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Bank failures, high APYs and bonus incentives. If there was ever a time to consider switching to an online bank it’s right now.
For years, traditional banks have struggled to keep pace with online neo banks but after the Silicon Valley Bank took a nosedive, consumers are on the hunt for a new place to stash their cash. And right on cue – enter the competition. Here are the details.
The Current State of Banking
Interest Rates have been skyrocketing in the banking world, and online banks have seen some of the biggest jumps, with some accounts exceeding 5.00% APY. On the other end of that spectrum, traditional institutions like Bank of America and Chase are still only offering a minuscule 0.01% on their standard savings accounts, which holds the national average savings rate back at just 0.35% according to the FDIC (as of February 21st, 2023).
Online banks with their unique structure are set up perfectly to take advantage of their competitors' oversight, and likely recruit some of their clientele along the way. Here’s how they can get a leg up.
- Low Overhead Costs: Online banks have lower overhead costs than traditional banks since they don't have to maintain physical branches and employ as large a staff. This allows them to offer higher APYs to their customers.
- Convenience: Online banks offer a wide range of digital banking services that can be accessed from anywhere with an internet connection, making banking more convenient for customers.
- Customer Service: Online banks often provide more comprehensive remote customer service than traditional banks since they have fewer physical branches and can focus on providing quality service online or over the phone.
- Lower Fees: Online banks often have lower fees for account maintenance, overdrafts and ATM transactions, which can help you save money over time.
The Competition is Heating Up
Online banks now have a triple threat on their hands and it looks like this:
- Trust in the traditional banking system is wavering. With a major player in the banking world collapsing (Silicon Valley Bank), this stands to be the largest bank crash our generation has seen since 2008.
- Traditional banks aren’t keeping up. The standard .01% interest isn’t cutting it anymore. With inflation bringing up the cost of just about everything, there needs to be an incentive for keeping your money in a savings account. And given the current climate, the chance to earn more money on your savings balance is unarguably enticing.
- Online banks are hot with ultra-high incentives. Banks like Axos and UFB are offering rates hundreds of times better than what you can find at traditional, brick-and-mortar banks. Plus, some accounts even come with a nice sign-up bonus for new accounts.
4 Warning Signs You Need to Get a New Bank Account
Banking Offers to Watch
While there is plenty of incentives available, here are our top picks:
UFB Direct Preferred Savings
The UFB Direct Preferred Savings account offers an unheard-of interest rate at 5.02%, no maintenance fees or monthly minimum balance requirements. Couple this with a free ATM card, an intuitive mobile app and SMS banking, it’s a hard offer to beat.
Axos Rewards Checking
On the checking account front, Axos has a great offer all their own with 3.30% APY no overdraft fees or insufficient fund fees and a similar all-online format for ultra convenience.
CIT Bank Savings Connnect
This CIT account offers a competitive APY of 4.50%. They also feature FDIC-insured savings accounts and zero monthly service fees.
SoFi Checking and Savings
New SoFi customers can currently earn a one-time bonus of up to $250 when they open a new SoFi Checking and Savings Account before December 31, 2023 and receive qualifying direct deposits. Additionally, accounts with monthly direct deposits qualify to earn a higher interest rate on their savings balance with no monthly fees including zero overdraft charges.
Making The Switch
The banking landscape is still uncertain but if you're not totally happy about where you've been banking, now is the best time to consider making a switch. With high intro bonuses, outstanding APY and low fees (many banks having none at all), there's every reason to contemplate moving your money.