Where Should you Bank?

If you are like me, you probably can’t remember the last time you went to your bank in person or used cash to purchase something. It’s hard to beat the convenience of swiping your card to purchase something instead of paying with cash and awkwardly trying to collect your change from the cashier and shove it into your wallet or purse so the person in line behind you can check out. If someone hands you a check you probably take a picture of it on your phone and use the mobile deposit in your banking app. It’s that easy. I’ve asked myself over the past two years what is the point of brick and mortar banks? Are there any benefits to banking with an online-only bank? The purpose of this blog is to address the tradeoffs between traditional and online-only banks by analyzing the concerns regarding security, convenience, interest rates, and fees.

 First and foremost, security is the most important function a bank has to offer. If you can’t trust a bank to keep your money safe then why wouldn’t you put it under your mattress? Brick and mortar banks offer a psychological sense of security because handing over money to a bank teller or just having the option to drive to your bank gives you a feeling of security. Handling all your money online can be nerve-racking in the age of hackers and complex online scams. You may be thinking it’s much riskier to be banking online, but the fact is you are just as likely to be hacked banking with your traditional bank as with an online bank. Both banks use the same or similar databases and nearly identical levels of security and encryption. As far as security goes, it’s more important that you exercise proper security precautions when you log into your banking accounts. To make sure that you’re safe, always use secure connections instead of public Wi-Fi and make sure that your bank is backed by the FDIC (Johnson).

How convenient it is to work with your bank and how easy it is to access your money is another critical factor when determining which type of banking method, you would like to use. Online banking might seem like the most convenient option because it offers 24-hour access to your accounts, but this isn’t necessarily true. Almost all traditional banks today offer the same features as online banks with mobile deposits, transfers, and bill pay. These banks typically have their own mobile app which you can control most facets of your account in the same way you would banking through an online-only bank. Online banks present certain hurdles that you wouldn’t have to worry about with more traditional banks such as depositing and withdrawing cash. However, most online banks have agreements with other banks that allow their clients to use their ATMs to withdraw cash for little to no fee. If you need to withdraw more cash than your daily limit from an ATM you might have to get creative by using your debit card to get cash advances or cash back. If you’re like me and you rarely use cash, this might not be too concerning. 

One of the most enticing benefits of banking with an online-only bank is that they typically offer better interest rates and lower fees than traditional banks. Online banks have a much lower overhead than traditional banks because they don’t have to pay for the physical presence of the bank, ATM maintenance, and cash services offered by traditional banks and they pass these savings on to their clients. According to MoneyRates.com, the average interest rate on a savings and money market accounts for online banks is 5 to 6 times higher than traditional banks. In addition, online banks often have lower minimum balance requirements and lower fees than traditional banks. These lower fees and requirements are more appealing to younger clients who may have less money.

What type of bank is best for you? If you’re enticed by the features that online banking offers such as mobile deposit and online banking access you don’t have to make the switch from a traditional bank. Nearly all major brick and mortar banks offer some form of these online banking features. If you use or deposit cash often, online banking may not be the best option for you. However, if you’re looking for a bank that has high-interest rates, low fees, and lower minimums, online banking could be a great option for you. Don’t think you have to choose one bank over the other. You have the option to leave some of your money in your traditional bank and put some in an online bank. Do your homework and weigh the pros and cons of each option and whether it makes sense for you to make the switch or do a combination of both.


Johnson, Greg. “Online vs. Traditional Banking: Which Is Better?” The Dough Roller, The Dough Roller, 28 Nov. 2019, www.doughroller.net/banking/online-vs-traditional-banking-which-is-better/.

“Best Savings Accounts of March 2020: MoneyRates.com.” Money, www.money-rates.com/best-savings-accounts.htm.