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

Kailey Hagen
Cole Tretheway
By: Kailey Hagen and Cole Tretheway

Our Banking Experts

Ashley Maready
Check IconFact Checked Ashley Maready
Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page. APY = Annual Percentage Yield. APYs are subject to change at any time without notice.

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 banks, but brick-and-mortar banks still excel in some areas.

When deciding between online vs. traditional banks, choose a bank that meets you where you are right now. You're not locked in forever -- should you require extra services or better rates in the future, you can switch banks. You can even open accounts at two banks to get the best of both.

Unsure which bank type fits you best? No worries. Read on for details into which type of bank could best satisfy your banking needs.

Online bank vs. traditional bank comparison

Before we start determining which is right for you, ket's look at savings accounts at an online bank vs. a brick and mortar bank to compare side-by-side.

Service Savings accounts at brick-and-mortar banks Savings accounts at online banks
Interest rates Generally low Generally high
Hours of operation Fixed to the bank's schedule Flexible to your schedule
ATM networks Extensive ATM networks Coverage varies
Customer service In-person service in addition to call centers Call centers often extended or 24/7 hours
Account access Branch withdrawals, transfers, and ATMs Transfers and ATMs
FDIC insured Yes Usually

How to choose between an online bank and a traditional bank

1. Determine your banking needs

You can find basic bank accounts, like checking and savings accounts, at both traditional banks and online banks. It's the other services that set these bank types apart.

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

But if you're prioritizing 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.

2. Compare rates

Online banks tend to offer the best rates, but not always. Don't assume online banks always offer the highest returns. If you want to earn relatively high interest on savings, shop around.

Compare savings rates

Make sure you're getting the best account for you by comparing savings rates and promotions. Here are some of our favorite high-yield savings accounts to consider.

Account APY Promotion Next Steps
up to 4.60%
Rate info Circle with letter I in it. You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at:
Min. to earn: $0
New customers can earn up to a $300 bonus with qualifying direct deposits!
5.00% APY for balances of $5,000 or more
Rate info Circle with letter I in it. 5.00% APY for balances of $5,000 or more; otherwise, 0.25% APY
Min. to earn: $100 to open account, $5,000 for max APY
Rate info Circle with letter I in it. To ensure you keep getting the highest rate at UFB, you'll need to keep an eye on their rates. Occasionally, the bank launches new accounts with higher rates. Existing accounts need to contact the bank to request being moved to one of these new accounts.
Min. to earn: $0

3. Evaluate bank fees

All bank accounts charge fees, but online banks generally charge fewer. Online banks have lower overhead costs -- so they can charge you less and pay you more.

Most online banks don't charge you monthly fees or have minimum balance requirements. Brick-and-mortar banks often have both. You may be able to waive monthly fees if you meet minimum balance requirements or set up direct deposits.


How to know what fees you'll pay

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.

4. Consider if you use ATMs often

Both types of banks usually offer ATM access. The better choice boils down to your location and banking habits.

Most banks offer ATM locator tools on their websites or mobile apps, so you can see how many ATMs are 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 there may be none near you. Plus, you can rack up extra fees for using out-of-network ATMs (unless your bank reimburses you for this).

5. Ask yourself if you're comfortable banking online

There's little to distinguish online vs. brick-and-mortar banks in terms of online banking. Nearly every bank lets you view your balance, transfer funds, pay bills, and remotely deposit checks via website or mobile app.

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’re unable or unwilling to bank on the internet, a brick-and-mortar bank is your best bet at getting things done.

Which should you choose: online vs. brick-and-mortar banks?

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.

Ultimately, you should pick an online bank if you're comfortable managing your money entirely online and you prioritize high returns and low fees. But consider a traditional bank if you require specialized services or you want in-person support at a branch when you need it.

Have you decided which bank type best meets your needs? If so, you're well on your way. Next, compare top banks so you get the best of what you're looking for. Or, take a step back and consider the big picture: generally speaking, how to choose a bank.

Still have questions?

Here are some other questions we've answered:

The Ascent's best savings accounts

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. The Ascent's top savings account picks can earn you more than 10x the national average savings account rate.

Our Banking Experts