We were debating how to title this category, and settled on “best digital banks”, even though strictly speaking that isn’t accurate. Often referred to as “challenger banks” or “neo-banks” by those in banking, the term usually refers to upstart banking products that offer their services exclusively via mobile app. The exact structure of these products is a little more complex.

In creating our list, we chose to focus on products most comparable to traditional bank checking accounts – though other types exist, like the ‘cash management’ accounts offered by SoFI and Robinhood.

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Hot take: Digital Bank Accounts

If you’re planning on holding savings, we recommend Varo to get the best savings interest rate.

If you’re traveling abroad or spending in foreign currencies, we recommend Revolut for the best features and foreign exchange rates.

Top Digital Bank Accounts 2020

All the accounts we reviewed include: app-based account opening, push alerts, budgeting tools, a Visa or Mastercard-affiliated debit card, and FDIC insurance on deposits through their partner bank up to $250,000. The key differences are highlighted here.

Revolut

Card type: prepaid Mastercard 
ATM Access:
no fee up to $300 in withdrawal per month (unclear it ATM owner charges)
Check deposit: No
Monthly fee: No ($9.99 per month for premium edition)
Other fees: Card delivery fee; 2% on foreign ATM withdrawals over $300 per month
Early direct deposit: No
Overdraft: not permitted
Card security: freeze; limited mag-stripe or internet transactions; location restrict
Savings account APY: No separate savings account
Foreign exchange rate: Interbank (best rate)
Round up the change savings: optional

Offered via bank partner: Metropolitan Commercial Bank

Varo

Card type: Visa debit  
ATM Access: 
no fees at 55,000 All Point ATMs
Check deposit:
 Yes, via mobile deposit
Monthly fee:
 None
Other fees:
 $5.95 to deposit cash via Greendot network
Early direct deposit:
 Yes, two days early
Overdraft:
 not permitted
Card security:
card freeze
Savings account APY:
 1.41% APY (2.80% APY on first $10,000 with monthly $1,000 direct deposit & 5 debit card transactions)
Foreign exchange rate:
 unknown
Round up the change savings:
 optional

Offered via bank partner: Bancorp Bank

Monzo
Only available via wait list currently

Card type: Mastercard  debit
ATM Access: 
no fee, but ATM operator may charge
Check deposit:
 No
Monthly fee:
 None
Other fees:
 3% on foreign ATM withdrawals over $300 per month
Early direct deposit:
 No
Overdraft:
 not permitted
Card security: 
card freeze
Savings account APY:
 No separate savings account
Foreign exchange rate:
 Interbank (best rate)
Round up the change savings:
 optional

Offered via bank partner: Sutton Bank

N26

Card type: Visa  debit
ATM Access: 
no fees at 55,000 All Point ATMs; 2 free out of network withdrawals per month 
Check deposit:
 No
Monthly fee:
 None
Other fees:
 unknown
Early direct deposit:
 Yes, two days early
Overdraft:
 not permitted
Card security: 
card freeze
Savings account APY:
 No separate savings account
Foreign exchange rate:
 unknown
Round up the change savings:
 No

Offered via bank partner: Axos Bank

Chime

Card type: Visa  debit
ATM Access: 
no fees at 38,000 MoneyPass or Visa Plus ATMs
Check deposit:
 Yes, via mobile deposit
Monthly fee:
 None
Other fees:
 $2.50 out of network ATM fee
Early direct deposit:
 Yes, two days early
Overdraft:
 up to $100 overdraft allowed with no fee (must opt-in; restrictions apply)
Card security: 
card freeze
Savings account APY:
 No separate savings account
Foreign exchange rate:
 unknown
Round up the change savings:
 optional

Offered via bank partner: Bancorp Bank and Stride Bank

What is a Digital Bank?

While often referred to as “digital banks” or “app-based banks”, none of the products appearing in our list are actually banks themselves. Instead, they partner with a state or federally chartered, FDIC-insured bank to offer their products. The bank each company partners with is listed in the comparison above.

The key defining aspect of these “challenger banks” is that they offer banking services via an app and have no physical branches. In most cases, they only offer customer support via chat or email.

While there is no set definition for an app-based bank, commonalities of these products include:
-Seamless, mobile-based account opening
-Few or no fees
-Visa or Mastercard-branded debit card
-Real time notifications
-Multiple sub-accounts to organize money
-‘Round up the change’-type saving program

How to Compare Digital Bank Accounts?

We’ve highlighted our key criteria in the digital bank rankings above. After looking at these five digital banks (and even more, that we chose not to include), our conclusion is that there is little differentiation among these products. If you’re considering a digital bank, these are the questions you should ask yourself.

Do you plan to hold savings in the account?

If so, Varo is the best choice. It is the only digital bank reviewed that offers a separate “savings account” product, which boasts an interest rate of 1.41% APY (as of May 19, 2020). If you get at least $1,000 direct deposit and make five debit card transactions per month, that jumps to a whopping 2.80% APY on the first $10,000.

Do you plan to travel abroad or spend in other currencies?

Pay attention to the exchange rates offered. Revolut and Monzo specify that you get the “real” exchange rate (meaning they aren’t marking this up and using it as a source of revenue). Chime, N26, and Varo don’t charge foreign transaction fees – but don’t specify the exchange rate used.

Would getting paid two days early help your budget?

Varo, Chime, and N26 offer this feature, where they’ll make funds available upon receipt of payment instruction (rather than date of settlement). This means you may get access to your funds earlier (note restrictions may apply).

Do you need to deposit checks?

Only Chime and Varo offer check deposit – via mobile deposit in their apps.

What is the difference between a digital bank and a traditional bank with an app?

The three key differences (originally anyway) were:
-Quick, app-based account opening
-Easy, feature-rich mobile app
-Low or no fees with no account minimums

These days, the major banks have caught up and offer polished web and mobile experiences on par with the digital banks. The biggest difference between a major bank and the digital banks at this point is the simplicity, low/no fees, and transparency of the accounts the digital banks are offering.

Note that none of the digital banks offer paper checks. While this might not be surprising, there are still some times when you need to be able to write a check.

Pros & Cons of a Digital Bank Account

Pros of a digital bank account
-no minimum balance requirements
-low or no fees
-quick application process
-polished, feature rich mobile app

Cons of a digital bank account
-customer service only through chat or email
-fees to deposit cash
-no paper checks
-some don’t allow DEPOSIT of check

Is it worth switching to a digital bank?

Without knowing all the particulars of your financial situation and how you use financial services, it’s hard to give specific advice. We’ve highlighted the pros and cons of using a digital bank above.

If you’ve been charged fees or struggle with minimum balance requirements with a traditional bank, a digital bank may be a good option for you. If you’re planning to travel abroad, and want a card/account specifically for that purpose, a digital bank account may also make sense.

But if you’re reasonably happy with your current account, and aren’t getting hit with monthly or hidden fees, we don’t see much upside to switching to a digital bank.

Are digital banks safe?

Yes. All the digital banks we looked at offer their services by partnering with a licensed, FDIC-insured bank partner. Your deposits are insured up to $250,000 by the FDIC.

What do I need to open a digital bank account?

The process of signing up for a digital bank account is straightforward. Once you’ve downloaded the digital bank’s app, you’ll need to go through an account opening process. You’ll need to supply your name, date of birth, address, phone number, email, and Social Security Number. While there isn’t a credit check to open digital bank account, they do need to verify your identity.

You may also need to upload a photo of a government issued ID, like a driver’s license or passport. Some also require a “selfie video” to further verify that the person opening the account is the person shown in the ID. While it may sound a bit complicated, the process is streamlined and should take about five minutes.

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