Ever had to rush to the bank on your lunch break just to deposit a check?
You wait in line, fill out a slip, and maybe even get hit with a fee—just to move your own money around.
These days, you can do almost all of that with a few taps on your phone. From paying bills to transferring funds and even depositing checks, banking has gone digital in a big way.
But does that mean online banks are automatically better than traditional ones? Not always. Each has its strengths—and some drawbacks, too. Here’s how to figure out which type of bank is the right fit for you.
How Online and Traditional Banks Compare
Both types of banks let you manage your money, but they go about it in very different ways. Here’s how they compare in the areas that matter most.
Access to Your Money
Online banks are built for convenience. You can log in anytime—day or night—to check balances, pay bills, or transfer money. All you need is a phone or internet connection.
Traditional banks give you the option of handling things in person. If you like the idea of walking into a branch to ask a question or solve a problem, this might be a better fit.
Fees and Interest Rates
Online banks tend to charge fewer fees—sometimes none at all. That’s because they don’t have to pay for buildings, tellers, or as much overhead. They also often offer better interest rates on savings accounts and CDs.
Traditional banks usually charge more for things like monthly maintenance, overdrafts, or out-of-network ATM use. Some have started lowering fees to stay competitive, but they still usually lag behind online banks in this area.
Customer Support
Online banks handle customer service through apps, chat, or phone. It can be fast and efficient, but you might not get the personal touch—especially if there’s a complex issue.
Traditional banks offer face-to-face help. Whether you’re opening an account, applying for a loan, or dealing with fraud, you can walk in and talk to someone who knows your situation.
Cash Deposits and Withdrawals
Online banks are great if you rarely use cash. You can still withdraw using ATMs (some even refund fees), but depositing cash can be tricky and may require using a partner network or third-party service.
Traditional banks make it easy to handle cash. You can deposit or withdraw money at a branch or their own ATMs without extra steps or fees.
Extra Services
Online banks focus on the basics—checking, savings, maybe a few extras like budgeting tools or early direct deposit.
Traditional banks offer more in-person services, like cashier’s checks, notaries, and safe deposit boxes. You won’t find those at most digital-only banks.
Pros & Cons of Online Banking
One thing to remember when considering online banking vs. traditional banking is that many traditional banks offer all three. With these banks, you can visit a traditional bank branch if you’d prefer, but you also get the convenience of online and mobile banking.
Then, there are online-only banks. Some of these allow you to use ATMs for cash-related banking activities, but you might find yourself paying ATM fees. On the other hand, many online banks offer low or no banking fees, so the costs might cancel each other out.
Pros
- Ease of use: As convenient as brick-and-mortar locations can be for depositing and withdrawing cash, online and mobile banking make managing your accounts a breeze. Using the website or mobile app, you can typically pay bills, move money between bank accounts, and deposit paper checks.
- Lower fees: Online-only banks know they’re competing with national banks. For that reason, you’ll also find online banking comes with lower fees. As a result, many traditional banks have lowered their rates and increased digital offerings to compete.
- Competitive rates: In addition to lower fees, online-only banks boost very competitive interest rates on online savings accounts, checking accounts, and CDs. Best of all, the internet makes it easy to compare annual percentage yield online across multiple banks and credit unions to find the best deal.
Cons
- Limited cash options: Before you sign up with an online bank, consider how you’ll handle financial transactions like cash deposits. Your online bank should offer an option for ATM access, but this can come with limitations and fees, so read the fine print.
- Account setup: With a traditional bank account, you simply hand over some identification, complete an application, and make a minimum deposit. With a digital bank, you’ll need to meet these qualifications remotely, which can slow down the process a little.
- Customer support limitations: With an online savings account or checking account, you’re usually limited to chat or phone support, and wait times can sometimes be excessive. Most traditional banks provide phone and online support, too, but you’ll also have brick and mortar branches if you need them.
Pros & Cons of Traditional Banking
Traditional banks have been around for centuries, offering checking and savings accounts, loans, and investment services. Consumers had to travel to a nearby physical location to deposit money, transfer money, withdraw cash, and handle account issues, which could be inconvenient, particularly since banking hours are often limited to weekdays.
But even as the number of online banks has grown, brick-and-mortar banks have held steady. In addition to adding digital banking to their offerings, traditional banks offer benefits not found in an online bank account.
Pros
- Easier for cash transactions: One of the most compelling reasons to go with a traditional bank is the ease of cash transactions. You can withdraw and deposit cash without relying on an ATM or accruing extra fees.
- Personal service: For some people, in-person customer service is a huge perk. Even knowing you can walk into a local branch and speak to someone face to face can give you peace of mind.
- Available to everyone: Not everyone has an internet connection, making traditional bank branches a necessity. Those who can get online might not have access to a mobile device to be able to make check deposits. Even if you have everything you need to bank online, local branches will let you manage your finances if your internet goes down.
Cons
- Higher fees: To remain competitive, many online banks reduce fees. Some traditional banks have lowered their fees to compete, but you will often find better rates on savings and CDs with online-only banks.
- Accessibility limitations: Depending on the bank, you might find that your options are limited at your local branch. Not all physical locations will have bilingual representatives, for instance, and some buildings aren’t accessible to those with physical limitations.
- Limited service hours: Banks have such limited hours, the term “banking hours” has become a part of the English language. Most banks are open at the same time their customers are working. Unless your bank offers weekend hours, this means you have to either take time off work or visit a branch on your lunch hour.
Are online banks safe?
Yes—most online banks use strong security protocols to protect your money and personal information. Here’s what they typically have in place:
- Data encryption – Your information is encrypted during transfers and storage, making it much harder for anyone to intercept or misuse.
- Multifactor authentication – You’ll usually need more than just a password to log in—like a code sent to your phone or biometric login—which helps block unauthorized access.
- Frequent security audits – Reputable online banks bring in outside cybersecurity experts to test and improve their systems on a regular basis.
- Real-time alerts – If anything suspicious happens with your account, you’ll usually get an instant notification so you can act quickly.
- FDIC insurance – Most online banks are FDIC-insured, which means your deposits are protected up to $250,000, just like they would be at a traditional bank.
Security-wise, online banks are on par with—or in some cases, ahead of—traditional banks. Just make sure the one you choose is FDIC-insured and has the protections above.
Online Banks to Consider
Not sure where to start? Here are some standout online banks worth a look—each with its own strengths depending on what you need.
SoFi
SoFi offers a combined Checking and Savings account with up to 3.80% APY on savings and 0.50% APY on checking when you set up direct deposit. It’s a great pick if you want to earn interest across all your balances and keep things simple.
SoFi goes beyond basic banking. You can also access loans, credit cards, investing, and even insurance—plus perks like career coaching and discounts on estate planning.
Current
Current is a solid option if you’re looking for a low-hassle account with built-in credit-building tools. Like Chime, it has no monthly fees or overdraft charges and supports early direct deposit.
Both Current and Chime offer features for teens and families, but if you deposit cash often, Current makes it easier with access to over 40,000 Allpoint ATMs and cash reloads at stores like Walmart and CVS.
Chime
Chime is a favorite for people who want to avoid fees. There are no monthly maintenance charges, overdraft fees, or minimum balance requirements. It also offers early direct deposit, a clean mobile app, and the SpotMe® feature for fee-free overdrafts.
If you rely on ATMs, Chime gives you access to over 60,000 fee-free machines—more than most online banks.
Final Thoughts
There’s no one-size-fits-all answer when it comes to choosing between online and traditional banks. It really comes down to how you like to manage your money. If you’re comfortable with technology and want fewer fees and higher interest rates, an online bank might be a better fit. But if you handle cash often or want in-person support, sticking with a traditional bank may be the smarter choice.
That said, many people use both. You might keep a traditional checking account for cash deposits and face-to-face service, while using an online savings account to earn more on your balance. No matter what you choose, make sure the bank fits your daily habits and long-term financial goals—and always check for hidden fees before signing up.
