Online Banking vs the Brick and Mortar bank

Just the other day, someone sent me an article about online banking and I found something I didn’t expect.  Apparently, brick and mortar banks are opening online banking divisions.  But I’m not talking about Chase or Bank of America.  I’m talking about your hometown bank, the bank you grew up with, had a little bank book with, went to kindergarten with the teller’s son.  I guess they saw that online banking is most likely the next big thing in banking.  Considering banks hate change, this is probably a good thing.  I mean, we all like better interest rates and no fee accounts right?  So this means that we should all just walk into our corner bank and enjoy the good life right?  We’ll have all the benefits of both worlds!

Wrong.

The community banks that are going this route are being a little bit sneaky about this.  If you walk in to one of the banks and open an account, you’re not going to get the same rate as their online accounts.  But what’s even worse is that you won’t even be given the option.

You see, banks love not paying us interest.  Seriously, they love it.  The lower they can push their interest rates, the better off they are.  Now, these banks are opening online banking divisions and are offering some of the BEST rates in the country on those online accounts.  But a brick and mortar account is going to be 0.20% or less.  Granted, that’s WAY better than Bank of America.  And the service is probably miles better than B of A as well (sorry guys).  But if that’s a full 1.00% less than their online account, you’re being cheated.  Plain and simple.

This is not to say that regular banks are all bad.  There is some merit to walking in and dealing with a person face to face.  Same goes for knowing that there will almost always be a free ATM around when you need one.

So what is the real benefit of online banking?  Well, let’s run this down really quickly:

1.  Get paid actual interest:  Just compare the online banks versus the brick and mortar banks and you can see this one.  It’s a simple side by side comparison!  Online banks are giving you around 1.00% a year (my bank, Capital 360, the form ING Direct, is offering 0.75%).  The best brick and mortar bank?  Well that would be Chase, which is offering 0.25% in NY.  Citibank is offering the best nationwide right for a brick and mortar, at 0.20% .  Did I mention the online banks have checking accounts with interest? I think that online banking wins this round.

2.  Customer Service: When was the last time you tried to actually close an account with your bank?  What about when you had a simple question about something?  Obviously this is a pretty objective area but we the benefits of rankings.  Overall, the online banks by and large crush the national banks with great customer service.  On a community level, credit unions and your smaller, local banks are actually fantastic.  It helps when you grew up with the people there and have had your account with them all your life.  This is definitely a tie between small, local banks and online banks.  National banks do not stand a chance in the customer service arena.

3.  Ease of use:  Online banking is pretty easy.  Most people get concerned about depositing money, etc, but most of the online banks have figured out how to get around it.  USAA, one of my favorite online banks, has built a special app for your phone to facilitate deposits.  And it’s actually surprisingly safe.  I know some people that prefer going to a teller but for me, I’d rather not walk into a bank ever again!  Online banking is definitely the easiest thing out of the options.

Overall, I’m a huge proponent of online banking.  It just seems to make the most sense!  However, that’s just me.  What it really comes down to is what is best for YOU!  While I think that these accounts are easy and getting tons of interest is great, it might not be right for everyone.  So do what works best for you but at the very least, make an informed decision!  Ask your bank if they offer online banking accounts with higher rates and see if you can get those!  There’s money to be made out there so go get it!

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One thought on “Online Banking vs the Brick and Mortar bank

  1. I noticed a local bank near me offering an online checking and savings account. Like you mention, you can’t walk into the bank to open the account. You have to do so online. Plus, you can’t use the brick and mortar part of the bank at! You have to do everything online. If you have a check, don’t even think about walking into a branch, because they can’t deposit it for you. On one hand, I sort of understand the idea, but on the other hand, if they don’t make this super clear to customers, they are going to have many frustrated customers that open up this type of account.

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