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If you look at the list of savings accounts with the highest interest rate, almost all banks are online banks. And most Americans don't know the names of these banks.
According to the FDIC, there are over 4,600 banks in the United States. And there are another 2,900 credit unions in the United States (according to NCUA). That's over 7,500 institutions that keep your money safe – chances are you don't know most of their names.
To answer your question: Can you trust online banks? As long as a bank or credit union is FDIC or NCUA insured, you can have confidence that your money is safe. These banks are all regulated and even in the unlikely event that the bank fails, your money is protected.
Therefore, you should always look for the best banks and credit unions to park your money – no monthly fees, high interest rates, good apps and great customer service.
Online banks vs. traditional brick-and-mortar banks
When Americans think of banks, they usually think of the largest banks in the United States. This list includes well-known brands such as:
- Chase Bank
- Bank of America
- Citigroup
- Wells Fargo
- Goldman Sachs
But these same banks are also notorious for other headlines. Wells Fargo has often been in the headlines for creating fake accounts. The CFPB just penalized Bank of America for doing similar things with fake accounts.
In fact, most of these large traditional banks do not have a particularly good ethical track record. So if you're concerned about trusting small online banks, you might want to ask yourself, “Can I trust these big brick-and-mortar banks?”
Then it depends on the prices. These major banks typically have some of the lowest interest rates on their savings accounts. Chase Bank and Bank of America almost always offer interest rates below 0.05% APY.
Compare that to this selection of the top accounts:
How do you know if an online bank is reputable?
So how do you know if an online bank or credit union is reputable? There are a few things to consider.
First, all banks will be FDIC insured. This means that they are regulated by the Federal Reserve and that all deposit accounts are protected by the US government up to the current deposit limits ($250,000 per account holder). Credit unions have a similar entity called NCUA (National Credit Union Association).
Secondly, you can read the reviews on sites like Deposit Accounts. However, we always advise caution when it comes to reviews: when people are upset, they always find a way to complain. When people are happy, they don't spend the time searching review sites to write positive reviews. Therefore, review sites are almost always negatively biased.
You can also rely on websites and aggregators like ours (The College Investor), Bankrate and Nerdwallet. We have team members who easily check and test banks. We also have a compliance team that monitors rates and looks for feedback that may be worth updating and covering.
If a bank is on our list (or even if it's been reviewed but doesn't have the best rating), it's probably a very reputable bank or credit union.
People ask too
Can you trust online banking?
Yes, online banking is the norm today. You can trust that all banks employ high levels of security to ensure their customers are safe when banking online.
How do I know if an online bank is reputable?
You can check whether an online bank is FDIC or NCUA insured. You can also read bank reviews on websites like ours.
Is it risky to use an online bank?
No, using an online bank is not riskier compared to a traditional bank. In fact, all traditional brick-and-mortar banks now use online banking.
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Best High Yield Savings Accounts in March 2024, Best Online Banks in March 2024, Best Credit Unions Nationwide in March 2024
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