Digital banking is nothing new; many of us have been logging on to pay our bills and check our balances for years or even decades.
However, there has arguably never been a more exciting time to open an online checking account than now. As AI and smartphone technology evolve, many banks are adding new features to their online accounts, helping us manage our money more efficiently. Some banks are also cutting their fees to attract new customers and keep current ones loyal in an increasingly competitive market.
With this in mind, it’s unsurprising that experts predict rapid growth in this area. Research from Statista estimates there will be approximately 217 million online banking users in the US by 2025—up from roughly 197 million in 2021.
If you’re considering opening an online checking account, this guide has all you need to know. Read on to learn how digital banking works, the top reasons to open a checking account online, and more.
An online checking account allows you to perform the same tasks as a conventional account, such as paying bills, checking your balance, and depositing funds.
However, you’ll typically manage your account through a digital portal or the bank’s mobile app rather than by visiting a physical branch.
While many traditional banks allow you to manage your account both online and in person, there has also been rapid growth in online- or app-only banks in recent years. Unlike conventional banks, these don’t have physical branches for their customers to visit.
Additionally, not all companies behind digital-only banking apps are banks. In many cases, they are financial technology (fintech) companies that have partnered with banks to operate under their banking licenses. Nevertheless, this does mean that you’ll have all the same security and protection as you would with a traditional bank.
There are many reasons to open a checking account online. Some of the most attractive benefits:
Whenever you open a new account, you should consider any fees the bank charges. In addition to monthly maintenance fees, some banks impose hefty penalties if you go overdrawn or withdraw cash from the ATM.
Although there are no hard-and-fast rules, many online banks charge lower fees than their traditional counterparts. Some even offer free checking accounts with little or no minimum deposit requirements.
These rates may be particularly attractive if you choose a bank without physical branches. As these companies don’t need to cover expenses such as rent and utilities, they often pass these savings onto customers through lower monthly fees or higher yields on savings.
Sophisticated digital tools can be one of the biggest perks of opening a checking account online.
While features such as automatic payments for monthly bills and fraud alerts on suspicious transactions are now standard on most accounts, banks regularly add new tools to their online platforms.
For example, several banks offer voice-powered virtual assistants, which can help you perform regular tasks such as transferring money or finding the nearest ATM.
Other banks employ AI technology to analyze your spending patterns and make personalized product recommendations based on how you use your checking account. For instance, if you regularly have a surplus balance in your account, this technology may suggest a suitable savings product.
While visiting a branch often involves waiting in line for long periods, you can usually log onto your online account and complete your banking within minutes. And since online banking isn’t restricted by branch business hours, you can typically access your account 24 hours a day.
This instant access can be particularly useful if you need to send money unexpectedly or check if someone has made a payment into your account.
Likewise, many banks and banking apps allow you to open an account in less than 10 minutes. (However, you may also need to upload additional documents, such as your photo ID.)
When you’re banking online, you can normally view your balances and spending in real time via your digital portal or mobile app.
Having this up-to-date information can allow you to see exactly how much you have available to spend at any given time, which may help you avoid accidentally going into your overdraft. Other online accounts also allow you to keep track of your spending across different categories, such as bills or groceries.
Some online checking platforms also show the balance in other linked accounts, such as your savings or credit cards. This can provide you with a valuable snapshot of your overall financial position.
If you’d like to build up a nest egg, you may be able to make automatic savings from your checking account. Some apps, for example, include a “save the change” feature, which rounds up your transactions to the nearest dollar and transfers the difference into a linked savings account.
Most online banks offer numerous cybersecurity features to prevent other people from accessing your account.
Almost all online solutions allow you to add 2-factor authentication to your checking account, which requires you to provide 2 forms of identification when you log in.
The primary authentication is typically a password, which you’ll choose when you open your account, and the second is a 1-time code sent via email or SMS.
Most mobile apps also allow you to add biometric log-ins to your account, such as fingerprint ID or facial recognition. As these traits are unique to every person, they can be extremely difficult to falsify.
These features should apply whether you open a personal or business account. Learn more about business banking in our article on managing your finances with the right business checking account.
There are clear benefits to opening a checking account online, but digital banking may not be for everyone. Some potential downsides include:
With a digital or app-only bank, you likely won’t be able to speak to a banker face-to-face if you have any concerns about your account. Some customers also miss the personal touch of building a relationship with staff at their local bank.
Banks typically spend millions of dollars every year trying to ensure their digital solutions run smoothly, but occasional glitches are inevitable. Downtime on apps or online platforms could leave you unable to access your account when you need to pay a bill or transfer funds.
If you choose a bank without brick-and-mortar locations, depositing cash into your account may not always be straightforward. As an alternative, some digital banks partner with other financial institutions and allow you to deposit cash at their locations.
Additionally, remember that almost all banking apps offer mobile check deposits, which are often easier and more convenient than visiting a physical branch.
It’s natural to worry that you may be turned down for an online checking account if you have a less-than-perfect financial history.
Is there a reason to worry? Potentially.
You might, for example, be rejected if another bank has previously closed a checking account in your name due to unpaid overdraft fees. You may be placed on a list held by the reporting agency ChexSystems if you’ve faced these types of issues. Many banks review this list before approving applications for a checking account.
Luckily, however, this doesn’t necessarily mean that you won’t be able to open a new account.
For example, you could explore product ranges available from banks that do not use ChexSystems—or do not rely on it exclusively—when assessing new applications. At the time of writing, these include Capital One, Chime, and Varo.
In addition to searching for banks with no credit check requirements, you could consider taking out a prepaid debit card. This will allow you to pre-load funds—often at an ATM—and then spend whatever is available.
However, carefully researching the market before choosing a card is essential. All cards involve some form of fee, but the best prepaid debit cards are free to use at ATMs or can be used at many locations.
Opening a checking account online can be a great way to manage your money. They’re often low-cost or free, provide powerful tools, and help you avoid long lines at physical bank locations. Crucially, with an online checking account, you can securely log in and oversee your finances with ease.