Is Choosing an Online Bank Over a Traditional Brick-and-Mortar Bank a Wise Decision?

Is online banking better, or should you stick with a traditional, physical bank? Since 2011, around 700 million people have opened bank accounts. Many are now opting for online banking instead of local banks or credit unions.

For me, online banking saves time, but I understand why some people prefer a traditional bank. If you’re unsure which is right for you, here are some things to consider:

**Security Concerns**

People often worry that online banks are less secure than traditional ones. This isn’t entirely true. Sharing your personal information online might feel risky, but most companies use strong security and encryption to protect your data. Established online banks are very secure, and simply knowing your username and password often isn’t enough to access your account, especially if you’re on an unfamiliar device. Both online and traditional banks secure your deposits up to $250,000 through FDIC insurance.

**Customer Support**

When you have questions about your account, you’ll want to reach out to a bank representative. Online banks offer toll-free support lines during business hours. If you prefer face-to-face communication, a traditional bank is a better fit for you. Either way, your issues will be addressed based on your personal preference.

**Deposits and Withdrawals**

If your bank is close by, cashing a paycheck or withdrawing money is easy. Many banks allow free ATM withdrawals. With online banks, you can often deposit a check by snapping a picture of it and uploading it to their platform. Although this might take a bit more effort, setting up direct deposits with your employer can streamline the process. Online banks also offer fee-free withdrawals at certain ATMs, and you can access funds with cash-back options or your debit card as usual.

**Higher Interest Rates**

One big draw of online banks is the higher interest rates on savings and checking accounts. Without the costs of physical branches, online banks can offer better rates, helping your money grow faster compared to the low interest you might get from a traditional savings account.

**Making the Switch**

At first, I was hesitant to move from a traditional bank to online banking, but I’m glad I did. When I wanted to save more, my local bank required a $250 minimum deposit to open a savings account, which I didn’t have. Online banks usually have low or no fees and don’t require minimum deposits. For example, CapitalOne 360 let me open both checking and savings accounts without minimum deposits or monthly fees. Other top online banks that offer great rates include Goldman Sachs Bank USA, Barclays, and Ally Bank. These banks have easy application processes, so it’s worth comparing them to find the best fit for you.

Do you prefer online or traditional banks? Are you satisfied with your current savings account interest rate?