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What You Should Know About Online-Only Banks Before You Open an Account

Technology has transformed just about everything these days — including how you bank. 

In fact, a 2018 survey by the American Bankers Association shows that more than 70% of Americans access their bank accounts primarily through the internet or a mobile device.

It comes as no surprise then, that today there are banks that exist entirely online.

If you’re a customer of an online-only bank there’s no building to drive to move your money or address other bank businesses, because all of your transactions are conducted on an app or website.

This type of access makes things feel easy, but it’s also worth exploring the unique features and benefits of online banks before opening up an account, as well as how online banks actually work.

How does an online bank account work?

There’s not much difference between how an online bank, or “internet” bank, works versus a traditional bank; it’s just that an online bank operates on the Internet instead of in a brick and mortar building.

"Just because an online bank doesn’t have branches doesn’t mean there’s no one to talk to if you need some help."

Meanwhile, online banks typically offer many of the same services as traditional banks including: electronic fund transfers (EFT), access to ATM machines, direct deposit, and the ability to make debit card purchases.

Online bank considerations

Every online bank is different. These are some additional features you may want to consider: 

Higher rates

Because online banks don’t have the same overhead costs as banks with physical branches, some offer Annual Percentage Yields that are typically higher than ones you’ll find at traditional banks.


Look for the security measures that online banks have in place, things like multi-factor authentication, SSL encryption, the use of firewalls, and the requirement of using secure browsers.

FDIC insurance

Not all financial institutions are insured by the FDIC. Before opening an account with an online bank it could be worth checking if it’s aligned with the independent government agency because FDIC insurance protects up to $250,000 in deposits per depositor, per insured bank.


As with traditional banks when working with an online bank, you’ll be able to make electronic transfers to move money into your account from another bank and some banks may allow you to mail checks.

Foreign travel

If traveling outside the country, your online bank may have benefits, like low costs for using ATMs internationally, reimbursing international ATM fees or waiving foreign transaction fees.

What happens if I need to talk to a live person?

Just because an online bank doesn’t have branches doesn’t mean there’s no one to talk to if you need some help: online banks may provide customer assistance through telephone support, chat and/or email.

Is an online bank account right for me?

Before you move forward with opening an account at an online bank, consider which features you can benefit from the most, and which you might be okay sacrificing. High APYs and ease of access alone may be the most attractive qualities that online banks can offer when compared to traditional brick-and-mortars.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.