One of the best things about having a smartphone and an internet connection is that you can find out about anything, anywhere, and anytime. It really is just like having the world at your fingertips. The same is true for online banking. Online banking lets you manage your money without moving from your sofa using a phone or computer that you love so much. Traditional banking, on the other hand, usually requires you to visit a brick-and-mortar building and interact with real human beings (which is kind of a drag).
Now that you have the gist of it, I wanted to go ahead and define both modes of banking the way they deserve. Online banking is a mode of banking that predominantly exists online (and I’m sure you already know what “online” means, so I won’t bother explaining). Predominantly online banks don’t typically have a physical building that you can visit to meet your banking requirements. Make sure to keep this in mind when choosing where you keep your money.
Traditional banking refers to banks that absolutely have one or more physical locations (or branches) that offer personalized services to every individual. In addition to tellers and other staff members who help you keep your money safe, some traditional banks also offer online services. They just sometimes aren’t as advanced as their online counterparts. They have safety deposit boxes, ATMs, and other physical services that all you have to do is (have the courage to) walk into a bank to access.
At the end of the day though, I’d like to let you know that, whether you choose to bank online or in a physical building, always make sure the bank is FDIC insured. The Federal Deposit Insurance Corporation (FDIC, duh) offers insurance up to $250,000 to the depositors to keep their deposits insured in the case of bank failure.
When applying for a bank account (whether for an online or traditional bank), make sure to check whether they offer more than $250,000 in funds in case the bank goes under. You can do this by checking the bank’s website. It’s usually located near the very bottom (see image below) of the bank’s webpage.
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| Image Taken From AmericanExpress.com |
In some cases, banks partner with other banks to increase their insurance coverage. For example, my personal high-yield savings account provides up to $8 million in FDIC coverage since they are partnered with many other banks.
But I’ll end my spiel now so we can dive right into the differences between online and traditional banking and try to decide which is better for you. Here’s a comparison of the two based on different categories: convenience, offered services, fees, security, and customer support. This will be your one-stop shop for deciding which type of account will meet your needs the best.
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Convenience:
- Online banking- This mode of banking offers 24/7 services, ATMs across the globe, high-end mobile applications, accurate account information, and access to transaction history anywhere. Impressive, right?
- Traditional banking- Limited hours of service, limited online features, ATMs, brick-and-mortar locations, multiple branches, and limited access to account information and transaction history when the banks are closed.
Services Offered:
- Online banking- Services offered by online banking include but are not limited to remote deposits and transfers, wallet integration with your smartphone, international payments and shopping, tools for financial education and budgeting, and a bunch of online investment options.
- Traditional banking- With traditional banking, you may get in-person consultations, safety deposit boxes at the bank premises, in-person applications for loans, and a smile (if you are lucky). You may even get a lollipop! But this usually applies to (meddling) kids.
Fees and Costs
- Online banking- Lower fees and fewer charges, no or lower monthly maintenance and overdraft fees, no ATM fees (in most cases), and higher Annual Percentage Yield (APY) because of the lower operational costs.
Note: An APY is the annual interest rate on your deposits. You get this just for keeping money in your savings account. For example, if you’re getting .01% APY on, say, $10,000, you should be getting back $10 for having that amount in your bank for a full year.
By the way, if you’re only getting a .01% APY from your bank then you need to immediately switch banks. The era of not getting the most bang for your buck when putting your money in your savings account ended as soon as banks started offering 2%+ APYs.
- Traditional banking- Because a bank has a huge building and a lot of employees, you have to pay monthly maintenance fees, ATM fees, overdraft fees, and higher charges. After all, why not charge you ridiculous fees just to hold onto your hard-earned money?
Note: It may look like I’m siding with online banking and that absolutely may be the case. Online banking is just superior, especially when it comes to its better APYs and convenience.
Security
- Online banking- It utilizes highly powerful cyber-security measures such as strong firewalls, encryption techniques, two-factor authentication, biometric logins (another use of the on-screen fingerprint scanner on your smartphone), and account alerts to scare off cyber intruders.
- Traditional banking- Most of everything is physical here. In addition to tellers, accountants, and managers, banks may also have security guards and security cameras to make sure your money isn’t at risk of being stolen. They also may have access to basic online mobile applications. The applications, however, may not be as intuitive as predominantly online banks.
Note: Both modes of banking have risks. Online banks often fall victim to cybercrimes and as most of the traditional banks also offer online services now, they are at risk for cybercrimes too, in addition to robberies. Scared yet?
Customer Support:
- Online banking- With online banking, you can get 24/7 customer support via chat, email, and phone through secure channels. In case of any issue, technical or otherwise, it may fall short.
- Traditional banking- Most modern banks also strive to offer 24/7 phone and email support to customers but there may be a queue. They are famous for their in-person support but you have to visit them during banking hours. Well, that’s a challenge.
Now Go Choose Your Bank!
Before the dawn of the age of the internet, there were only banks and people working inside or outside them (keeping what’s inside safe). Personal relations and physical interactions were of utmost importance. As time went on, banks started advancing and became safer.
Soon after that, sending and receiving money became as easy as sending a text from your phone. Now, online banking is one of the most popular forms of banking because of human beings (like me) who don’t want to leave their homes to go out into the (dreaded) public. That doesn’t mean that traditional banking has lost its value, though, it’s still the same (but maybe a bit less valuable than online banking).
Both modes of banking have their targeted clientele. Some people prefer traditional banks while others prefer online banks. They also have differing advantages and disadvantages. That means that it’s up to you to decide which route you want to take. Remember, the safety of your money should be your top priority. Keep that in mind while choosing a bank, whether online or physical, to satisfy your financial needs.
Checking the credibility and reliability of a bank is very easy. If it’s a bank that operates online, you can check its reviews and app ratings. If it’s a traditional bank, you can ask around and find out more from other people. Good luck doing that if you have social anxiety, like me.
Anyway, at the end of the day, please make sure you are getting exactly what you want in a bank while making sure your money is safe from being lost. I hope that you use these tips (and maybe more if you decide to keep scrolling through our blog) to make confident decisions with your money.
And remember, even though everybody may not like me, they have no choice but to love me because I will always be there for them and accept them for who they are! Happy banking.