In this article, we take a look at the best online banks in 2024.
Online Banking
It is no secret that banking is one of the industries that have been most significantly impacted by digitalization. The need to visit a bank has reduced with the introduction of ATMs, while the introduction of online banking channels has significantly diminished the need for physical banking. A recent MarketWatch survey among US adults revealed that 41% of respondents prefer to use their bank’s mobile app over using its website or going to a branch.
In 2023, Bank of America Corporation (NYSE: BAC) clients had 23.4 billion digital interactions. This was an 11% increase from 2022, which itself was an all-time record for Bank of America Corporation (NYSE: BAC), highlighting just how rapidly online banking platforms are penetrating the consumer banking market. In times past, a lack of digital literacy and susceptibility to data theft made it challenging for clients to adopt mobile banking options safely. Presently, however, Capital One Financial Corporation (NYSE: COF) reports that 86% of Americans know how to protect themselves and their personal information online while 70% of U.S. households report being enrolled in digital banking for some or all of their accounts.
As such, digital banking has transformed from being an amenity to now being an essential component of any banking experience. Motley Fool reports that 91% of consumers view digital banking as an important factor in choosing where to bank. Consequently, providing the best digital banking experience has become imperative for banks in order to gain a greater chunk of the market. From the consumer perspective, expectations regarding online banking experiences continue to evolve and become more demanding, and a failure to meet said expectations can have severe implications for financial institutions.
Factors Impacting Customer Satisfaction towards Online Banks
According to a recent J.D. Power study, although online banks have a higher level of customer satisfaction than traditional banks, customer satisfaction scores among online banks fell by nearly 3% between 2023 and 2024. Some of the most common reasons for a decrease in customer satisfaction according to the study were extended problem resolution times, issues with debit cards, fraud & unauthorized account activity, and user-friendliness of the banking applications. However, digitalization isn’t the only factor determining how good an online bank is.
In addition to factors involving digitalization, banks competing to provide the best banking services must also pay attention to more conventional factors. Motley Fool reports that a competitive interest rate is an important factor for 88% of consumers in choosing where to bank. Moreover, when asked for which product are competitive interest rates most important, 49% of consumers responded that interest rates on savings were more important to them than any other product.
Offering a higher yield on savings and certificates can help institutions establish themselves as the best online banks for savings. The impact of high-yield accounts on customer satisfaction was recently highlighted in the U.S. National Banking Satisfaction Study by J.D. Power. The study revealed that more and more national bank consumers were holding secondary bank accounts. This trend was primarily fueled by the ability of investment management and internet-only financial institutions to offer higher deposit interest rates. The same study also ranked Capital One Financial Corporation (NYSE: COF) highest in terms of overall satisfaction.
Capital One: The Best Online Bank?
Capital One Financial Corporation (NYSE: COF) has consistently been regarded as one of the best online banks in the industry. Its 360 savings accounts have no fees or minimum balance requirements. It offers an Annual Percentage Yield (APY) of 4.25% on any balance, meaning consumers across all levels of savings can earn a healthy yield. Similarly, its one-year CD accounts have an APY of 5.00%. Moreover, its mobile application and website are both extremely efficient and user-friendly, allowing clients to navigate through a range of products without overwhelming those interested in using basic features. Thus, a combination of competitive savings rates, an affordable fee structure, and a convenient mobile application has enabled Capital One Financial Corporation (NYSE: COF) to establish itself as one of the largest digital banks in the US.
Although interest rates offered on deposits by Capital One Financial Corporation (NYSE: COF) aren’t the highest in the industry, they are still quite competitive. The reason major banks often offer a less competitive savings rate is to stretch the gap between its average lending and borrowing rates, which directly translates into a higher net interest income for these institutions. Currently, Capital One Financial Corporation (NYSE: COF) offers a much higher savings rate in comparison to competitors such as Bank of America Corporation (NYSE: BAC) and JPMorgan Chase & Co. (NYSE: JPM), which is evident in its financials.
Although Capital One Financial Corporation (NYSE: COF) posted an interest income of $41.94 million in 2023, its interest expense for the period was recorded at $12.70 million. On account of such high-interest expenses, 75% of which were due to payouts on deposits, the company’s earnings per share fell by 33% (YoY) to $11.98. Despite this, share prices have increased significantly since the start of 2023 and reached $148 at the end of Q1 2024. This is largely because the stock got a boost after investors learned that Berkshire Hathaway was accumulating shares of the company. The first two quarters of 2023 saw Berkshire purchasing nearly 12.5 million shares of Capital One stock. The company is also poised to get a boost from a reduction in interest rates in 2024. Investor confidence is also on the rise after the company’s definitive agreement to acquire Discover, a strategic expansion that aims to enhance its consumer banking and global payments platform. Moreover, a forward P/E ratio of 10.67 for Q1 2024 indicates that the company is in a position to yield further gains to investors.
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Alternatives to Capital One: 12 Best Online Banks in 2024
Methodology
To develop our list of alternatives to Capital One, we initially picked out the most recommended best online banks in 2024 on the internet. We used 5+ sources including Nerd Wallet, Money Crashers, and Market Watch to develop a shortlist. Further research was narrowed down to these banks only.
Among these best online banks in 2024, we developed a scorecard using metrics such as APY on savings accounts and one-year CDs, affordable fee structures, app ratings, and online banking & card reviews on Reddit threads. By standardizing these metrics on a linear scale, each bank was scored, based on which we sorted our list in descending order. The top 12 alternatives to Capital One were chosen as the best online banks in 2024.
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Here are our Alternatives to Capital One: X Best Online Banks in 2024.
12. Upgrade
Insider Monkey Score: 3.34
Upgrade offers one of the highest APYs on savings accounts in the industry at 5.21%, however, this is only applicable on deposits of a minimum of $1000. In addition to a high savings yield, there are no monthly fees, and all users can enjoy a 1% cashback on certain debit card purchases & payments. Moreover, with a 4.7 and 4.9 rating on Google Play and Apple’s App Store respectively, it is one of the best free online banking alternatives to Capital One.
11. Discover Financial Services (NYSE: DFS)
Insider Monkey Score: 3.47
Discover Financial Services (NYSE: DFS) offers an APY of 4.25% in its Savings Account which is paid out at the end of each month. In addition, there are no monthly fees and requirements for minimum balance, making it quite convenient to maintain in addition to other accounts. Discover Financial Services (NYSE: DFS) also offers competitive IRA CDs for retirees, with a one-year APY of 4.70%. Moreover, consumers who tend to rely on cash will be extremely satisfied with the bank’s ATM network which comprises of 60,000+ fee-free machines.
10. Zynlo Bank
Insider Monkey Score: 3.68
Zynlo offers a 5% APY on its savings account that requires no minimum balance, making it one of the best options for a savings account. In addition, its More Spending account also offers a 2% APY. In lieu of cash backs, consumers can take advantage of the ZYNG Round Up & Match product. One of its most creative aspects is that Zynlo allows users to create personalized folders within a single account to bifurcate their savings.
9. Alliant Credit Union
Insider Monkey Score: 3.99
Alliant Credit Union offers the lowest APY out of all the banks on our list at 3.10%, which is still more than 6 times the national average APY. In addition, this yield is only attainable with a minimum balance of $100. In terms of CDs, Alliant offers a 5.15% APY rate for a 12-month tenor with a minimum deposit of $1000, making it one of the best alternatives to Capital One in terms of CDs.
8. Marcus by The Goldman Sachs Group, Inc. (NYSE: GS)
Insider Monkey Score: 4.35
Marcus by The Goldman Sachs Group, Inc. (NYSE: GS) does not offer any checking account; however, its savings accounts and CDs offer very lucrative rates. Its savings account APY is 4.40% while its one-year CD account APY is 5% (for a minimum of $500). One of the shortcomings of being a user of Marcus by The Goldman Sachs Group, Inc. (NYSE: GS) is that it does not offer any cards, meaning that users have to rely on at least one additional account to make payments and purchases. Despite this, it happens to be one of the best online banks in 2024 with an impressive mobile application.
7. Quontic Bank
Insider Monkey Score: 4.39
Quontic’s savings account can be opened with an initial deposit of just $100 and it offers a 4.50% APY that is paid out at the end of each month. Those unwilling to carry cash or cards can try out the Quontic Ring, a personalized ring that can be tapped to make purchases. However, currently, this feature is only available to checking account users.
6. CIT Bank
Insider Monkey Score: 4.62
Although CIT Bank offers an APY of 5% on its Platinum Savings account, this is only applied if the minimum balance in the account is greater than $5,000. Otherwise, the APY falls to just 0.25%. However, those worried about maintaining a high balance can opt for its Savings Connect Account which offers an APY of 4.65%. In addition, CIT offers one of the best checking accounts in the industry for Zelle users.
5. Varo Bank
Insider Monkey Score: 4.86
Although Varo Bank offers users the possibility of attaining a 5% APY, this is contingent on several caveats. Users must receive $1,000 or more in direct deposits and maintain a positive checking and savings balance at the end of the preceding month to qualify for this rate, and even then, it is only applicable for the first $5,000. However, even if users fail to achieve these conditions, they can qualify for an APY of 3%. Varo Bank is one of the best online banks in 2024 in terms of overdraft coverage, which can cover up to $500.
4. SoFi Bank
Insider Monkey Score: 5.02
SoFi offers several different savings products and seamless services, making it one of the best online banks in 2024. Its APY of 4.60% can only be attained by customers who set up direct deposits or who deposit at least $5,000 every 30 days into their account. For users without direct deposits, the APY drops to just 1.20%. Users can also boost savings using its Roundup feature, creating sub-accounts called Vaults, or achieving a referral bonus.
3. EverBank Financial Corporation
Insider Monkey Score: 5.09
EverBank offers a 0.40% APY on its checking account and a 5.05% APY on its savings account without any maintenance fees. In addition, users can also attain a 4.80% APY using a one-year CD that only requires a minimum deposit of $1000. EverBank is one of the best online banks with Zelle, which can be linked to its checking account, thus allowing users to send and receive money swiftly.
2. TAB Bank
Insider Monkey Score: 5.24
In terms of savings rates, TAB Bank’s savings account has the highest APY out of all the alternatives to Capital One on our list. The TAB Save account requires a minimum balance of $0.01 and offers an APY of 5.27%. Moreover, the TAB Spend account offers a 3.50% APY along with a 1% cashback on certain purchases, making it a very competitive choice for users with regular payments. All interest on deposits is paid out monthly. For users interested in CD accounts, TAB offers a one-year CD with an APY of 5.15%, the joint highest of all the banks in our list. On the other hand, TAB Bank’s mobile app has a 4.2 rating on the Google Play Store, indicating a lack of customer satisfaction in comparison to its competitors.
1. UFB Direct
Insider Monkey Score: 5.37
UFB Direct offers its banking products and services through Axos Financial, Inc. (NYSE: AX). It is one of the best alternatives to Capital One in terms of savings rates, as it offers a 5.25% APY on all balances with no monthly fees. Many of its digital banking features can be accessed via SMS, making it convenient for users with limited access to fast internet. Users can boost savings even further if they open a Freedom Checking Account that can allow them to attain an APY of up to 5.45%, given certain conditions. Both of these accounts can be accessed using a single mobile application which has a 4.7 rating on Google Play Store and a 4.8 rating on Apple Store.
At Insider Monkey, we delve into a variety of topics, ranging from the best online banks in 2024 to the best retirement destinations; however, our expertise lies in identifying the top-performing stocks. Currently, Artificial Intelligence (AI) technology stands out as one of the most promising fields. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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