In many ways, banking is the foundation of your personal finances. A bank can be your hub for managing daily expenses, paying household bills and housing your emergency fund.
But what type of bank is best for you? Brick-and-mortar banks have long kept the funds of community members safe and secure, but online banking is a modern and convenient way to manage money. Both have their advantages, so the best choice is the one that fits your specific needs.
The Rise of Online Banking
While the coronavirus pandemic pushed online banking to the fore, the trend was already there. In fact, four in five customers prefer to manage their finances digitally rather than in person according to the 2020 Chase Digital Banking Attitudes Study.
People go digital for many reasons, including:
- Convenience of 24/7 access to account management, allowing you to schedule transactions whenever you want, rather than be subject to “bankers’ hours.”
- Easy to access when you’re on the road for work or for fun.
- Potentially higher interest rates on savings accounts.
On the other hand, it’s important to be aware of the potential downsides, including that it could take longer to access your funds. You also might have more limited products and services to choose from. There are also risks of technology disruptions, and you may have more restricted — or expensive — ATM service.
Familiarity of Brick-and-Mortar Banks
The local branch of your bank houses a business relationship that might span generations. During your childhood, your parents may have taken you there to open a passbook savings account. You might even have warm feelings and memories of milestones like buying your first car or signing the mortgage to your first home. There are lots of reasons many people prefer a physical bank, including:
- Interaction with people who know your needs as a customer.
- Services like safety deposit boxes and notaries.
- Local, low-cost or no-fee ATMs.
- In-person assistance when you need it.
- Greater sense of security “knowing where your money is.”
On the other hand, physical branches generally come with downsides such as generally lower CD and savings account rates, limited hours and typically higher fees.
Best of Both Worlds
Both physical and internet banks can offer FDIC insurance, which protects your deposits up to $250,000 in the event of a bank failure. Additionally, many brick-and-mortar banks offer digital banking services like online bill pay and mobile check deposit. This lets you access online banking while still retaining many of the benefits of physical branches, including access to fee-free ATMs and personal attention when needed.
Neither option has to be a one-stop shop for all your banking needs. You can keep your household checking account at the bank down the road for the personalized service and your emergency fund in an online bank for the higher yield it may offer. As you review your choices, your Well Cents financial professional can help you find the best fit for your in-person and online banking needs.