When opening a new bank account, the first decision you have to make is what kind of bank you want to work with. There are clear advantages to online banks, but brick-and-mortar banks still excel in some areas.
When deciding between online vs. traditional banks, choose a bank that meets you where you are right now. You're not locked in forever -- should you require extra services or better rates in the future, you can switch banks. You can even open accounts at two banks to get the best of both.
Unsure which bank type fits you best? No worries. Read on for details into which type of bank could best satisfy your banking needs.
Online bank vs. traditional bank comparison
Before we start determining which is right for you, ket's look at savings accounts at an online bank vs. a brick and mortar bank to compare side-by-side.
| Service | Savings accounts at brick-and-mortar banks | Savings accounts at online banks |
|---|---|---|
| Interest rates | Generally low | Generally high |
| Hours of operation | Fixed to the bank's schedule | Flexible to your schedule |
| ATM networks | Extensive ATM networks | Coverage varies |
| Customer service | In-person service in addition to call centers | Call centers often extended or 24/7 hours |
| Account access | Branch withdrawals, transfers, and ATMs | Transfers and ATMs |
| FDIC insured | Yes | Usually |
How to choose between an online bank and a traditional bank
1. Determine your banking needs
You can find basic bank accounts, like checking and savings accounts, at both traditional banks and online banks. It's the other services that set these bank types apart.
If you need these services, a brick-and-mortar bank may be a better fit:
- Cash deposits
- Safety deposit boxes
- Foreign exchange services
- In-person customer service
But if you're prioritizing great interest rates and low fees, an online bank is the way to go.
Online banks don't have to funnel a bunch of money into maintaining a branch network. That means they can offer you better rates.
2. Compare rates
Online banks tend to offer the best rates, but not always. Don't assume online banks always offer the highest returns. If you want to earn relatively high interest on savings, shop around.
High-yield savings account comparison
We recommend comparing high-yield savings account options to ensure the account you're selecting is the best fit for you. To make your search easier, here's a short list of standout accounts.
Show Best Offers Available in
| Account | APY | Promotion | Next Steps |
|---|---|---|---|
Open Account for SoFi Checking and Savings Member FDIC. Rating image, 4.75 out of 5 stars. 4.75/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | up to 4.60% Rate infoYou can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet.Min. to earn: $0 | New customers can earn up to a $300 bonus with qualifying direct deposits! | Open Account for SoFi Checking and Savings |
Open Account for CIT Platinum Savings Member FDIC. Rating image, 4.75 out of 5 stars. 4.75/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | 5.05% APY for balances of $5,000 or more Rate info5.05% APY for balances of $5,000 or more; otherwise, 0.25% APYMin. to earn: $100 to open account, $5,000 for max APY | N/A | Open Account for CIT Platinum Savings |
Open Account for Barclays Online Savings Member FDIC. Rating image, 4.00 out of 5 stars. 4.00/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | 4.35% Min. to earn: $0 | New customers can earn a $200 bonus with a minimum $25,000 qualifying deposit. Terms apply. | Open Account for Barclays Online Savings |
3. Evaluate bank fees
All bank accounts charge fees, but online banks generally charge fewer. Online banks have lower overhead costs -- so they can charge you less and pay you more.
Most online banks don't charge you monthly fees or have minimum balance requirements. Brick-and-mortar banks often have both. You may be able to waive monthly fees if you meet minimum balance requirements or set up direct deposits.
How to know what fees you'll pay
Whichever type of bank you go with, review its fee schedule before you sign up and make sure you're comfortable paying what it's charging. Ideally, you want to pay as little as possible so you can hold onto more of your money.
4. Consider if you use ATMs often
Both types of banks usually offer ATM access. The better choice boils down to your location and banking habits.
Most banks offer ATM locator tools on their websites or mobile apps, so you can see how many ATMs are in your area. If you plan to deposit cash at an ATM, make sure your bank offers deposit-taking ATMs as well.
If you're opening an account at a brick-and-mortar bank, you're probably choosing one that has a branch near you. That gives you easy access to fee-free ATMs when you're near home. But unless your bank has a large, nationwide ATM network, you could get stuck paying $3 to $5 to make an out-of-network ATM withdrawal when you travel.
Online banks usually partner with nationwide fee-free ATM networks, but there may be none near you. Plus, you can rack up extra fees for using out-of-network ATMs (unless your bank reimburses you for this).
5. Ask yourself if you're comfortable banking online
There's little to distinguish online vs. brick-and-mortar banks in terms of online banking. Nearly every bank lets you view your balance, transfer funds, pay bills, and remotely deposit checks via website or mobile app.
The main difference here is whether or not you can visit a branch if you want to. With an online bank, you won't have that option. If you’re unable or unwilling to bank on the internet, a brick-and-mortar bank is your best bet at getting things done.
Which should you choose: online vs. brick-and-mortar banks?
The online vs. brick-and-mortar banks competition will likely go on forever because each type has definite pros and cons. Both types of bank are insured by the FDIC. Both types are also safe places to bank.
Ultimately, you should pick an online bank if you're comfortable managing your money entirely online and you prioritize high returns and low fees. But consider a traditional bank if you require specialized services or you want in-person support at a branch when you need it.
Have you decided which bank type best meets your needs? If so, you're well on your way. Next, compare top banks so you get the best of what you're looking for. Or, take a step back and consider the big picture: generally speaking, how to choose a bank.
Still have questions?
Here are some other questions we've answered:
- Credit union vs. bank: What’s the difference?
- How do you open a checking account online?
- What is APY?
The Ascent's best savings accounts
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. The Ascent's top savings account picks can earn you more than 10x the national average savings account rate.
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By:Kailey Hagen
Writer
Kailey Hagen has been writing about small businesses and finance for almost 10 years, with her work appearing on USA Today, CNN Money, Fox Business, and MSN Money. She specializes in personal and business bank accounts and software for small to medium-size businesses. She lives on what's almost a farm in northern Wisconsin with her husband and three dogs.
By:Cole Tretheway
Cole Tretheway is a full-time personal finance writer whose articles have been featured on The Ascent and The Motley Fool. He has a degree in English with a Certificate in Professional and Technical Communication from California Polytechnic University, SLO.
Fact CheckedAshley Maready
Writer and Editor
Ashley Maready is a former history museum professional who made the leap to digital content writing and editing in 2021. She has a BA in History and Philosophy from Hood College and an MA in Applied History from Shippensburg University. Ashley loves creating content for the public and learning new things so she can teach others, whether it's information about salt mining, canal mules, or personal finance.
