Consumers across the United States are currently evaluating their banking choices, weighing the merits of traditional brick-and-mortar institutions against online-only banks. The decision involves considering over 3,800 banks nationwide.
Brick-and-mortar banks maintain physical branch locations where customers can conduct transactions in person. These institutions often provide a wide array of financial products, including checking accounts, savings accounts, mortgages, auto loans, and credit cards. They typically feature extensive ATM networks, making cash deposits and withdrawals straightforward processes. Many large traditional banks have also invested significantly in online and mobile banking technology, offering sophisticated digital tools to their customers.
However, these banks frequently charge higher fees, including monthly maintenance fees for deposit accounts, though they often provide methods to waive these charges. They also tend to offer lower annual percentage yields on savings products. For example, some major brick-and-mortar banks currently offer savings account rates as low as 0.01 percent, compared to the national average of 0.62 percent.
In contrast, online banks operate primarily through digital platforms without physical branch networks. These institutions generally offer higher annual percentage yields on savings accounts and certificates of deposit, with some currently paying between 3 and 4 percent. They typically charge fewer or no monthly maintenance fees, passing on savings from reduced overhead costs. Some online banks also provide ATM fee reimbursements through partnerships with networks like Allpoint or MoneyPass.
Yet online banks present limitations. Cash deposits are often unavailable or come with associated fees, though some institutions facilitate deposits through retail partners like Walmart, Walgreens, or CVS. Customer service is usually restricted to phone, chat, or online channels, with few options for in-person assistance. Most online banks offer a narrower range of account types and financial products compared to their traditional counterparts.
Both types of institutions provide deposit insurance through the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, ensuring customer funds are protected in case of bank failure. Security measures including encryption and multi-factor authentication are standard across online and traditional banking platforms.
Industry observers note that consumers are not limited to choosing one type of bank exclusively. Some maintain accounts at both online and brick-and-mortar institutions to access higher savings yields while retaining branch services for cash transactions and in-person support.