Online banking is not only very, very convenient, but can also be a good way to get a better bank account. Online only banks and bank accounts generally have less overheads to pay, meaning they can offer their customers better terms. For example, you might find that an online bank account has a better interest rate or overdraft rate. An online bank account can be accessed at any time with no waiting in queues, making managing your finances very easy indeed. Most accounts will allow you to take care of everyday transactions like bill paying, money transfers, and standing orders or direct debits. It does however mean you need a certain level of computer literacy, as logging in online replaces face-to-face customer service in a branch. At the moment, many current accounts are offering better interest rates than savings accounts – so if you plan to save rather than spend, it’s definitely worth looking at both types to check all your online only bank account options.
Online Only Accounts
First Direct Regular Saver Account
If you want a savings account, then the Regular Saver offers a generous interest rate in return for regular deposits. The AER (basically, the interest rate) is 6% and the requirements in return are an investment every month of between £25 to £300. The saving amount can also be carried over to the following months. The interest is worked out daily and is paid at the end of the first year. So, if you want to save up and won’t need to withdraw the money, the returns could be good – up to £117 in total. First direct offers customer support 24 hours, 7 days a week, and a mobile banking app that can be used with iPhone, Android and iPad.
First Direct 1st Account
If you need a current account, the 1st Account may be more appropriate. It allows for £250 of interest-free overdraft, and comes with a ‘satisfaction guarantee’ – if you don’t like the account, the bank will give you £100 (though you need to have deposited £1,000 every month for 6 months beforehand). The bank will also give you £100 for joining, though you have to have deposited £1,000 in the account within 3 months of the open date. Firstdirect also offers ‘text message banking’ which allows you to receive a mini statement by phone, know when you reach your overdraft, and other information as well.
Tesco Bank Current Account
This online only bank account has no monthly fee and an interest rate of 3% AER for savings up to £3,000. You also receive 1 point for every £4 spent in Tesco (1 point per £8 spent for elsewhere), so if you do all your grocery shopping in Tesco and prefer not to use a credit card, it can be a great extra benefit. If you go into your overdraft you can expect to pay out 18.9% EAR though this will vary.
Santander eSaver Account
This online-only account pays a relatively low interest rate of 0.35% AER, but it does offer unlimited deposits and withdrawals. So if you think you’ll need to access your money frequently rather than just leaving it in the account, this could work. There’s also no monthly fee. Interest is calculated daily and can be paid either monthly or annually. Both online and mobile banking services can be used with this account.
Card One Banking Guaranteed Acceptance Bank Account
This card doesn’t need credit checks in the application process, and guarantees to accept you as an account holder. It comes with a prepaid debit card and the account can be used to pay bills and receive payments. When your salary is received into the account, the funds are used to pay for bills, then the remainder can be transferred onto the card. This can be good if you are one of the approximately one million people in the UK who aren’t eligible for a ‘normal’ bank account. While perks are very limited, having this kind of online-only bank account and managing it well can help build a good credit history, making it more likely you will be accepted for other financial products in the future. Though the account is online, cash and cheques can be paid in through branches of National Westminster Bank.
Online Accounts From High Street Banks
This current account offers an interest rate of 5% on balances up to £2,500, and has a 0% overdraft for the first year. If you will have a balance of less than £2,500, and if you plan to go into your overdraft every now and then, this offers good value. It does however require a monthly injection of £1,000, and after one year the interest rate drops to 1%. At that point, it would make sense to look for a new bank account that offers a better interest rate. Though this account offers online banking, it is not a bank account that operates only online, so you can benefit from being able to visit branches too.
Santander 123 Current Account
This account is not online-only, but offers a competitive interest rate (3% for a balance of at least £3,000) with the benefits of a current account. The overdraft rate is 0% for the first 4 months if you’re an account switcher, and there’s monthly cashback offers for household bills. There is a £5 monthly fee however, and at least £500 must be paid in each month. If you will have large amounts coming in, and you don’t want to move sums of that money to a higher interest savings account, then the more generous interest rate on this current account could work for you.
Ulster Bank Current Account
This current account offers some useful extras. The Emergency Cash Service lets you take up to £300 from an ATM if your debit card is lost or stolen. The account also offers text alerts to help manage the account, and a special mobile banking app. There’s no monthly fee either. The interest rate on your savings however is low, being 0.01% AER. This bank does have branches in Northern Ireland, though for anyone living outside of that area it will effectively operate as an online account.