Discover Bank and Capital One are often recognized as credit card giants, but these financial institutions offer banking products and services as well. And they’re both known for providing fee-free online accounts with competitive interest rates.

If you’re looking for a new bank, you might be wondering which is better: Discover vs. Capital One. Read on to learn more about the key features and differences between Discover and Capital One’s offerings.

Founded in 1986, Discover Bank offers a wide range of credit cards, including rewards credit cards, credit cards for building credit, fee-free credit cards, as well as several online bank accounts. This includes a cash-back checking account, a high-yield savings account, certificates of deposit (CDs), money market accounts (MMAs), and retirement accounts.

Read our full review of Discover Bank

Capital One was founded in 1994 as a credit card company and has since expanded its offerings to include a full suite of banking products and services for consumers and businesses. These include savings accounts, checking accounts, and more. Capital One also gives customers access to an extensive library of educational resources and credit tools.

Read our full review of Capital One

If you’re searching for a checking account that earns interest, Capital One is the clear winner. Even though it offers a conservative 0.1% APY, that’s still more than the current national average rate for interest-bearing checking accounts.

Discover’s checking account does not earn interest, but it does make up for that by offering 1% cash back on up to $3,000 in debit card purchases each month.

There are no overdraft fees, monthly maintenance fees, or minimum balances associated with either account. Both of these checking accounts made our top 10 list of the best free checking accounts available today.

Capital One and Discover have similar offerings when it comes to savings accounts. Both accounts offer a competitive 3.5% APY, which is more than eight times the national average. Neither account charges a monthly mainenance fee or requires a minimum balance.

The main difference between these two accounts is that Discover's savings account is currently offering a welcome bonus of up to $200 if you meet certain criteria.

Choosing between Discover CDs and Capital One CDs will depend on the factors that are most important to you. Both banks offer CD interest rates up to 4.2% APY, though Discover offers a wider range of terms.

Neither account requires a minimum opening deposit, but there is an early withdrawal penalty of up to 24 months’ worth of simple interest for Discover’s CDs and up to six months’ worth of interest for Capital One CDs. If there’s a chance you may need to withdraw your funds before your CD reaches maturity, Capital One is potentially a safer bet because it charges a smaller penalty than Discover.

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Capital One does not currently offer a money market account.

Discover’s money market account offers up to 3.45% APY and does not impose a minimum opening deposit, minimum balance requirements, or monthly maintenance fees. This account also comes with a debit card and checks for easier access to your money. Because of these many benefits, Discover’s money market account made our list of the 10 best money market accounts available today.

In addition to deposit accounts, Discover offers credit cards, personal loans, student loans, home loans, and retirement accounts.

Capital One offers a number of different types of credit cards, including credit-building cards, cashback cards, travel rewards cards, student rewards cards, and business rewards cards. It also provides auto, business, and commercial loans.

Both Discover and Capital One offer competitive APYs on their banking products. They both provide an attractive 3.5% APY on savings accounts and similar CD rates up to 4.2% APY.

However, Discover offers money market accounts (with up to 3.45% APY) while Capital One does not offer this product.

Both Discover and Capital One operate on no-fee models; neither bank charges monthly maintenance fees or overdraft fees for its deposit accounts.

Discover and Capital One are fairly similar when it comes to their rates, fees, and product offerings. However, Discover Bank is the better choice for those who want to earn rewards on their checking account spending and/or are interested in opening a money market account.

Capital One is a solid option for those who are interested in earning as much interest as possible on their deposits. Capital One’s checking accounts currently offer 0.10% APY, while its CDs offer rates as high as 4.50% APY.

Read more: How Capital One's acquisition of Discover could affect you

Capital One and Chase are both big names in banking. Both banks offer a range of financial products and services such as checking and savings accounts, certificates of deposit, lending products, and more. Here’s how these two banks stack up against each other.

Capital One is a Virginia-based credit card company founded in 1994. Over the years, Capital One has expanded its offerings to include a full suite of financial products and services for consumers and businesses, including savings accounts, checking accounts, loans, and more, which are available online. Capital One also gives customers access to an extensive library of educational resources and credit tools.

Read our full review of Capital One here

JPMorgan Chase Bank, more commonly known as Chase, is a national bank headquartered in New York City that offers personal, business, and commercial banking products. Its offerings include checking accounts, savings accounts, CDs, credit cards, home and auto loans, and more.

Capital One’s most basic checking account — the 360 Checking Account — offers 0.10% APY with no monthly fees and no overdraft fees. Capital One also offers a significantly larger ATM network than Chase with more than 70,000+ fee-free ATMs (versus 15,000 for Chase).

Capital One’s 360 checking account made our list of the 10 best free checking accounts available today.

Chase Bank’s most basic checking account is free to open. However, it does not earn interest, and there is a $12 monthly fee unless you meet certain requirements to have it waived. This account also imposes a $34 fee for overdrafts. Its ATM network includes about 15,000 ATMs.

When comparing each bank’s savings accounts, Capital One’s 360 Performance Savings outperforms Chase’s Savings Account in a few key ways.

With 4.10% APY, Capital One’s savings interest rate is more than eight times the national average. The 360 Performance Savings account is also free to open and has no monthly fees or minimum balance requirements.

Chase’s savings account, on the other hand, only offers 0.01% APY for its savings account and does not currently offer a high-yield savings account option. There is no minimum opening deposit or minimum balance requirement, but there is a $5 monthly fee unless you qualify to have it waived.

Capital One’s CDs range from 6-month to 60-month terms and offer up to 4.30% APY with no minimum opening deposit requirement.

Chase offers a wide range of terms from one month to 120 months. However, the minimum opening deposit for a Chase CD is $1,000 and these CDs only offer 0.01% APY, regardless of the term (relationship customers can earn 0.02% APY).

Read more: What is relationship banking, and is it worth it?

In addition to deposit accounts, Capital One also offers a variety of credit cards, including travel rewards cards, cash-back cards, student cards, business credit cards, and more. It also offers auto loans and auto loan refinancing, as well as credit monitoring tools.

Chase Bank also offers personal and business credit cards, as well as home and auto loans, and investment products. Chase customers can also take advantage of Chase’s free credit score tool and online education center for more financial education resources.

Capital One offers significantly higher APYs on its deposit products than Chase Bank. While Capital One customers can earn as much as 4.50% APY on their balances, Chase’s accounts offer a maximum of 0.02% APY.

Read more: APY vs. interest rate: What's the difference, and why does it matter?

When you switch from a traditional bank to an online bank, there can be a bit of a learning curve.

Online banks don't usually have physical locations, and they don't deal with physical money, so you'll have to do some searching to find out how you can conduct certain transactions — like depositing cash to your bank account. Your options for making a cash deposit depend on the financial institution, but in most cases, it's as easy as visiting a nearby ATM.

There are several ways to deposit cash to an online bank account, with some much more convenient than others. Before you choose one of your bank's options, look into their deposit limits for each method, the amount of time it takes to gain access to your funds, and the fees involved with the transaction.

Like traditional banks, most online banks have ATM networks you can use to withdraw and deposit cash. However, when you search for an ATM for your online bank, you might have to narrow your search to ATMs that specifically accept deposits.

To avoid ATM fees, look for an in-network ATM. If you do have to go out of network, check to see if your online bank reimburses the fee. For example, Alliant reimburses ATM fees up to $20 a month.

Once you complete a cash deposit at an ATM, don't expect the funds to be available right away. There may be a cap on how much of the money you can access on the same day, and then a waiting period of one or more business days before the rest is available. With Axos Bank, for example, you'll have to wait up to five business days to withdraw funds if you deposit them at an out-of-network ATM.

Several online banks partner with retail locations that you can visit to deposit cash. For example, Axos and Varo Bank allow you to deposit cash at Green Dot Retailers, which include Walmart, 7-Eleven, CVS, Dollar General, Kroger, and a handful of other chain stores. To make a deposit, you simply visit the retail location and ask a cashier to conduct the transaction.

Just note that you may be charged a fee at certain locations. With Chime, you can make fee-free deposits at Walgreens and Duane Reade, but could pay a fee if you go elsewhere. Axos and SoFi's retail partners charge up to $4.95 per transaction.

Another option is to transfer the money through a linked account. To go this route, you'll first have to link your online account to one of your outside accounts at a traditional bank. Then, you deposit the cash to your linked account and transfer the money between banks.

While the transfer process itself can take just a few seconds, it might take a few business days to set up a linked account, since you'll likely have to complete an account verification process, which includes making a trial deposit. So instead of waiting until you need to deposit cash, consider setting up a linked account as soon as you open your online account.

Perhaps the least convenient way to get cash into your online account is to send money via wire transfer. This is another option that requires you to visit a bank branch as your first step since online banks typically accept wires via bank only (and not through wire transfer services). Once you deposit the funds, you'll have to provide your bank with the following:

Photo ID

Your name and contact information

The bank account number for your online account

Your online bank's ABA or RTN routing number

Adding to the inconvenience of this option is the fact that it can take up to three business days for the funds to be available after a wire transfer, and your bank may charge a transfer fee of around $25 to $50.

Before choosing an online-only bank, check to see if and how they accept cash deposits. While many online banks issue debit cards that you can use to deposit cash at ATMs, some don't. For example, Marcus by Goldman Sachs does not issue debit cards or allow ATM use, and Ally and Discover only allow you to withdraw money at ATMs.

Here's an example of a few online-only banks and credit unions that do accept cash deposits:

The popularity of online banks has exploded since the internet was commercialized in the late 1990s and early 2000s. According to university researchers, online banks have increased their deposits by a factor of 30 since 2001, three times the rate of traditional banks in the same period.

Why? Customers are drawn to the higher interest rates that online banks offer on deposit accounts, which also often come with lower fees.

It’s no surprise that banking customers like higher rates and lower fees. But why is it that online banks consistently offer the most competitive savings options? Let’s take a look.

Read more: The 10 best online banks of 2024

Every bank is different, but their reason for paying higher deposit rates often comes down to a combination of lower costs and more competition.

Online banks typically face lower overhead costs than traditional banks. This is because they don’t maintain physical branches, which means they don’t have to pay to lease buildings, heat and cool them, pay people to clean at the end of the day, and so on. Simply put, there are far fewer expenses when banks aren’t paying to run hundreds or even thousands of branches five to six days a week.

Online banks don’t pocket the entirety of the cost savings they achieve through lower overhead. They often pass those lower costs on to consumers, which is one reason for the higher deposit rates and lower fees.

One of the primary ways banks make money is by lending out customer deposits to individuals and businesses. So they need to encourage customers to keep money in their accounts. However, online banks are often newer companies without the brand loyalty of big banks, so they may need to pay higher interest rates to encourage new business.

Competition can be fierce in banking, which is only amplified with online banks. Customers can now use more than just a handful of banks near home; they can open an account with an online bank from anywhere, within minutes.

There are dozens of online banks, all vying for deposits from the same customers. As a result, there can be a race to the top. In theory, the bank that pays the highest rates can win over more customers from competing banks.

The national average savings account rate is just 0.46%, according to the FDIC. However, many online banks pay interest rates upwards of 5% APY.

That said, deposit rates for online savings accounts rarely exceed the federal funds rate, which is the rate banks pay to borrow money from each other overnight. As of Aug. 22, the Fed’s target range is 5.25%-5.50%.

Even online banks looking to push the limit on deposit rates don’t usually exceed the top end of that range. And for those that are close, there may be caveats. For instance, Poppy Bank pays 5.50% APY, but the depositor must maintain a minimum balance of $1,000. MyBankingDirect pays 5.35% APY but requires a minimum of $500 to open. Flagstar pays 5.35% as well, but the minimum balance is $25,000, and the high APY is only guaranteed for five months.

As mentioned, online banks give customers high rates to attract their deposits and prevent them from going to competitors. However, competitive environments usually mean things are constantly changing, and online savings rates are no exception. That said, these are the best online savings rates currently available:

If you don’t want to be at the mercy of variable savings account rates, which can change frequently, you might consider a certificate of deposit (CD). These accounts often have fixed interest rates, allowing you to lock in your APY for the entire term.

The catch: You usually can’t make withdrawals from a CD before the maturity date without paying penalties, but some consumers might see that as a fair tradeoff to avoid the possibility of a drop in savings account rates. That is especially true as interest rate cuts seem increasingly likely this year.

If that happens, deposit rates will follow suit. However, locking in one of today’s top CD interest rates can help insulate you from falling deposit rates:

Online banks can offer many benefits, including high interest rates, few fees, and low minimum balance requirements. These perks can be attractive to consumers who want to get the most out of their money, especially if they already do most of their banking from a mobile device.

However, online banks can have drawbacks. For one, they don’t have physical branches, which means you can’t meet with someone in person if you need help (though many online banks offer 24/7 customer support via phone, email, or live chat). You may be able to find competitive savings account rates at your local community bank or credit union, where you’ll receive more personalized attention as well.

Many online banks also have a convenient mobile check deposit feature. However, it may be tougher to deposit cash. And when you can, you may need to pay a fee.

Similarly, while some online banks give you access to vast ATM networks, not all have this benefit. Those that don’t may reimburse you (up to a limit) for third-party ATM fees, but you still have to pay the fee upfront.

Overall, online banks have several benefits and drawbacks to consider. If you feel the pros outweigh the cons, they can be a great place to keep your money. However, you can always keep your traditional bank account active alongside an online savings account. That way, you will still have access to in-person services should you need them, along with the benefits online savings accounts offer.

When was the last time you walked into a physical branch of your bank? If you can't remember how long ago it was, it might be time to switch to online banking.

While online-only banks have some limitations — particularly for people with spotty internet access — they also deliver higher interest rates on deposit accounts and lower fees than traditional banks, often with similar (or better) security.

For the most part, online banks offer the same protections as brick-and-mortar institutions, including FDIC insurance on your deposits. So, as with traditional banking, it's a combination of the bank's security measures and your personal habits that determine how safe your accounts will be.

In this age of data breaches, it's natural to have doubts about the safety of online banking. In 2023, banks represented almost half of all companies that experienced financial data breaches, while credit unions made up another 7%, according to Comparitech. By comparison, however, online banks experienced less than 0.5%.

While online and traditional banks have many of the same cybersecurity and privacy regulations, online banks may be safer because they have no physical branches, meaning far fewer employees. As negligible as that detail may seem, a study from Verizon found that some 74% of all data breaches were enabled by employee activity, whether it was through errors or deliberate fraud.

That doesn't mean online banking is always safer than traditional alternatives, especially since data breaches aren't the only security threat to customers. Whether you complete your bank transactions digitally or in person, the transaction happens online, and your sensitive account information is stored online, too. In other words, it's still vulnerable to threats like malware and identity theft whether you bank in person or online.

Every bank has its own set of security policies, but online banks are generally as safe as traditional banks since they often use the same preventative security measures, including:

Encryption software

Multi-factor authentication

Firewalls

Monitoring for unusual account activity

Mandated privacy policy training for employees

Keep in mind these are all best practices, and some banks are better than others when it comes to online security. When choosing an online bank, prioritize those that offer robust security features.

Further, as an account holder, it's also up to you to take advantage of the most valuable security features each bank offers, whether it's an online bank or not. That includes enabling multi-factor authentication, account alerts, and automatic updates for your banking app.

You can also take simple steps to keep your account safe from some of the biggest threats to banking security: phishing and stolen login credentials. Wherever you bank, you should always choose a strong and unique password for your accounts, never log in while using public WiFi, and avoid clicking on links in unsolicited emails and text messages.

Read more: How to use AI to improve your finances

To find out if an online bank is legitimate and secure, you'll need to verify through reputable sources. At a minimum, your online bank should be FDIC insured — meaning they insure you against losses on up to $250,000 in deposits — and actively in business, both of which you can quickly confirm using the FDIC's BankFind Suite tool.

For good measure, go one step further and check to see what you can find out about the bank online. To learn about their track record with security issues, search for news and reports on cybersecurity incidents at the bank, read their customer reviews, and check out their app ratings.

If the bank is legitimate, you should also be able to find information about their security policies on their website easily. Take a look to confirm that they provide 128-bit or 256-bit data encryption and use multi-factor authentication. If this information isn't posted on their website, consider it a sign to look for another online bank.