If you bank at a traditional brick-and-mortar bank, your money probably isn’t growing there.
That’s because traditional banks — with their thousands and thousands of physical locations — typically offer annual percentage yields (APYs) as low as 0.01% on their checking accounts. That’s pretty puny.
Online banks, on the other hand, can offer their customers higher interest rates, because they have less overhead. They have fewer employees and zero physical locations. They don’t have to pay for all those buildings — and all that air conditioning.
One of the highest interest rates we’ve found for an online checking account is from SoFi Money. That checking account earns you 2.25% APY, the percent in interest (including compound interest) you’ll earn on your money in a year.
Frankly, that’s practically unheard of. According to the FDIC, the average checking account earns 0.06% APY — which makes SoFi’s rate of 2.25% more than 37 times higher. Heck, it’s better than the rate on a lot of savings accounts.
Sure, you might be able to find a savings account with a slightly higher yield. But SoFi offers a one-stop checking-and-savings account, with the best of both worlds. You can keep all your moolah in the same place and get all the benefits of checking and savings without having to shuffle your money between accounts.
Checking and savings combined. You might think that’s like oil and water. But maybe it’s more like peanut butter and jelly, and it works. It’s like bacon and eggs. Like macaroni and cheese. Like Batman and Robin!
No Fees for This Account
SoFi (which is short for “Social Finance”) is an online personal finance company that first made its name as an affordable option for refinancing student loans. It has since expanded into mortgages, personal loans — and now banking.
And here’s another big plus for SoFi’s checking-slash-savings account: There are no fees.
There are no account fees, no monthly fees and no overdraft fees. And SoFi will automatically reimburse you for ATM fees at about half a million ATMs that are in the Visa, Plus or NYCE networks.
You can open an account with no minimum balance.
Making the Switch to an Online Account
Even though online banking is growing in popularity, brick-and-mortar banks still dominate the industry.
But keeping your money in an online account might make sense for you if, like a lot of us, you pretty much do your banking on your computer or your phone, anyway.
SoFi Money takes a number of steps to make the transition easy:
- ATMs: With the automatic reimbursement of ATM fees, you can use just about any ATM anywhere for free.
- Checks: If you occasionally need a physical check — to pay your landlord or whatever — you can get checks from SoFi for free.
- Website: SoFi’s website and mobile apps have detailed FAQs, and they make it simple and easy for you to see any information you want to see.
Should You Switch to an Online Bank?
Here at The Penny Hoarder, overdraft fees are one of our pet peeves. About 30% of checking account holders pay overdraft fees each year, according to the Consumer Financial Protection Bureau. And the average overdraft fee got higher in 16 out of the last 17 years, and is now approaching $35.
SoFi Money won’t charge you overdraft fees. Instead, it cancels transactions when your account balance drops to zero.
Here’s an upside: Your account comes with a handy spending tracker called Relay, which gives you a useful, high-level view of your finances — which should make it easier to avoid a zero balance.
If you don’t already use an online bank, you’ll have to get used to having no physical branches to visit. That means you can’t make cash deposits or get face-to-face customer service from a bank teller. You can, however, talk to someone on the phone.
That could be a change from what you’re used to. But you might find it’s worth it for a free checking account with one of the highest interest rates we’ve ever found.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He’s trying to go digital.