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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 vs. brick and mortar banks, but brick and mortar banks can still be the right choice for some people. Here's a closer look at some of the most important factors to consider when comparing online vs. brick and mortar banks.
If you're torn about whether to go with an online vs. brick and mortar bank, think about the features you plan to use most often. You can find basic bank accounts, like checking and savings accounts, with traditional banks and online banks, but there are some specialized services you can only find with brick and mortar banks. If you need a safe deposit box or foreign exchange services, for example, traditional is the way to go.
Brick-and-mortar banks also hold the edge for those who need to deposit cash frequently. Deposit-taking ATMs are less common with online vs. brick and mortar banks. If your online bank doesn't have these, you will have to first deposit the cash into a brick and mortar checking account and then transfer the funds to your online bank, which can take a couple of days.
You tend to get better customer service with brick and mortar banks too. You'll usually deal with a live person every time you call and you can get to know and work with the same person every time if you prefer. Online banks tend to rely more heavily on chat bots, and if they do connect you to a live person, it's usually someone far away in a call center.
The biggest advantage for online banks vs. brick and mortar banks are the rates. Online banks don't have to funnel a bunch of money into maintaining a branch network. That means they can offer you better interest rates on savings accounts, CDs, and loans that brick and mortar banks can't match.
All bank accounts usually charge some type of fees, but generally, online banks come out ahead when comparing online vs. brick and mortar banks. Again, this comes back to the fact that traditional banks have lower overhead costs, so they can charge you less and pay you more.
Most online banks don't charge a monthly fee or have minimum balance requirements. Brick-and-mortar banks often have both, but you may be able to waive the monthly fee if you meet the minimum balance requirement or set up direct deposits to your account.
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.
Both types of banks usually have ATM access, but when it comes to online vs. brick and mortar banks, your location and habits will dictate which is better than the other.
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 surcharge-free ATM networks, but that doesn't mean there will be one near you. And again, you can rack up extra fees for using out-of-network ATMs unless your bank reimburses you for this.
Most banks have ATM locator tools online or in their mobile apps, so you can see how many ATMs it has in your area. If you plan to deposit cash at an ATM, make sure your bank offers deposit-taking ATMs as well.
There's little to distinguish online vs. brick and mortar banks in terms of online banking today. Nearly every bank offers online and mobile account access so you can view your balance, transfer funds, pay bills, and remotely deposit checks.
The difference is that this is usually your only option when using an online bank whereas you can visit a branch for personalized assistance when you're using a brick and mortar bank. If you don't have great internet access or you're not comfortable using the internet, a brick and mortar bank could be the wiser choice.
The online vs. brick and mortar banks competition will likely go on forever because each type has definite pros and cons.
Choose an online bank if you're comfortable managing your money entirely online and you want to score the highest APYs possible while paying next to nothing in fees. But consider a traditional bank if you require special services or you like the idea of getting personalized support at a branch when you need it.
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The Ascent's beginner's guide to banking covers the essentials of selecting the right bank account so you can confidently take action.
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