Online vs. Brick and Mortar Bank: Which Is Better?

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.

What are your banking needs?

You can find basic bank accounts, like checking and savings accounts, with traditional banks and online banks.

If you need these services, a brick-and-mortar bank may be a better fit:

• Cash deposits
• Safety deposit boxes
• Foreign exchange services
• In-person customer service

On the other hand, if you're looking for great interest rates and low fees, an online bank is the way to go.

Online banks don't have to funnel a bunch of money into maintaining a branch network. That means they can offer you better rates on their services.

Comparing rates

One popular online bank is Synchrony Bank. A popular brick-and-mortar option is Capital One Bank.

You can compare the rate for one of Synchrony's savings accounts to one of Capital One's savings accounts below:

Is it important for you to avoid bank fees?

All bank accounts usually charge some type of fees. But online banks generally charge fewer fees. This is because online 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.

Do you use ATMs often?

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. 

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.

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 fee-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.

Are you comfortable banking online?

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 main difference here is whether or not you can visit a branch if you want to. With an online bank, you won't have that option 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.

Which should you choose?

The online vs. brick and mortar banks competition will likely go on forever because each type has definite pros and cons. Both types of bank are insured by the FDIC. Both types are also safe places to bank.

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.

Still have questions?

Here are some other questions we've answered:

• Credit union vs. bank: What’s the difference?
• How do you open a checking account online?
• What is APY?