considering? Here are a few key factors to evaluate when you're comparing online banks:

• FDIC insurance: This vital coverage means that up to $250,000 of your money (per depositor, per FDIC-insured bank, per ownership category) will be returned to you in the event of bank failure.
• A well-rated mobile app: An online bank should invest in technology, so dig into reviews of its mobile app to see what features (and issues) it has.
• ATM availability: If you need to take out cash, you'll need an ATM, so plug in your ZIP code to see if there are in-network machines convenient to you. Alternatively, opt for a bank that reimburses fees.
• Competitive APYs: Online banks don't have the overhead costs of branches, so they pass the savings on to you in the form of higher rates on CDs, savings accounts, and money market accounts.

Opting for an online bank can be a revolution for your money management toolbox. If it's been ages since you visited a bank branch and you're tired of silly fees and low APYs, give online banks a closer look.