How switching to an online bank made me thousands richer

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After we married, my husband and I were eager to start our financial journey together on the right foot. We closed our separate accounts and opened a joint account at Bank of America. We opted for the convenience of a branch less than a mile away from our home. 
The idea of having easy ATM access and in-person support to answer our questions seemed like the right choice.

But after a few years, we began to hear about the advantages of online banking. Despite our hesitation, we decided to try it and moved our savings and direct deposits to Ally Bank, one of the leading online banks.

Six years later, I can confidently say that switching to an online bank has been a game-changer for our money. By taking advantage of the benefits offered by online banking, we've saved money in fees and earned significantly more interest on our savings. 

Here are five reasons I’m happy I switched to a digital bank — and how online banking has made me thousands of dollars richer over the years.

1. No maintenance fees or requirements 

One of the big benefits we noticed after switching to an online bank was the lack of maintenance fees. 

Before, we had two Bank of America accounts: an Advantage Plus Banking checking account and an Advantage Savings account. The checking account had a monthly fee of $12, and the Advantage Savings account had a monthly fee of $8. 

Fees could be waived if we met certain conditions, such as maintaining a minimum balance. While we had always managed to avoid these fees, it was a constant concern.

Together, both fees would have cost around $20 per month. If we had incurred those fees at Bank of America over the past six years, it would have cost us $240 per year, or $1,440 in total. 

Ally Bank offers a Spending account (similar to a checking account) and a Savings account. Both accounts charge no monthly maintenance fees. By switching, we no longer had to worry about meeting any requirements or facing monthly charges. 

This saved money and reduced our stress, especially when I transitioned to freelance work and didn't have a consistent direct deposit.

2. Mobile deposit and ATM fee waivers 

One concern consumers have about online banks is the lack of branches for depositing checks and withdrawing cash. 

But Ally's mobile deposit feature makes depositing checks a breeze. With just a few photos, my freelance checks are deposited into my account, saving me the 10-15 minute trip to the bank branch.

Ally is part of the Allpoint network, which has just as many ATMs as Bank of America in our area. The Allpoint network also has over 43,000 ATMs nationwide, allowing me to deposit or withdraw cash while traveling domestically. 

Plus, Ally reimburses up to $10 in ATM fees each month, allowing me to withdraw cash from any ATM about three times per month without worrying about extra charges.

3. Higher interest rates on checking and savings accounts 

While the convenience and lack of fees are significant perks, the real advantage of online banks is the higher interest rates. When we first switched our savings to Ally, our savings account had an APY of around 1.25%. This is a far cry from the 0.02% APY offered by Bank of America.

Over time, interest rates fluctuated due to economic conditions (especially during the COVID-19 pandemic). But even at its lowest point, Ally Bank’s savings account interest rate was 0.50%, still far better than what we would have earned with a traditional bank.

We’ve averaged around 1.7% APY on our savings for the past six years. Today, as of May 2024, we're earning an impressive 4.20% on our money.

To show the impact of these higher rates, let's compare the earnings on our $20,000 emergency fund over six years:

• With our previous bank's 0.02% interest rate, we would have earned a mere $24 in total interest.
• With Ally Bank's average rate of 1.7% over the past six years, we've earned over $2,000 in interest.

If that wasn’t enough, Ally’s Spending account offers interest — rare for most big banks. You can earn 0.25% APY on balances over $15,000 (and 0.10% on balances less than $15,000). This is compared to Bank of America, which offers a paltry 0.01% on its checking account.

My husband and I sometimes put additional cash in our savings account for upcoming expenses or life transitions. We can easily transfer funds between checking and savings, allowing us to maximize our interest.

4. Budgeting is made easy with the buckets feature 

One of my favorite features of Ally is their Spending and Saving Buckets. This tool allows us to allocate money for specific uses without a separate budgeting app. We can create buckets for expenses like groceries, medical costs, or bills. Our debit card purchases are automatically linked to the specific category.

Setting up buckets takes a bit of time and effort. But once we got the hang of it, we found it much easier and more effective than a third-party app. Having everything in one place made overspending feel more visceral, as it directly impacted our account.

We also use buckets within our savings account to save for major purchases, such as a down payment on a home or a new car. Knowing that I'm contributing to a specific goal makes it easier to stay motivated. 

The flexibility of buckets allows us to move around funds as needed. If we have an unexpected car repair that exceeds our set amount, we can pull from another bucket to cover the expense.

5. Excellent customer service 

Although we don't contact customer service often, the few times I've contacted Ally Bank have been positive experiences. Wait times for phone support have been minimal, and I've always received helpful answers to my questions.

As someone who prefers not to spend too much time on the phone, I appreciate the option to use the chat feature for quick inquiries. The chat support offers guidance on tasks like ordering new checks or navigating the mobile app.

The bottom line 

Switching to an online bank has been one of my husband's and I's best financial decisions. Over the past six years, we've saved thousands of dollars in fees and earned significant interest on our savings.

Ally Bank's features have simplified our finances and allowed us to focus on our goals without worrying about fees. If you're considering switching to an online bank, I recommend researching your options and finding one that aligns with your needs and priorities. 

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.