A traditional bank is also known as a brick-and-mortar bank or a physical bank. Traditionally banking has been done in physical buildings, but even physical banks offer apps for your smartphone so that you can access your bank information online. The convenience of being able to choose whether you want to deposit money in a building or through an app is one of the many benefits that traditional banks offer.
But are these types of banks still the best option, or is it time to move to online-only banking? Here’s a look at all of the advantages that online banking offers over traditional banking.
Safe Websites and Also FDIC Insured
One of the biggest reasons that most people are wary of online banks is that they’re online. Something that is only accessible online can be fearful, especially with all of the stories of people getting scammed online. The good news is that because online banks operate fully online, they take the necessary precautions and steps to ensure that their website/app is safe, secure, and fully functioning for their customers. As long as you’re on a secure network, your bank information will stay completely secure.
Online banks are also FDIC (Federal Deposit Insurance Corporation) insured just like traditional banks are. This institution is responsible for safeguarding your money in the event of a bank failure. Both online and traditional banks are insured for up to $250,000 per customer, so you’re just as protected at an online-only bank as you are at a brick-and-mortar bank. Of course, you must do your research on online banks before choosing one, but reputable online banks are just as safe as reputable traditional banks.
Fewer Fees and Higher Interest Rates
Traditional banks are notorious for charging fees. Most banks charge a maintenance fee (ranging from $5 to $15) each month to help with the overhead costs of the actual building. Because online banks don’t have these costs, they don’t charge maintenance fees or any other fees that traditional banks charge. Depending on the traditional bank you choose, you may or may not have to pay any fees, but most traditional banks charge at least a maintenance fee.
Other common fees charged by banks include:
- Early account closing fee
- Excessive transactions fee
- Insufficient funds fee
- Out-of-network ATM fee
- Overdraft fee
- Wire transfer fee
Some online banks may charge these fees as well, but many don’t.
Another benefit of banking completely online is that you get a high-yield savings account. Online banks offer more interest on the money you put in your savings account (usually 10 times more than traditional banks), and you want higher interest rates when the money is in your possession, as opposed to owing money to an institution or person.
Access to Your Account Nearly 24/7
The downside of traditional banks is that they’re usually only open Monday through Friday during standard business hours (9 AM to 5 PM), meaning that most people don’t have time to visit a physical bank. They’re also closed on major holidays. On the other hand, online banks are always accessible as long as you have internet access and their website/app isn’t down— which doesn’t happen as often as traditional banks close.
Online banking also makes it possible for you to deposit your paycheck (via your smartphone camera or direct deposit), so you don’t have to worry about standing in long bank lines during your lunch break. The only downside is that you can’t deposit cash, but you can withdraw cash at certain ATMs and stores without having to pay an ATM fee. This may not be a problem for most people, since fewer people are using cash due to everything that has been going on in the world lately.
If you’re tired of all of the fees from your traditional bank, or you’re finding that it’s hard to meet the requirements to waive them, it may be time to try an online-only bank. Again, make sure to research different banks and read all of the fine print to ensure that you’re avoiding fees and that you’re truly getting more benefits than you would at your current bank. You’ll also want to choose a reputable online bank for your security and peace of mind.
If you’ve been thinking about trying an online bank, now is the time. If you’re still skeptical, at least consider an online savings account so that you can earn more interest on your savings. You may find that you prefer this type of banking and you’ll easily be able to open an online checking account.
