The four best digital-only banks revealed

As a result of local bank branch closures, more and more Brits are being forced to turn to a digital bank.

As many as 16 percent of Britons have opened or are planning to open a digital checking account due to traditional bank branch closures in their area, according to research from comparison site Finder.

According to consumer group Which? main banks have closed 5,355 branches since January 2015.

This year, 102 bank branches have already been earmarked for closure. If the closures continue at this rate for the rest of the year, they will likely eclipse the 2022 figure of 619.

Overall, a quarter of adults currently hold an account with a digital bank, up from just 9 percent of the population when the survey was first conducted in 2019.

This is not surprising given the rapid growth of some online-only banks in recent years.

Monzo claims to have attracted more than 7 million customers since its launch in 2015, while Starling Bank has attracted about 3.5 million customers since 2014.

JP Morgan’s Chase banking brand, which launched in the UK in September 2021, raised more than 1 million in its first year.

According to Finder, another 10 percent of the population said they plan to open a digital bank account in the next 12 months.

Closing bank branches is probably not the only reason why more and more people are opening a digital bank account.

Digital banks offer some of the most accessible savings rates at a time when many of the major banks are paying substandard rates.

Kroo, for example, pays 3.03 percent in credit interest, while Chase and Monzo both have linked instant savings accounts that pay 3 percent.

Digital-only banks also almost always allow free transactions abroad, which many of the big banks don’t.

Many of the major banks charge transaction fees when using their debit card abroad. For example, Lloyds and Barclays charge 2.99 percent, while NatWest and HSBC charge 2.75 percent. They also typically charge a cash withdrawal fee at ATMs.

The digital-only UK banks tend to spare their customers these sneaky fees.

We’ve decided to take a closer look at the four most popular digital bank accounts currently being offered to Brits.

What is it?

Chase is part of US financial giant JP Morgan and launched in the UK in September 2021.

During its first year of offering bank accounts in the UK, it attracted over a million customers.

However, it is by no means a new entrant in banking, as it also has 56 million digital customers in the US and parent company JPMorgan manages trillions of pounds in assets.

Notable features

• One percent cashback on card spend for 12 months (capped at £15 per month)
• The cashback offer will be extended for one year if you deposit £500 per month into the account
• Access to linked easy access savings account that pays 3 percent
• Round up trades to put savings on autopilot at 5 percent interest
• From April 2023 you can receive 1 percent interest on current account balances
• There are no costs associated with using the Chase Debit Card abroad
• It also has a numberless card for an extra layer of security

App rating:

• Apple App Store: 4.9
• Google Play: 4.6

Watch out:

It is worth noting that you will need a relatively new smartphone to manage the account.

Your smartphone must have iOS 14 and above or access Google Play on Android 8.1 and above, which means some devices are not supported due to hardware limitations.

The bank also doesn’t currently offer joint accounts, so it won’t necessarily work for everyone.

Chase does not allow overdrafts, so the limit on the payments you can make is the amount you have in your account.

What is it:

As only online banks go, Monzo has one of the longest histories and largest customer bases.

Founded in 2015, it claims to be the UK’s largest digital bank with over 7 million customers, adding 150,000 each month.

Notable features:

• Monzo has a linked account with direct access of 3 percent
• Instant expense alerts and spending budgets for things like groceries
• Categorizes expenses into groups such as transportation, groceries, and eating out
• No charges for using the card abroad

App rating:

• Apple App Store: 4.6
• Google Play store: 4.1

Watch out:

There are three types of personal checking accounts to choose from: the standard free account, the £5 a month Monzo Plus and the £15 Monzo Premium.

Most people opt for the free account. The other two accounts offer extras such as phone insurance or rounding up small change to savings.

Overdraft rates are either 19 percent, 29 percent, or 39 percent, depending on credit score.

What is it:

Originally a smartphone-only bank with offerings largely aimed at holidaymakers, Starling has increasingly become a legitimate, profitable challenger to Britain’s largest banks.

It currently has more than 2,000 employees and serves approximately 3.5 million current account customers.

It has consistently achieved the highest number of net accounts through the official switching service since the start of 2020.

Notable features:

• No costs abroad
• Instant payment notifications
• Complete transactions to put savings on autopilot
• Your expenses categorized
• Instant card lock security
• Share the bill with friends

App rating:

• Apple App Store: 4.9
• Google Play: 4.5

Watch out:

Starling offers a regulated overdraft option. Rates are charged at 15 percent, 25 percent, or 35 percent depending on credit score.

What is it:

Although Kroo was founded way back in 2016, it is really a newcomer. It launched its current account late last year after being granted a full UK banking license.

Kroo also wants to appeal to people by promising to plant two trees for every account opened, with the goal of planting one million trees by the end of 2023.

Notable features:

• It pays 3.03 per cent credit interest on balances up to £85,000
• No extra costs for spending abroad
• It plants two trees for every current account opened
• Bill splitting feature allows customers to spend, track and checkout with friends
• Instant spending notifications
• Divides expenses into categories, such as transportation, groceries, and eating out

App rating:

• Apple App Store: 4.7
• GooglePlay: 4.4

Watch out:

As a newcomer, this is the most untested of all four bank accounts. There have been reports of long waiting times due to high demand for those wanting to sign up.

Kroo does offer the option of being allowed to be overdrawn. The rate is calculated at 24.9 percent.