An online bank can be as safe as a high street one if it's FDIC-insured, because the FDIC says deposits are automatically insured to at least 250,000 US dollars at each insured bank. The catch is that many money apps aren't banks. The FDIC says nonbank companies themselves are never FDIC-insured, so check which bank holds your balance.
When people ask me whether an online bank is safe, they usually mean two different things: is the company real, and is my balance protected if it goes wrong? Those aren't the same question, and the second one has a precise answer from the FDIC. I've pulled together what the FDIC and the CFPB say in their own words, turned it into a checklist, and added my guides to individual apps at the bottom.
What the FDIC insures
The FDIC says your deposits are automatically insured to at least 250,000 US dollars at each FDIC-insured bank. It says it only insures your money if it's in a deposit account at an FDIC-insured bank, and it lists mutual funds, annuities, life insurance policies, stocks and bonds, crypto assets and municipal securities as products it doesn't insure.
So the first question isn't whether a bank is online or has branches. It's whether it's FDIC-insured, and what type of account you hold with it. A savings account at an insured online bank sits in the same protection as one at a branch bank. An investment product from the same company doesn't.
Bank or fintech app: the difference that matters
Plenty of apps look like banks. They show a balance, give you a debit card and let you receive wages. But the FDIC says nonbank companies themselves are never FDIC-insured, and that funds sent to a nonbank are not eligible for insurance until the company deposits them in an FDIC-insured bank and after other conditions are met.
That's why many fintech apps work with a partner bank. The bank is the insured institution, and the app is the interface on top. It's a perfectly normal set-up, but it means your protection depends on that bank and on how the app holds and records your funds.
What happens if the app fails
This is the part most marketing skips. The FDIC says FDIC deposit insurance doesn't protect against the insolvency or bankruptcy of a nonbank company, and that recovery may take some time. It also says that if a nonbank deposited your funds in a bank, you may be eligible for pass-through FDIC deposit insurance coverage, but only in the event of a bank failure, and the nonbank must keep records identifying each owner and their share.
In plain English: pass-through cover can help if the partner bank fails, but it isn't a guarantee against problems at the app itself. Read the app's disclosures with that in mind.
Payment apps are a different case again
The CFPB says FDIC insurance generally doesn't apply to money that sits in your payment app unless you sign up for additional services from the app, and that payment apps are provided by companies that don't carry FDIC or NCUA insurance. It suggests moving money right away from the payment app into an insured bank, credit union or card account.
If you use an app to send or receive payments, treat it as a pipe, not a place to store a balance, unless its own disclosures clearly say otherwise.
A checklist for checking any online bank
- Find the bank's name in the app or on its website, not just the brand name. If an app says its products are insured, the FDIC says to identify the specific FDIC-insured bank or banks where it says it will deposit your funds.
- Search for that bank in the FDIC's BankFind Suite, which lets you search by bank name, FDIC certificate number, web address, location or branch office.
- Check the product, not just the company. Deposit accounts are insured; investments and crypto assets are not.
- Read the disclosures and terms of service carefully. The FDIC says to check whether the account may be eligible for insurance before you deposit funds.
- Be clear on what's insured if the app itself fails, and what isn't.
- If you're unsure, call the FDIC on 877-ASK-FDIC to check whether you're dealing with an insured bank.
- Watch for lookalike pitches: an app that talks about insurance but never names a bank is one to question before you move any balance.
| What you hold | What the FDIC and CFPB say |
|---|---|
| A deposit account at an FDIC-insured bank | Automatically insured to at least 250,000 US dollars at each insured bank |
| A balance held by a nonbank app | Nonbank companies are never FDIC-insured themselves |
| Funds a nonbank deposited at a bank | May be eligible for pass-through cover, only if the bank fails |
| A payment app balance | FDIC insurance generally doesn't apply unless you sign up for additional services |
| Stocks, crypto assets, mutual funds | Not insured by the FDIC |
It also helps to know that the CFPB advises reading the information for your app. Some apps require steps such as signing up for direct deposit or using the app's own card before FDIC or NCUA coverage applies to your balance, so the small print can change the answer from one app to the next. If the wording is vague, ask support to confirm the partner bank in writing before you move a balance across.
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I can't give financial advice, and your own circumstances matter, so use this as a way to ask the right questions.
Online banks and finance apps I've covered
These guides apply the same checks to the names people ask me about, from app-based accounts to lenders and credit builders. Remember that some are banks, some work with partner banks and some aren't offering deposit accounts at all.
Online banks and finance apps
Each guide sets out who runs the company and what its own pages say, so you can run the checklist above.
- Is Chime legit?
- Is Varo legit?
- Is Current legit?
- Is SoFi legit?
- Is Wise legit?
- Is GO2bank legit?
- Is LendingClub legit?
- Is MoneyLion legit?
- Is Upgrade legit?
- Is Credit One Bank legit?
- Is Acorns legit?
- Is Kikoff legit?
- Is Self legit?
My verdict on online banking
Online banks aren't unsafe by default. What matters is whether there's an FDIC-insured bank behind your account and whether you're holding a deposit product. Do the BankFind check, read the disclosures and be wary of any app that talks about insurance without naming the bank.
Frequently asked questions
Are online banks as safe as traditional banks?
If an online bank is FDIC-insured, the FDIC says deposits are automatically insured to at least 250,000 US dollars at each insured bank, the same as at a branch bank.
How do I check if a bank is FDIC-insured?
The FDIC says you can use its BankFind Suite, searching by bank name, FDIC certificate number, web address, location or branch office. You can also call 877-ASK-FDIC.
Is a fintech app the same as a bank?
No. The FDIC says nonbank companies themselves are never FDIC-insured. Many apps work with a partner bank that holds the deposits.
What is pass-through insurance?
The FDIC says that if a nonbank deposited your funds in a bank you may be eligible for pass-through coverage, only in the event of a bank failure, and the nonbank must keep records identifying each owner and their share.
Is a payment app balance insured?
The CFPB says FDIC insurance generally doesn't apply to money that sits in your payment app unless you sign up for additional services from the app.
