Can I Trust Online Banks?

If you look at the list of highest interest rate savings accounts, almost all of the banks are online banks. And, for most Americans, you won’t recognize 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 the NCUA). That’s over 7,500 institutions to safely keep your money – chances are you don’t recognize most of their names. 

So, to answer your question: can you trust online banks? As long as a bank or credit union is FDIC or NCUA insured, you can trust that your money will be safe. These banks are all regulated and even in the unlikely event the bank fails, your money is protected.

As such, you should always be looking 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 about banks, they usually think about the largest banks in the United States. This list includes well known brands, like:

1. Chase Bank
2. Bank of America
3. Citigroup
4. Wells Fargo
5. Goldman Sachs

But these same banks are also notorious for other headlines. Wells Fargo has been in the news a lot 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 don’t have a great ethical track record. So when you’re concerned about trusting small online banks, maybe you should be asking yourself, “can I trust these large brick and mortar banks?”

Then it comes to rates. These big banks typically have some of the lowest interest rates on their savings accounts. Chase Bank and Bank of America almost always offer rates under 0.05% APY.

Compare that to this selection of the top accounts:

How To Know If An Online Bank Is Legit?

So, how do you know if an online bank or credit union is legit? There are a few things to look at.

First, all banks will be FDIC insured. This means that they are regulated by the Federal Reserve, and that all deposit accounts will be protected by the US Government up to the current deposit limits ($250,000 per account holder). Credit unions have a similar thing called NCUA (National Credit Union Association).

Second, you can read the reviews on websites like Deposit Accounts. However, we always urge a word of caution with reviews: if people are upset, they always find a way to complain. If people are happy, they don’t spend the time finding review sites to write positive reviews. As such, review sites are almost always skewed negatively.

You can also rely on websites and aggregators like ours (The College Investor), Bankrate, and Nerdwallet. We have team members who simply review banks and test them out. We also have a compliance team that monitors rates and looks for feedback that may be something worthwhile to update and cover. 

If a bank is on our list (or even if it has been reviewed but doesn’t make the best-of cut), it’s likely a very legitimate bank or credit union. 

People Also Ask

Can Online Banking Be Trusted?

Yes, online banking is the norm today. You can trust that banks all use high level security to ensure their customers are safe using online banking.

How Do I Know If An Online Bank Is Legitimate?

You can check to make sure an online bank is FDIC or NCUA insured. You can also read banking reviews on sites like ours.

Is It Risky To Use An Online Bank?

No, it’s not any more risky to use an online bank compared to a traditional bank. In fact, traditional brick and mortar banks all use online banking today.

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