We usually associate an interest rate with a savings account, but some online checking accounts actually do pay interest. The interest rate that you can get depends a lot on your credit history and the kind of balance you can carry. Rates can vary quite a bit from bank to bank so consult a Web site like Bankrate. Online checking accounts have many of the same features as more conventional accounts, but there are a few special features that come only with online checking.
Instead of using a payment system or sending checks to your creditors through the mail, you can transfer the funds electronically through your bank, using funds in your online checking account [source: Nationwide ]. The beauty of online bill pay is that you can avoid the cost of stamps and any fees from third-party payment programs that many companies and utilities use to accept your monthly payments.
The money will also be delivered to the creditor usually in one or two days, as opposed to the five to seven days when a check is mailed. Some online accounts offer rewards programs tied to debit cards too.
Not to be confused with a rewards checking account, these programs allow you to earn points for purchases and redeem them for goodies [source: Wang ]. One of the major drawbacks with online-only banks is that it can take much longer to deposit a check. Without a physical location or ATMs, the only option used to be mailing any checks you receive to a central depository. However, many banks, both online and traditional, now offer "mobile deposits" to make depositing checks much faster.
Using the bank's smartphone app, you snap a photo of the check you need to deposit, and the bank uses the image to deposit the funds for you [source: Block ]. Of course, there's still a delay as the funds clear, but it's much faster than mailing things in.
Banking online can be convenient, but there will be times when you need access to cash. Because online-only banks don't have physical locations, they'll often offer ATM fee reimbursements. Usually, they'll only reimburse a certain number of transactions each month. Fee reimbursement is becoming so common that even banks with brick and mortar locations are starting to follow suit [source: Wang ].
How do you manage your money in an online account, and is your money safe there? We'll look at how deposits, transfers, and security work on the next page.
To get money into your online account, you've got a few options. Most people are already familiar with direct deposit: Instead of receiving a check from your employer or payee, you give them routing information, so they can deposit your money directly into your bank account.
You can also deposit checks by taking a photo of them with your smartphone [source: Block ]. If you're depositing cash, you can either buy a money order and mail it in or deposit the cash into a traditional bank account and transfer the money.
Got more than one online account? One area where online banking is very convenient is transfers. With an online account, you can do it with just a few clicks on the bank's Web site s. If you're trying to move the money from one bank account to another you can transfer between accounts at the same bank for free. If you're transferring money to another bank, you may have to pay a transaction fee [source: HSBC ]. The best online banks, nonbanks and credit unions offer checking accounts with fewer fees and higher interest rates than traditional banks do, in part because of the money they save by not operating branches.
Why trust NerdWallet: Our writers and editors follow strict editorial guidelines to ensure fairness and accuracy in our coverage to help you choose the financial accounts that work best for you. See our criteria for evaluating banks and credit unions. These accounts are secure, backed by the Federal Deposit Insurance Corp. Although they are not technically banks, nonbanks offer most of the same services that traditional institutions do.
Here are our favorite online checking accounts. NerdWallet's ratings are determined by our editorial team. The scoring formulas take into account multiple data points for each financial product and service. Use your Rewards Checking account to make your full monthly Axos consumer loan payment to earn 0.
Special features: In addition to its consumer-friendly overdraft program, Chime has two automatic savings programs. One lets you round up every debit card transaction to the nearest dollar and automatically transfer the difference to your Chime Savings account.
The other allows you to choose a percentage of your paycheck that automatically gets transferred into savings. Chime says: "Round Ups automatically round up debit card purchases to the nearest dollar and transfers the round up from your Chime Spending Account to into your savings account. Customers can use over 38, free ATMs through two networks, MoneyPass and Visa Plus Alliance, and can receive their direct deposit up to two days early early access to direct deposit funds depends on payer.
If you need to write a check, Chime has a free online feature that creates and mails one on your behalf. Customers of One Finance, a nonbank financial institution, can organize money in linked sub-accounts called "pockets," whether for paying bills or saving toward goals. One Finance also gives customers access to a large ATM network.
Special features: Customers start off with three pockets: Spend, Save and Auto-Save and can create more to customize their experience. Save and Auto-Save pockets earn interest. Save pockets earn 1. The Auto-Save pocket earns 3. When you use your debit card, purchases are rounded up to the next dollar, and the difference is deposited in Auto-Save. Customers can also have a portion of their direct deposit paycheck dropped into Auto-Save.
Other pros: One Finance is part of the Allpoint network, which gives customers access to more than 55, fee-free ATMs. Unlike most credit unions, Alliant makes it easy to apply for membership and take advantage of its interest checking and high-quality digital tools. Special features: 0. To be eligible for this rate, you must opt out of paper statements and make at least one electronic deposit to your account each month. Alliant also has a great high-yield savings account. Like some other Axos Bank checking accounts, the Rewards Checking has great perks: no overdraft fees and no monthly fees, plus domestic ATM fee reimbursements.
Special features: With Rewards Checking, you also can earn up to 1. And if you can use a second chance account responsibly, this can help you qualify for a standard account down the line. Checkless checking accounts are another type of alternative checking account. First, decide whether you want to open a checking account at a brick-and-mortar bank or credit union or at an online bank.
Brick-and-mortar banks are good for people who need to visit a branch, while online banks may charge fewer fees for checking. So you need to decide what matters more to you—convenience or cost.
That includes looking for these fees:. Finally, consider what features or benefits a checking account has to offer that are most important to you. These can include things like online and mobile banking access, earning rewards on purchases, a widespread ATM network or the ability to earn interest on your balance.
Choosing the right checking account ultimately comes down to finding the best mix of features, access and cost to fit your individual banking needs. I'm a freelance financial journalist and a regular contributor to U. News and CreditCards. You can find me on LinkedIn or follow me on Twitter seemomwrite. She has worked as a personal finance editor, writer, and content strategist covering banking, credit cards, insurance and investing. As a small business owner and former financial advisor, Daphne has first-hand experience with the challenges individuals face in making smart financial choices.
Select Region. United States. United Kingdom. Rebecca Lake, Daphne Foreman. Contributor, Editor. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations. What Is a Checking Account? Was this article helpful? Share your feedback. Send feedback to the editorial team. Rate this Article. The pros include higher yields, lower fees, and high-tech features that help with account maintenance and budgeting.
The cons include more difficult access to customer service, as well as online security concerns. Federal Deposit Insurance Corporation. Checking Accounts. Personal Finance. Savings Accounts. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.
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