Online banks are serving up serious competition for their traditional, old-school banking counterparts. The costs associated with traditional banks, from ATM fees to monthly account maintenance fees, can quickly add up, often unbeknownst to banking customers who might not check every little detail on their statement.
On top of that, online banks oftentimes offer more competitive rates, giving customers a good reason to switch from their local branch to an online-only account. Here are different ways online banks can save you money.
No Monthly Fees
Online banks are able to offer lower fees thanks to lower overhead costs, said Bill Clancy, vice president of deposit banking at Northpointe Bank, which serves online customers in all 50 states.
"The biggest benefit to customers in dealing with an online bank is the relatively lower cost of delivering services when compared to a traditional bank or credit union that possesses a large branch network," he said. "The costs to build, maintain and staff branches is extremely high. With an online bank, these cost savings can be passed along to our clients in the form of higher deposit rates and more investments in technology."
A GOBankingRates.com ranking of the best online banks put Ally Bank at the top of the list, in part owed to the fact that its checking account doesn't charge monthly maintenance fees. Other checking accounts free of monthly maintenance fees included Discover and Bank5 Connect.
Higher Interest Rates
It's uncommon for major banks to offer regular savings account rates above 0.01% APY, according to ValuePenguin. For online banks, however, higher rates are a selling point.
Bank of Internet USA offers a variety of checking and savings accounts offering far above your standard 0.01% APY. Its High-Yield Savings Account earns 0.61% APY, while its Rewards Checking earns up to 1.25% APY, plus cash back. Discover's savings account earns 0.95% APY, with a minimum opening balance of $500.
Among the highest-earning saving accounts from online banks is Everbank's Yield Pledge Money Market account, which offers a one-year introductory 1.11% APY.
A higher interest rate on your checking and savings is nothing to sneeze at, either. According to an online calculator from Ally Bank, if you have a savings account with a 1.00% APY, you'll earn an estimated $251.25 over 12 months on an account holding $25,000.
No Fees for Sending Money
Fees are an easy way for banks to make a quick buck. And most bank customers are used to paying fees on certain money transfers. But many online banks won't charge you for transfer services.
EverBank allows customers to send money to friends and family through a range of delivery methods, such as by text, email and even PayPal, with no service fee. Ally Bank offers fee-free ACH transfers to a non-Ally Bank account, and you won't be charged for incoming wire transfers.
In contrast, some traditional banks, like Wells Fargo, will charge $3 to transfer money to an external account, or more for next-day transfers and wire transfers.
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Cash-Back Rewards
Following in the footsteps of many credit cards, some online banks offer accounts with cash-back rewards programs on top of other money-saving benefits.
The Discover online bank provides unique cash-back rewards to customers, too. With a Discover Cashback Checking account, customers earn $0.10 for each debit card purchase they make on up to 100 transactions each month. Each check that clears and bill you pay online also earns $0.10.
Bank of Internet USA's Rewards Checking offers cash-back offers, which customers can activate to redeem. Cash earned is deposited at the end of the following month.
No or Low ATM Fees
The average ATM fee in 2014 was $2.77 for non-customers, according to Discover. That amount doesn't include fees charged by your own bank for going outside its network. Even without physical locations, Discover and many other online banks are able to offer ATM services to customers with little to no ATM fees. Some online banks even offer reimbursements for fees charged by other bank ATMs.
But many online banks are part of no-fee ATM networks. Ally Bank even provides an ATM locator tool for customers looking to withdraw cash in its network. Even if you rack up charges from out-of-network ATMs, Ally Bank reimburses up to $10 at the end of each statement cycle for fees accumulated at other ATMs domestically.
Other online banks will reimburse all ATM fees charged by other U.S. banks, provided you meet certain requirements. For example, Everbank reimburses ATM fees for customers who maintain a minimum account balance above $5,000.
Alerts to Avoid Overdrafts and Late Payments
In the age of the internet, online banks and their mobile apps provide customized alerts to help customers avoid overdrafts and late payments. Round-the-clock access to online banking accounts also allows for customers to check balances and pay bills outside of regular business hours.
Ally Bank sends automatic alerts to help customers keep track of account activity and overdrafts, free of charge. Although the service is not unique to online banks, it is reflective of how these non-traditional institutions are keeping pace with the competition -- and customers' demands.
"Banks face increased consumer expectations today and online banks are doing a much better job of fulfilling their clients' financial needs when compared to brick-and-mortar banks," said Clancy. With more resources being put toward online portals, higher savings rates and other competitive products, it's no wonder more people are switching to online banks.
This article originally appeared on GOBankingRates.com: Ways Online Banks Are Saving You Money