Traditional vs Online Savings Account

    The pros and cons of a traditional savings account and a virtual savings account.


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    Before we move on to retirement accounts, I wanted to cover a topic that I think is very important to cover – traditional banks vs online banks. Some of the savings accounts that I’ve talked about have both options to open them at a traditional bank or an online bank. Some of the accounts I’ve talked about only have an option to be opened at an online bank. I think it’s important to discuss what is a traditional bank versus an online bank and what are some of the pros and cons of each of these banks. 

    What is a traditional bank?

    A traditional bank is a bank that has a physical location. This can be your local city bank to a large bank like Bank of America. You’ll have a face-to-face interaction when it comes to your banking needs. You can go in person to transfer money, deposit checks, withdraw cash, and pay your bills. Traditional banks offer mobile apps to do all of this virtually as well though. 


    To me, the most obvious pro of a traditional bank is the in-person experience you can get. Whether you are going in to cash a check or get a loan, you know that you will have an in-person experience. Sometimes it’s good to show face at a traditional bank to build relationships. You never know when you might need to apply for a loan and having a personal relationship with a bank can help you out. 

    On the same line, you have many more banking options at a traditional bank. You can use a traditional bank for all of your banking needs from a checking and savings account to a home equity loan, auto loan, mortgage, and so on. This variety will allow you to stay with the same bank for everything which can be very convenient. 

    You will also have access to your money much faster. If you need cash today you know you can go to the bank and get that cash from your account. You can do this with an online bank, but you just have to know which ATM to go to. If you know where your local branch is, you can just go there on your lunch break if you have an emergency. 


    When it comes to traditional banks they do have some downsides. The first is that they typically have more fees than online banks. You may have to pay $10 a month just to keep your savings in an account unless you meet a certain threshold. Having a monthly maintenance fee is really not ideal. 

    Along with fees, you also will find that traditional banks have lower interest rates for savings accounts. They offer some of the lowest interest rates and you’ll basically earn a few dollars a year depending on how much money you have in your savings. 

    Lastly, and this is the biggest issue for me, their mobile banking or online banking experience is lacking. My local bank in South Carolina took years to have an app and it’s still not really the best app. With so many things being virtual now I want my traditional bank to invest in having a stellar online banking experience. 

    What is an online bank? 

    An online bank is a bank that has no physical location and relies on a computer or mobile app for your banking needs. You’ll use this website or app to transfer money, deposit checks, and pay your bills. 


    One of the biggest features of an online bank is that it will have lower fees. Because they operate online they do not have the overhead of a traditional bank like paying rent for a physical location. They have the ability to offer low or no maintenance fees. You won’t have to worry about keeping a certain balance in these accounts in order to avoid the $10 monthly maintenance fee of traditional banks. 

    Another big feature of an online bank is that they offer better interest rates. Again, because online banks don’t have a brick-and-mortar location they can offer better interest rates than traditional banks. The average interest rate at a traditional bank is 0.06% compared to the average rate for an online bank of 0.45%. This is a very large difference when it comes to earning interest on your savings! 

    You might think that because an online bank is fully online that they won’t have any standard bank services, but you will have those services. You will have access to ATMs in the case that you need cash. Most online banks have no fee ATMs that you can go to. To find out where these are you can go on their app to find out. You also will have the same federal insurance of your money like a traditional bank account. Your money will be in a safe place. If you have any banking inquiries you will be able to talk or chat with someone. I really like that online banks typically have a 24/7 chat option which is way better than a traditional bank. I can never make it to a traditional bank because their hours are when most people are working. 


    While I’m a huge online bank advocate, there are some cons to them that you need to be aware of. The most obvious is that because this is an online bank there are no branches. You will not have the option to talk to anyone in person if you need any help. This could be a deal-breaker for you. I’ve personally never needed to physically go into a bank for help, but there could be a  reason why you might need that option. 

    Another con is that you have fewer options at an online bank. You’ll most likely only find savings accounts at online banks and sometimes an option for a mortgage or line of credit. If you need a checking or certificate of deposit account you may need to go to a traditional bank.

    Wrap Up

    With all that info, I hope I’ve given you some things to consider. Are you going to choose a traditional bank or an online bank for your savings account? There are positives and negatives to both types of banks. You may find one con to be something that you cannot let slide or you may find that the cons don’t outweigh the pros. 

    Let me know, what type of bank do you prefer? I think you all know I love a good online bank. 

    Thank you for listening to another episode of No Fear Finance. Please listen to my other episodes if you are new or if you need a refresher on anything I’ve covered in the past. Make sure to check out to see the latest blogs, podcasts, and videos that we’ve put out. We have something for everyone. 

    Until then, have a great week and see you all next Monday. 



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