Here's What Happens When You Open an Account With an Online-Only Bank

Banking has changed by leaps and bounds over the years, and despite recent hiccups like big-name bank failures, I'd argue that banks have gotten better over time. One of the clearest examples of this is how much easier it's gotten to manage your money from wherever you are, rather than having to make a trip to a bank branch to deposit money, check your balance, or move cash around in your accounts.

In fact, technology has evolved so much that there are now online-only banks that exist only in cyberspace. Let's take a look at what happens when you open an account with one of these futuristic banks.

You'll get a range of account options

If you decide to join an online-only bank, you have choices right from the start. Online banks usually offer the same types of accounts you'll find at brick-and-mortar banks, including checking accounts, CDs, and money market accounts. But online-only banks really shine when it comes to savings accounts.

You'll earn a higher APY on your savings

If you decide to open a savings account with an online-only bank, you'll be opening yourself to the opportunity to earn more money on your money. Many of the best savings accounts available right now are offered by online banks, who pass their lower operating costs on to account holders in the form of a higher APY than you'll find with a traditional bank.

"APY" stands for annual percentage yield, and refers to how much interest you'll earn on money stored in a bank account. So if you've got a chunk of money saved up, it's worth finding a savings account with an online-only bank to house it and help it grow.

You'll enjoy a robust mobile app and banking tools

One of the pros of online-only banks is their investment in technology. If you're currently using a traditional bank (particularly a smaller one), you might be disappointed by its mobile app or website. But if you opt for an online-only bank account, you might be delighted by all the tools at your disposal, like growth projection charts for your savings, budgeting tools, and beyond.

You won't be able to directly deposit cash

It's not all sunshine and roses with online-only banks, and one difficulty you might encounter is an inability to deposit cash directly into your account. So if you tend to receive a lot of cash payments, this is something to be aware of. This doesn't mean there's no way to get cash into that account, though.

If you have an account with a bank that has physical branches (or offers the opportunity to deposit cash via ATM), you can deposit cash into that account, then transfer it to your online account (either by bank transfer or a payment app). It's an extra step, but if you don't deal in cash often, it shouldn't be enough of a reason to forgo the other perks of online banks.

You may have limited direct withdrawal options

Another thing to know about your new online bank account is that you might not easily be able to withdraw money. You don't have a physical bank branch to visit to take out cash, and it may take some research to find the best ATM to use. Online-only banks often have networks of ATMs that you can use for free (check your bank's website for locations), or they may reimburse ATM fees you pay at out-of-network ATMs.

Of course, to be able to use an ATM at all, you need an ATM card, and if you open only a savings account, you might not receive one. As an example, when I opened my online-only savings account, I knew I'd want periodic access to ATMs, so I opened a linked checking account, which came with a debit card. Getting access to your money might involve a workaround like this.

You'll pay no or few fees

Another big perk of online-only bank accounts is that they often come with fewer fees or even none at all. Since online banks don't have physical branches to maintain, they generally don't charge monthly maintenance fees on bank accounts. This is great news if you've ever been seriously annoyed that you're having to pay just to keep your account open. Some online-only banks are even doing away with overdraft fees. This is also wonderful, because when you've overdrafted your account, the last thing you need is more fees to pay on top of that.

Congratulations on your new online-only bank account! Download your bank's mobile app, enjoy a higher APY on your savings and fewer (or no) fees, and keep in mind that getting cash in or out of your account might require a bit more legwork than you're used to.