Is banking with a traditional brick-and-mortar bank a thing of the past?
Is online banking going to be the way of the future?
Which one is better for you?
While I don’t think we’ll ever do away completely with brick-and-mortar banks where you have to talk to a human cashier, I do think in the very near future, we will see even the biggest banks go the way of online banking.
If you’re still deciding which path is best for you and your financial goals, then this post is for you!
Let’s take a look at what each banking type has to offer.
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Certain Types of Transactions Can Only Be Completed in Person (For Now)
While you could probably go the rest of your life without ever actually visiting a bank, there are certain transactions that can only be done inside of a bank.
For instance, recently, an acquaintance had to roll over money in a 401(k) investment account from one bank to another.
In order to complete this transaction, the first institution had to mail a check to the acquaintance. She then had to go over to the bank for the account she wanted to roll over the money to so she could complete the transaction.
So yes, there are higher-level tasks which may require you to visit a bank.
Another one is large sums of cash or large checks - especially for businesses. While some ATMs do allow cash deposits, they have limits, and they are prone to jamming and errors. Same with mobile check deposit - the limits may be too low for some people.
If you're a business, check out the best business checking accounts here >>
Get Issues Resolved Quickly
It can be frustrating to be on the phone for hours trying to solve an issue with a transaction.
First you have to deal with an artificial intelligence system that may not fully understand what you need.
And then a remote customer service person may need to escalate your case so you get the help you need.
Before you realize it, you’ve spent an hour on the phone and the problem is still not resolved.
Even though you might have to wait to see a teller, it might be quicker to visit a local branch to get the issue resolved.
Big Money Decisions May Require You to Talk to a Financial Advisor at Your Bank
Ready to get a mortgage on your home? Or perhaps it’s time to take a business loan to get your idea up and running.
Sometimes, these scenarios require that you talk to a person at your bank so they can lay out all the options for you.
This is not something you can always do with online banking.
And even in these instances, there are now bank branches where you will talk to a person alright . . . but you will talk to them via a webcam.
Which brings me to my points on online banking.
The Flexibility to Complete Transactions Without the Hassle
One of the reasons online banking is going to be the way of the future is because it provides convenience.
You don’t have to get in your car and drive anywhere.
If it is freezing or raining outside, you don’t have to brave the weather just to complete a transaction at the bank.
Need to lock your account because you just spotted a suspicious transaction?
And certainly, you don’t have to wait 15 minutes in a line just complete a simple transaction.
Online banking makes everything convenient for users.
With online banking, you can:
- Deposit checks by taking a photo of the check and uploading it to an app.
- Set up bill pay so that your bills are paid automatically each month on the same date.
- Transfer money to friends and family within minutes.
- Move money into multiple types of accounts like your savings account and investment accounts.
- Manage everything from your cell phone and you never have to leave your couch.
You may have also noticed that online banks tend to give you more cash-back opportunities (even on simple checking accounts).
You can even earn higher interest on your savings accounts with online banks. This is another plus of online banking that makes it better than traditional banking.
Using the ATM
When you use an online bank, using the ATM is not always straightforward. Some online banks have agreements with certain institutions so that you can take money out of an ATM for free. This is not true for certain online banks.
In light of recent data breaches, you might be wary about putting your money into an online bank.
As long as the bank is FDIC-insured, they are required to cover up to $250,000 in losses if that ever happens.
And it’s important to note that traditional banks also store your information in similar data centers so a data breach could happen there too.
Save Paper, Save the Trees
Traditional banking comes with paper statements and paper receipts.
If you carry out all your transactions via an online bank, it’s likely you will be largely paperless and this helps the environment as well.
So which one is better? Ultimately, it’s going to depend on you, your financial goals, and what you need.
The reality, however, is as the world continues to innovate, it is likely we will see fewer and fewer traditional banks and see a shift to online banking.
So the earlier you dip your feet in that pool, the better.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.