Is a Brick-and-Mortar Savings Account Ever Worth It?

Online banking makes good financial sense for a lot of people these days. You usually don't have to worry about pesky bank fees, and you can earn a competitive interest rate on your savings. Right now, the best savings account interest rates today are earning over 5%. That could pay you $5 per year for every $100 you have in the account.

That makes it hard for many to contemplate switching to a brick-and-mortar bank, which may offer rates as low as 0.01%. But there are a few times you may want to consider holding onto a brick-and-mortar savings account.

When is a brick-and-mortar savings account worth keeping?

Brick-and-mortar savings accounts aren't known for having spectacular rates on their savings accounts, but this depends in part on where you look. Large, national banks typically have the lowest interest rates. They have the largest branch networks to maintain, which costs quite a bit of money. So rather than offering competitive interest, they rely upon reputation, customer service, and relationship benefits, like discounts on loan products for bank account holders, to draw in new customers.

Regional and local banks and credit unions sometimes offer better deals, though. For example, Peoples State Bank in my neck of the woods currently offers 5% APY on the first $15,000 of your savings account balance. Some people could earn more than this with an online bank, but it's still a lot better than what you could find with a large, national bank.

If your local bank offers decent rates, you might prefer to keep banking there, especially if you value customer service. It can be more challenging to get personalized support with an online bank when you need it. But if this isn't the case, an online savings account is a better fit for you.

What should you look for when choosing a savings account?

The savings account's interest rate will be the most important factor when choosing which bank to work with, but it's not the only one to consider. Some other things to focus on include:

• FDIC insurance: FDIC insurance protects your money up to $250,000 per person, per bank, per ownership type, against bank failure. It's crucial to only bank with institutions that have this. If you're working with a credit union, verify that it has National Credit Union Administration (NCUA) insurance.
• Maintenance fees: Most online banks don't charge them, but you want to be sure you won't pay to own your account anyway. If it has a maintenance fee, see if there are options to waive it.
• Online and mobile tools: Solid online and mobile account management tools are critical when your bank doesn't have branches. Check out app reviews to learn about how user-friendly it is.
• Support methods and hours: Online banks typically have phone and email support and some have live chat help as well. Make sure you're comfortable with the support options available to you, so you can get the assistance you need quickly.
• ATM card: An increasing number of online banks offer ATM cards to their savings account customers so they can withdraw cash directly without first transferring their funds to a checking account. If this interests you, focus your search on accounts with ATM cards.
• Other fees: Review the bank account's fee schedule so you understand what it can charge you for. Common fees to look for include wire transfer fees, out-of-network ATM fees, and fees for making too many withdrawals per statement cycle.

Once you've narrowed your list to a few options, compare them side by side to decide which you like best. If you have any questions, reach out to the banks directly for more information. Remember, you can always close the account later if you change your mind. But it's a lot easier to make a decision you're comfortable with the first time.