Traditional banks with brick-and-mortar locations were the only option for a long time. Recently, online banks, which don’t have physical branches and require you to do your banking on their app or website, have appeared.
Despite the names, traditional banks aren’t solely in-person and online banks aren’t only virtual. Traditional banks often offer apps, websites and other ways to bank online, while online banks may offer access to a network of ATMs.
Let’s look at the differences between the two as well as the benefits and drawbacks of each.
Traditional banking
Traditional banks have physical branches. These banks have been the only option for decades but often now offer both in-person services and online platforms, like apps and websites, where customers can handle many banking needs remotely. You can check your balance, pay bills and transfer money through a traditional bank’s digital platforms, but you also have the option to visit a branch. Traditional banks often have a network of ATMs where you withdraw money and deposit checks and cash.
Benefits of traditional banking
Choosing a bank with physical locations comes with several benefits, including:
- Customer service: One of the biggest advantages of traditional banks is the ability to speak with someone in person or over the phone.
- Brick-and-mortar locations: For those who prefer face-to-face interactions or need to handle more complex transactions, physical branches are convenient.
- Network of free ATMs: Many traditional banks have a large network of ATMs, allowing you to withdraw cash easily.
- Easily deposit cash: Traditional banks make it easy to deposit money at a branch or an ATM.
- More services: Traditional banks may offer products and services that online banks do not.
- Online and in-person: Many traditional banks allow you to access their services both through their website or app and at a branch.
Drawbacks of traditional banking
Here are a few things to keep in mind if you’re considering a traditional bank:
- In-person requirements: Although many traditional banks offer online services, you may still be required to visit a branch for certain needs, like opening specific accounts. This can be inconvenient if you prefer managing everything digitally.
- Limited hours: Bank branches have set hours, which may not always fit into your schedule.
Online banks
As the name suggests, online banks are virtual-only, meaning they don’t have physical branches. You handle everything through their website or mobile app, from checking your balance to depositing checks. Online banks can offer many of the same services as traditional banks.
Benefits of online banking
There are several benefits to choosing an online bank:
- Convenience: Online banks allow you to manage your finances anytime, anywhere. From transferring money to paying bills, you can handle it all from your phone or computer.
- Lower fees: Since online banks don’t have the overhead costs of maintaining physical branches, they may be able to charge lower fees for certain services or offer higher interest rates on savings accounts.
Drawbacks of online banking
Online-only banks can come with some limitations, including:
- Harder to deposit cash: One of the biggest challenges with online banks is depositing cash. Some online banks don’t accept cash deposits at all, while others will require you to find an ATM or allow you to deposit cash at a participating store.
- ATM fees: While some online banks reimburse ATM fees, others may not, especially if you use an ATM outside of their designated network. This can add up if you frequently withdraw cash.
- Customer service: Online banks typically rely on customer service via phone, chat or email, which may feel less personal and take longer to resolve complex issues.
Choosing between a traditional and online bank
The right choice for opening a bank account will depend on your needs and preferences. If you value in-person customer service, need to deposit cash regularly or prefer having a local branch nearby, a traditional bank may be the better fit. On the other hand, if you prioritize the ability to handle everything digitally, an online bank might be the right choice. Or you might find that a combination of both provides the right balance.
Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
