Online banking or traditional banking? Which one’s better? In this article, you’ll learn about what these banks are, the advantages as well as the disadvantages of using each of them.
If you are not familiar with these banks, these are the ones where you manage accounts with a computer or mobile device to deposit checks, transfer funds and pretty much any bank activity you can think of all done online. Ally, Digital International Bank, Discover and Betterment are some examples you can look up of online banks.
Now let’s start with the cons or disadvantages for being a customer of an online bank:
- Since we know everything is done online, then that means there’s very limited to no person-to-person interaction. This can be tough for people who would rather have their bank issues handled in person face-to-face and feel a lot more trust when talking to a bank professional in person rather than on phone or email.
- It’s all via Internet. Everyone knows there are always technical difficulties that can occur whenever we deal with the internet which means you might have to wait longer to do any bank businesses if you have no internet or your internet is somehow lagging or having technical issues which happens time to time.
- Some online banks don’t offer checking accounts for anyone who is interested in having one of the course.
Moving on to the pros of online banking:
- Believe it or not, it’s just as safe as regular traditional banks. Some people shy away from online banks because of the likely hacks that could happen online. But here’s the thing and guess what? Traditional banks store all your info in a computer system as well! It’s really all the same.
- Convenience. The internet is available 24/7, which means you can access it anytime, anywhere in the world as long as you have internet.
- Online banks have fewer fees they require you to pay. The reason the traditional banks have you pay higher fee is because they need the money to maintain their all over the country. Online banks don’t necessarily have that many branches if at all so there are very low maintenance which means they won’t hassle you for more fees .
- This brings us to our biggest pro of online banking. Since they tend to have lower fees they use that extra cash to give their customers through higher interest rates especially on savings accounts. The majority of online savings accounts average 2% and higher, which matches or even beats inflation. Keep in mind though that these fees and interest rates may vary and some could be higher or lower.
These are also known as brick-and-mortar banks. These are the ones that you’re more familiar with. 9 out of 10 times, most people started an account with a traditional bank.
Wells Fargo, Bank of America and Citibank are some examples of traditional banks to refresh your mind. In other words, these banks have physical locations you can visit personally to handle any bank business.
So what are the advantages of being a customer with a traditional bank?
- Face-to-face interaction. It’s simple. Some people would rather talk about financial business in person rather than through a telephone or computer sending email. It just gives you that peace of mind knowing you’re being reassured by a person looking at you rather than seeing an email or text from a person you don’t even know exists.
- It’s easier to fix banking issues or problems in person because sometimes, you can have a variety of issues with your bank accounts which includes late fees, ATM fees lost card fees and so on. With traditional banks, you can just walk in and explain the issue which can be reassured a lot faster and better in person rather than be put on hold on the telephone or having to email your online bank and who knows when you might get an answer. Plus, let’s face it. There are some issues that will be a lot easier to explain in person and better handled in person rather than phone or email.
- Another advantage which is what you will hear from a lot of traditional bankers is they feel that their money’s a lot more safer being in the physical bank rather than being online because they fear the money could get hacked or they could be victims of cybercrimes. It just simply comes down to this: There’s still some people out there who don’t trust the internet or the online world yet and we can’t blame them. So for these people having their money in a traditional bank, it gives them a lot more peace of mind and there’s nothing wrong with that. That’s how they feel.
Now let’s talk about some of the cons or disadvantages of being in a traditional bank customer:
- Long queues during certain times of the day. This does not need to be explained. No one likes long lines especially if you have lots of things to do. Another problem is that you can only visit during work hours so if you need something important done after work hours, you’ll have to wait to meet with a bank teller until the next day.
- Lots of fees. This includes monthly maintenance fees, proper statement fees, account closure fees, card replacement fees and many more but it depends on your traditional bank of course.
- Horrible interest rates on savings accounts. This is probably the worst disadvantage of traditional banks. The national bank average on savings accounts for traditional banks is 0.09%! That’s not even close to catch you up with inflation which is around 2% a year.
So which is better?
Now comes the ultimate question: Which bank should you go with online or traditional bank? Our answer to that is there’s no rule or law that tells you that you can’t have accounts with multiple banks. In our opinion, having a traditional bank account and an online bank account is the best alternative. Think of it like the best of both worlds!