Brick and Mortar Banking vs. Online Banking: Pros and Cons

Anders Skagerberg CFP, EA
Brick and Mortar Banking vs. Online Banking: Pros and Cons

The internet has dramatically reshaped how we work, communicate, and bank. Nowadays, most people can manage their finances via the web, accessing accounts and transferring money without ever having to set foot inside a physical bank location.

But there are still some advantages to using traditional brick-and-mortar banking services. So what should you consider when deciding which type of banking is right for you? In this article, we'll compare the benefits and drawbacks of brick-and-mortar banking versus online banking, so you can make an informed decision that best fits your needs.

Because, at the end of the day, both offer unique advantages that cater to different financial needs and lifestyles.

On the one hand, customers have long trusted traditional banks for their physical presence and personal touch. However, they often come with higher fees and lower interest rates on savings accounts. Alternatively, online-only banks provide a more flexible platform, allowing you to conduct financial business online at your convenience while generally charging lower fees.

So, let’s dive deeper into these differences, offering insights into ATM networks, maintenance fees, high-yield savings options, and security measures in place for both platforms.

Traditional Brick-and-Mortar Banking

Traditional banking institutions have physical locations for customers to conduct transactions and build relationships over time and have long been a cornerstone of personal financial management. 

Here are some of the key features and aspects of traditional brick-and-mortar banks:

Personalized Service and Trust Building

The face-to-face interaction offered by physical banks allows for personalized service and often fosters trust between the bank and its clients. Alternatively, forming a trusted bond with an automated chat representative can be difficult. 

The Convenience Of Nationwide ATM Networks

Beyond in-person services, brick-and-mortar banks also provide convenience through their extensive nationwide ATM networks. For many traditional banks, no matter where you go, accessing your funds is a breeze with the help of these widespread ATM networks.

Higher Fees Compared to Online Platforms

However, this level of service and accessibility often comes at a cost. Traditional banks tend to charge higher fees compared to online banking platforms due to their operational expenses associated with maintaining physical branches. And it makes sense—physical locations are an expense, and banks must pass that expense to their customers to stay in business. 

The Costs Associated With Traditional Banks

You need to be aware of the costs when it comes to old-school brick-and-mortar banks. Banking institutions often have a variety of expenses that can erode your savings over time.

Standard Monthly Maintenance Fees in Traditional Banks

One typical fee is the standard monthly maintenance charge. You must pay this set amount monthly, regardless of how much or little you use your account. While some banks may waive this fee if you maintain a minimum balance or meet other criteria, it's still something to consider when choosing where to bank.

Lower Interest Rates on Savings Accounts Balances

In addition, traditional banks typically offer lower interest rates on savings account balances compared to online-only platforms. This means that your money is not working as hard for you as it could be elsewhere. 

Minimum Deposit Requirements

Last, traditional banks often require minimum deposit amounts, and failure to maintain those requirements can result in additional fees. This can cut into your overall savings and leave you with less money in your account.

Benefits of Online-only Banking Platforms

Alternatively, online-only banking platforms have become an attractive option for savvy customers as the digital revolution progresses. These platforms offer many benefits that traditional brick-and-mortar institutions often can't match.

1. High-Yield Savings Accounts from Online Banks

The most significant advantage is the potential for higher returns on your deposits. According to Investopedia, many online banks provide high-yield savings accounts with interest rates significantly above national averages—often up to 10 to 12 times higher. This means you could earn much more on your savings compared to keeping them in a traditional bank account.

2. Fewer Charges and Lower Minimum Balance Amounts

Besides offering better returns, online banking platforms typically charge fewer fees than their traditional counterparts. They also tend to require lower minimum balance amounts, making them ideal if you're just starting out or don't have much money to deposit initially. The cost-effectiveness and convenience make online banking an appealing option for many individuals and families.

3. Convenience and Accessibility

Gone are the days of waiting in line to deposit checks or withdraw cash. Online-only banks offer the convenience of 24/7 access to your accounts from anywhere with an internet connection. Now, you can move funds between accounts, settle payments, monitor balances, and request loans directly from your phone or laptop. This convenience is especially beneficial for busy parents with young kids who may find visiting physical bank branches during regular business hours challenging. Additionally, many online banks provide convenient mobile applications to manage your finances wherever you are. 

4. No Need for Physical Checks or Cash Withdrawals

Online banking eliminates the need for traditional paper checks and frequent ATM visits. You can send money instantly through electronic transfers and use digital wallets like Apple Pay or Google Wallet for online and in-store purchases. Plus, many online banks reimburse customers' ATM fees when using an out-of-network machine.

5. Environmentally Friendly

Online banking is also environmentally friendly. By eliminating the need for paper statements and in-person visits, online-only banks help reduce paper waste and carbon emissions.

In conclusion, online-only banking platforms offer a range of benefits that make them a compelling option for many consumers. From higher returns on savings to lower fees, online banking is a convenient, cost-effective, and environmentally friendly way to manage your finances.

Security Measures in Place for Online Banking

In the digital age, security is a top concern for many. However, online banking platforms have risen to the challenge by implementing stringent measures to protect your personal information. These include strong encryption, multifactor authentication, and robust passwords.

Strong Encryption Used by Digital Establishments

All reputable online banks use high-level encryption to ensure your data remains secure during transmission. Intercepted data would be rendered useless without the unique encryption key, making it impossible to decode.

Multifactor Authentication and Robust Passwords

  • Multifactor Authentication: Many online banks require more than just a password for access; this could be something you know (like a password), something you have (like a physical token or mobile device), or something you are (such as biometric data).

  • Robust Passwords: Strong passwords are crucial in safeguarding your account from unauthorized access breaches. Most online banks enforce strict password policies requiring combinations of letters, numbers, and special characters.

These security features make online banking a safe option for managing finances virtually while providing peace of mind against potential cyber threats. Check out Bankrate for more information on online banking security.

Key Takeaway: 

Online-only banking platforms offer several benefits over traditional brick-and-mortar institutions, including higher returns on savings through high-yield accounts, fewer charges and lower minimum balance requirements, 24/7 accessibility and convenience, enhanced security measures such as biometric login and encryption technology, and environmental friendliness by reducing paper waste. Overall, online banking is a cost-effective way to manage finances with added advantages for the modern age.

But in the end, deciding between physical and virtual banking is a challenging decision. That’s because different people have different needs, wants, and preferences—traditional banking will be best for some, while online banking will be best for others. So, consider the advantages and disadvantages of each option before selecting one that best suits your needs.

Key Summary: Pros and Cons of Each Type of Bank

Brick-and-mortar banks offer familiarity, comfort, and direct human interaction but often come with higher fees. On the other hand, online banks provide efficiency, convenience, and lower costs but lack physical locations for in-person services.

Key Factors to Consider When Choosing a Provider

  • A wide-reaching ATM network or reimbursement program: This ensures you can access cash without paying hefty withdrawal fees or that your bank will reimburse you if you do.

  • Low fees and high rates: Look for institutions with minimal or no monthly maintenance fees while offering competitive interest rates on savings account balances.

  • Excellent customer support: Good customer service is vital, especially when dealing with financial matters. Ensure your bank provides top-notch service, regardless of where, how, or when you interact with them.

FAQs in Relation to Brick and Mortar Banking Vs. Online Banking

What Is The Main Difference Between Brick-And-Mortar Versus Online-Only Banks?

The main difference between brick-and-mortar banks and online-only banks is their physical presence. Brick-and-mortar banks have physical branches where you can conduct transactions and speak with bank representatives. In contrast, online-only banks operate solely through digital platforms, allowing you to manage your finances online without visiting a physical location.

Is It Better To Have An Online Bank Or Physical Bank?

Both online banks and physical banks have their advantages and considerations. Online banks offer convenience and accessibility, allowing you to manage your finances from anywhere, while physical banks provide a personal touch and face-to-face interactions, which some people prefer. Ultimately, the choice depends on your individual needs and preferences.

What Advantages Do Online-Only Banks Have Over Traditional Banks?

Online-only banks have several advantages over traditional banks. They often offer higher interest rates on savings accounts and lower fees due to their lower operating costs, and they provide the convenience of 24/7 access to your accounts and services from the comfort of your home using a computer or mobile device.

Why Use A Traditional Bank?

Traditional banks offer certain benefits that may be appealing to individuals. They provide the opportunity for in-person interactions with bank representatives, allowing for a more personalized and hands-on approach to banking. Additionally, traditional banks often offer a wider range of services, such as specialized financial advice, investment options, and access to additional financial products beyond basic banking services.


In conclusion, the Internet has revolutionized the banking industry, offering customers the choice between traditional brick-and-mortar and online-only banks. 

Both options have distinct advantages and considerations. Traditional banks provide a personal touch, in-person interactions, and a wider range of services, but they often come with higher fees and lower interest rates. On the other hand, online-only banks offer convenience, higher returns on savings, lower fees, and 24/7 accessibility. 

The decision ultimately depends on individual needs and preferences, so it's essential to weigh the benefits and drawbacks of each before making a choice.

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Anders Skagerberg CFP, EA Personal Finance Writer

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