Best app-based bank accounts
The future of banking is here and it's on your mobile - we've got the lowdown on the best app-based banks and how they work...
App-based banking, digital banking, challenger banks - whatever you want to call them, a new breed of banking has arrived. If you're not part of the action, you're missing out.
These new banking products - which range from current accounts to cryptocurrencies - exist purely on your smartphone. The apps flaunt the cutting edge of banking technology, including tools to help with budgeting, saving and even stock market trading.
And best of all, many services they offer are far cheaper than mainstream banks, especially currency exchange.
We've ranked and reviewed the best apps on the market, weighing up their pros and cons, so you know which one suits your needs best...
What’s on this page?
What are app-based banks?
As the name suggests, app-based banks exist purely in app form - meaning they don't have any physical branches that you can pop into like traditional banks.
You'll still have access to support and advice, usually in the form of a live chat feature in-app or a phone line, but you won't be able to physically speak to someone face-to-face or deposit cash.
They're all free to join, although you might come across some costs for premium products (all explained below).
If you go for a current account, you'll be able to order a debit card in the post with a sort code and account number, just as you would when opening a current account with any other bank. You'll be able to set up direct debits, transfer money and pay bills just the same.
The explosion of app-only banking is a result of the UK government introducing reforms to create 'open banking'. This basically means that your everyday bank must allow you to share your financial data (such as spending habits, regular payments, bank statements etc.) with budgeting apps or other banks.
Why choose an app-based bank over a traditional bank?
More and more people are turning to app-based banks because they give you greater control over your finances.
So far it seems most adopters are using them in conjunction with a 'traditional' account. There are no rules on how many current accounts you can have, so you don't have to make a full switch.
Typically people will keep their normal current account for things like their salary and rent payments, and transfer a set amount of spending money into an app account each month to keep track of day-to-day spending.
These app-based banks boast brand new banking technology, and offer things you probably won't get at your typical bank.
Common benefits of app-based banking include:
- Real-time notifications direct to your phone each time you spend money
- Budgeting tools that help you to set spending goals and over-spending alerts
- Fee-free overseas spending
- Auto-saving features which regularly set aside money in separate pots
- Fast in-app card cancellation
- In-credit interest (in some cases)
- They make banking easier, more transparent and fun!
All banking apps are positioned slightly differently and each excels in specific areas, which we explore in our reviews below.
Is your money safe in an app-only bank?
Plenty of people are still wary about storing their money in an app-only bank. What happens if the company goes bust? Will you lose all your money?
App-based banks that are fully licensed banks (that includes Starling Bank, Monzo and Atom Bank) are all protected by the Financial Services Compensation Scheme (FSCS) meaning that your money (up to £85,000) is protected should the bank go bust.
Meanwhile, Revolut and Monese don't currently hold banking licences (so aren't covered by FSCS) but are covered by the Financial Conduct Authority (FCA). Effectively your funds are stored completely separately in a licensed bank that the app company partners with. This means if one of these apps goes bust, you'll get 100% of your money back. However, if the bigger bank used to store your money happens to go bust, your money might not be protected.
App-based bank reviews
Current account features
For a well-rounded current account, Starling Bank is your best option. Their accounts offer a wide range of features, including in-credit interest, overdrafts, savings goals and fee-free spending abroad.
Here’s a quick run down of the main features:
- Real-time notifications on your phone as you spend
- Insights into your spending habits
- Set and monitor savings goals
- Lock and unlock your card in app
- Turn off certain spending functions eg. online spending or contactless payments
- Free cash deposits via any Post Office
- 24/7 in-app customer support
- ‘Settle Up’ allows you to get paid back or split the bill in seconds
- No fees for spending abroad
- 0.25 – 0.5% in-credit interest
- Allow joint accounts.
Things to watch out for:
- You’ll be charged for using an overdraft (fees are made clear)
- Maximum three cash withdrawals a day, up to £300
- Enter the code STUDENT1 when joining for fast-track
A major thing that puts Starling Bank ahead of the pack is the interest paid on balances held with them.
Most current accounts don’t offer interest at all, so this is still a pretty sweet deal. You’ll get a decent 0.5% AER on anything up to £2,000 and then 0.25% AER on balances up to £85,000.
Behind all the banking jargon, this basically means that, unlike most other banking apps, you’ll actually be making money when you use Starling – bonus!
Starling Bank do have an overdraft facility (subject to approval) but you will be charged 15% (EAR variable). Whilst students can apply, there is no student-specific overdraft at this time, so it’s better to get a 0% interest overdraft from one of the best student bank accounts (which you can transfer across).
You can apply for an overdraft as soon as you open the app. If you’re approved, you can choose the overdraft amount (up to £1,000), and usefully select how much overdraft you actually need within that maximum amount (to stop yourself from spending the full overdraft just because it’s there).
Interest is accrued daily and then charged to your account on the 15th of the following month, but this will all be clearly laid out in the app. For example, if you borrowed £105 for 30 days, it would cost you £1.22.
The same 15% fee applies on unarranged overdrafts, with charges being capped at a maximum £2 per month.
Starling Bank will conduct a credit check before giving you an overdraft (but they won’t if you’re just opening an account).
Starling Bank offer one of the best options for spending abroad, as they charge literally zero fees. You won’t be charged for using your debit card abroad or for taking out cash at ATMs (although remember that individual ATMs might have their own charges).
They use Mastercard’s exchange rates (with no extra fees), and you won’t be charged for the card or for topping it up. Make sure to check out our other top tips for saving on travel money.
Starling is currently the only banking app which allows anyone to set up a joint account.
These are great if you’ve got a partner or friend who you share financial commitments with – perhaps you live together and want a joint account for paying the bills.
Once you’re both on Starling it takes just minutes to set up. Then you’ll both be able to add and spend money. Starling joint accounts are for a maximum of two people, so won’t work if you’re wanting to split the bills between more than a couple of people in a house share.
Revolut is pretty similar to Starling, but it’s currently not an officially licensed bank – which means it can’t offer overdrafts, direct debits or FSCS protection. However, Revolut is regulated by the Financial Conduct Authority (FCA), and your money is protected within segregated accounts with licensed banks (Lloyds or Barclays).
Some of Revolut’s best features:
- Real time notifications
- Simple analytics to track spending habits
- Instantly freeze/unfreeze cards
- Turn off online, ATM and contactless payments
- Spend and send money abroad with no fees
- Use app to buy and exchange cryptocurrency (premium)
- Split the bill function (even if they don’t have the app)
- Free debit card with this special link
- Revolut Premium unlocks higher withdrawal limit, free withdrawals overseas, trading and cryptocurrencies.
Things to watch out for:
- Revolut are covered by the FCA but not the FSCS
- You can only withdraw £200 cash for free each month
Buy and exchange cryptocurrency
One of Revolut’s big selling points is the way in which it makes it super easy to trade cryptocurrencies.
If you’re new to this world, check out our Bitcoin guide for all the basics, including how to get started and calculate risk.
Revolut allow you to buy Bitcoin, Ether, Litecoin, Bitcoin Cash, Ripple and 25 other fiat currencies. They charge a small 1.5% markup on the current exchange rate and nothing else.
You can also use the app to follow real-time cryptocurrency rates and receive price alerts straight to your phone.
Revolut’s Vaults work in a very similar way to Starling’s Goals or Monzo’s Pots – you can set them up in seconds, and use them as a way to quickly and easily save up cash.
You can round up purchases to the nearest pound and save the difference, or set up weekly or monthly recurring payments. You can also invest the difference in cryptocurrencies – so if you buy a £2.25 coffee, you could automatically invest 75p in Bitcoin which will be stored in your Vault.
Send money abroad for free
Unlike many banks which will add on hefty charges, Revolut use the wholesale Interbank Exchange Rate (which banks use to trade between themselves) allowing you to access up to 26 currencies using the app for free.
Transfers take up to two working days, but you can pay a small fee for a turbo boost which will get your money there quicker.
The same benefits extend to spending abroad on holidays by using your Revolut debit card.
Monzo is incredibly similar to Starling Bank in terms of how they’re structured and the features offered to keep track of your money.
However unlike Starling, Monzo offers no in-credit interest, so you won’t make any money by using the app.
Current account features
Up until recently, Monzo was a prepaid card. But following its transformation into a fully licensed bank in 2017, users now have their own current accounts, with sort codes and account numbers.
The app and card work in essentially the same way as before, except now you can set up direct debits and apply for an overdraft.
Here are some of Monzo’s main features:
- Real-time notifications whenever you spend
- Savings ‘Pots’ that set money aside (by rounding up every purchase you make)
- Set spending targets for everything from groceries to eating out (and notifications if you’re heading over budget)
- Their ‘Bill Tracker’ will let you know if one of your regular direct debits is higher or lower than usual
- ‘Committed Spending’ shows all your bills in one place
- Spending abroad free (plus up to £200 cash withdrawals a month)
- They’re currently trialling Joint Accounts before rolling them out to all customers soon.
Things to watch out for:
- You can only withdraw £400 a day, up to £5,500 a month
- There are some charges for spending abroad (see below)
- You’ll be charged 50p a day for using an overdraft.
Monzo Pots are designed to help customers set aside and save money. Creating a new pot takes seconds and you can add a custom image. For example, if you’re saving up for a holiday, you could create a pot called ‘Spain 2018’ and upload a picture of a nice sunny beach.
Money that’s in a pot can’t be spent and won’t appear in your available balance. However, if you run out of money, you can easily transfer funds out of your savings pots and back into your current account to use it again.
If you create a new pot and call it ‘Coin Jar’, Monzo will automatically round up any purchases over £1 and add the difference to the pot. For example, if you buy lunch for £4.25, Monzo will round it up to a fiver and add 75p to your Coin Jar pot.
Up until recently, Monzo did have completely free spending abroad. However, the app was paying a hefty amount to cover ATM withdrawal charges abroad, so following a vote among their customers, they’ve introduced some fees.
You can withdraw up to £200 abroad over a 30 day period. However, any withdrawals over that amount will incur a 3% charge.
Regardless of whether you have an overdraft or not, Monzo offer all customers a £20 buffer – meaning you’ll only start being charged when you’re overdrawn by more than £20.
After that you’ll be charged 50p a day when you’re overdrawn (again, regardless of whether you have an overdraft or not), up to a maximum of £15.50 a month.
Monzo will send you a notification before they charge you anything, giving you plenty of notice to transfer funds from elsewhere.
If you don’t have an overdraft, Monzo will simply decline any payments which take you over your limit, but this won’t work for ‘offline’ payments like those through TfL or on airplanes – in which case you’ll go into the red and start incurring the 50p daily charge.
Like Revolut, Monese isn’t a fully licensed bank but a registered Electronic Money Institution (ECA) monitored by the FCA – so your money is kept separate from the company’s finances and will be protected if the app goes bust.
They offer all the usual perks, and are especially useful for international students – but unlike some of the other apps, there are quite a few fees to be aware of with Monese.
Here’s a run down of the main features:
- No proof-of-address, credit history or regular income needed to open an account
- Real-time notifications to keep track of spending
- Lock and unlock your card instantly in app
- A balance graph creates a handy visualisation of your ingoings and outgoings
- Deposit cash into your account at the Post Office or a PayPoint shop
- Transfer money abroad into eight currencies using real wholesale exchange rates
- Transfer money to your account from outside the UK using their European IBAN
- Open both a UK and Eurozone current account, allowing you to spend in both GBP and Euros
- Receive £10 for referring a friend who then deposits at least £10 in their account.
Things to watch out for:
- The Plus account, which comes with six free ATM withdrawals a month, has a monthly fee of £4.95
- With the free Starter account, you’ll be charged £1 for each ATM withdrawal – and you can only withdraw £300 a day
- There is a 2% exchange fee for international bank transfers, card spend and ATM usage (this reduces to 0.5% with a Plus account)
- You’ll have to pay £4.95 for your debit card with a Starter account
- There’s no overdraft facility – if you do end up in the negative, you won’t be charged but your account will be locked until you top up.
Anyone can open an account
One of Monese’s biggest selling points is that virtually anyone can open account with them, regardless of how long you’ve been in the UK for.
Unlike pretty much all other banks, you don’t need to provide proof-of-address – so if you’ve just arrived in the UK from abroad, you can still get a current account set up straight away.
You’ll just need to take a selfie and a photo of your ID (preferably a passport or ID card), and you’re set! You’ll have an account number and sort code in minutes. Plus, there’s no minimum balance requirement, so you don’t need to deposit cash straight away.
Once your account is open, you can receive and make payments, and set up direct debits, just like you would with any other current account.
Since app-based banks don’t have any physical branches, it’s normally not possible to deposit cash into your account.
However, Monese have paired up with the Post Office and PayPoint so you can deposit cash that way. Simply head along to any Post Office branch, or a convenience store with a PayPoint sign, hand over your Monese card and the cash you want to deposit, and the money with appear in your account the next business day.
However, you will be charged for this service. With a free Starter account you’ll be charged 3.5% at a PayPoint (min. £3), and 2% at the Post Office (min. £2). If you pay the £4.95 monthly fee for the Plus account, you’ll only be charged 2.5% at a PayPoint and £1 at the Post Office.
Plus there are caps on how much you can deposit – £500 a day at the Post Office, and £249 per transaction/ £500 per day at a PayPoint.
It’s a useful service to have access to, but the hefty charges arguably make it pretty worthless – you’d be better off depositing cash at a traditional bank and transferring it across to your Monese account.
Other ways to deposit
As well as depositing money in cash form, you can also top up your account by standard bank transfers, IBAN transfers or instant debit card top ups.
If you’re abroad, you can transfer money into your account via the Monese European IBAN (International Bank Account Number). Simply use the IBAN details provided and include your Monese ID in the reference. Euros will then be converted into GBP and added to your account, or if you have a Eurozone account, they’ll be directed straight there.
You can also instantly top up your account using a debit card that is also in your name, but both Starter and Plus account holders will be charged 0.35% for this.
Atom Bank is a fully licensed back, but they don’t offer current accounts like Starling and Monzo. Instead, they specialise in savings accounts and mortgages.
Although the bank has plans to introduce current accounts, debit cards and instant access savings accounts in the future, you can’t currently use Atom for day-to-day spending.
One unique feature of Atom is their use of biometric security. This means that unlike most other apps which use touch ID, the Atom app uses face and voice recognition instead (along with a passcode).
To access the app you might need to take a selfie or read a phrase out loud – which is arguably much easier than trying to remember complicated pass codes or security questions.
Another unique aspect of the app is the level of personalisation they allow.
When you join you’ll be given the opportunity to create your own brand – you get to name your bank, create a logo and choose your own colour palette.
Atom’s main product is its fixed savings accounts. You can open an account in minutes, and start saving with anything from £50 – £100,000.
For each savings account you can choose between monthly or annual interest (you’ll likely get a slightly better deal if you go for annual interest).
Interest rates range from 1.3% to 2.5% AER – some of the best saving’s rates on the market. The longer you choose to invest your money for, the higher your interest rate will be.
For example, the six-month fixed saver comes with interest of 1.8% AER, while the five-year option will give you the max 2.5%.
However, remember that just like most fixed-rate savings account, you can’t withdraw your money until it reaches maturity. Make sure you’re definitely not going to need the money before you squirrel it away in a fixed rate account!
It might be a bit too soon to start thinking about these just yet as a student, but Atom’s other main product is its mortgages.
They have a network of brokers who can advise you on your situation and your best option.
Once you’ve applied, you can track your application in-app and continue to manage it from there when it’s accepted – simple!