Three app-only banks you should know about

A new type of bank has appeared in the UK over the past couple of years: the mobile-only bank.

These offer savings and current accounts that you can only operate via an app on your smartphone. Not having to pay for branches gives these challenger banks a low cost base, which means in some cases they are offering fantastic deals.

Here’s three you need to know about, all of which are like most deposit holders covered by the Financial Services Compensation Scheme so even if the bank were to go bust, you'd get up to £85,000 of your cash back.

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Great for savers: Atom Bank

Since launching in 2015 this app-only bank has repeatedly hit the headlines for offering table-topping savings rates. At the moment it is offering among the top three best rates for one, two, three and five-year fixed-rate accounts, offering interest of up to 2.4 per cent.

You can open an account with as little as £50 and monitor your savings via the app. As for security, Atom Bank has been one of the market-leaders when it comes to biometrics - you can log in using facial, voice or fingerprint recognition.

Great for travellers: Starling Bank

Starling Bank offers a current account with a debit card you can use fee-free when you are abroad, cutting back substantially on your holiday costs. It has also partnered with Transferwise to give customers direct access to a low-cost foreign exchange service.

The app tracks your spending and can group it by shop, so you can see exactly how much you've spent on those takeaway coffees - a helpful guide if you want to start saving as you can see where you are overspending and where you might want to make cutbacks.

There is also a feature that lets you lock your debit card if you think it has been lost or stolen. You can unlock it again if you find it.

Starling Bank isn't yet fully open for business. It is allowing a limited number of people to open current accounts at a time, so it is not overwhelmed. Download the app and start the application process and it will contact you when it is next accepting new customers.

The current account pays 0.5 per cent interest on balances up to £2,000 and 0.25 per cent above that. You can have an overdraft with a 15 per cent AER interest rate.

Great for borrowers: B

B – part of Yorkshire and Clydesdale banks – launched last year and is the first app-only bank to offer a credit card. The card is fee-free to use abroad, so great for holidays, has a low 9.9 per cent interest rate and no fees for transfers.

It is the only credit card that combines fee-free spending abroad with a low interest rate, meaning you could cull a lot of other credit cards and just have this one.

The low-rate will appeal to people who don’t want to faff switching between zero per cent deals and paying transfer fees each time, or forget to switch and pay enormous interest once the zero per cent deal runs out.

Because B is part of Yorkshire and Clydesdale banks, it has full Financial Services protection and customers can use the other banks' telephone service or branches if they need extra assistance.