Online only banks are becoming increasingly common in today's banking landscape. Since Covid-19 and mandated distancing in effect, more and more people have embraced the freedom of online banking. The question remains though: Which is better?

The answer to this question is that it really depends. Both can be useful and banking customers all have different needs. This article explores the similarities and differences between online banking and the more traditional banking model so you can make an informed decision when it comes to what is right for your own personal finances.

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What is the Difference Between Traditional Banking and Online Banking?

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Both traditional and online banks provide customers with banking tools. The tools are slightly different and each has its advantages and disadvantages. Let's review the differences.

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Traditional Banking

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The traditional banking model can also be referred to as "brick and mortar." This model has been in effect since the inception of banking and is based on the presumption that customers want (or need) to stop by their local branch to perform all of their banking needs in person. This approach to banking was of course necessary before much our lives moved into the digital space.

Most customers don't enthusiastically choose to pop in to a local banking branch if they can avoid it. Wouldn't you rather save that precious time and energy rather than wait in a banking queue? That's why even traditional "brick and mortar" banks have now adopted online service channels to offer more convenience to their customers.

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So, if both online and traditional banks have online services, what's the difference?

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The difference is a matter of priority. A traditional bank will lean on an "in-person first" experience and will typically backfill some basic functionality into an online portal. Online banks on the other hand are "mobile first (and only)" and so have invested more time and resources into perfecting their online and mobile offerings.

The reality is that traditional banks have a wider suite of products. As good as banking technology has become, there are just some things that haven't been solved for yet through digital channels. If you have a complicated financial situation, maintaining a relationship with a traditional bank is probably a good idea.

That doesn't mean that you can't also have a digital bank to take advantages of all of those offerings as well. Wait... are you suggesting we have more than one bank? Absolutely, for many people, utilizing an online only banking provider at a minimum is a great idea. And we'll get into why later. In addition, maintaining an account at a local, traditional banking provider could be useful for those once in a blue moon banking needs.

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Pros and Cons

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Pros of Traditional Banks:

• Local branches offer walk-in, face-to-face customer service
• Greater number of banking products so that customers can keep all banking and personal finance needs with a single provider
• More options for cash deposits

Cons of Traditional Banks:

• Often have higher monthly fees
• Usually have lower interest rates on savings accounts
• Less established mobile banking and website-based options that increase time and reduce functionality for most every-day banking needs
• Often smaller network of ATMs
• Fewer options in under-banked geographic areas

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Who are Traditional Banks Best For?

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A traditional bank works well for people who:

• Need to apply for a mortgage, or other credit or lending needs and prefer to keep everything under one roof at all costs
• Want to regularly deposit lots of cash
• Feel more at ease having their money at a bank with a physical location

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Online Banking

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Let's move on to online offerings. Online banking offers a lot of benefits when compared to a traditional bank. Often referred to as digital banking, online banking allows people to do many everyday banking tasks through a website or mobile app.

As we talked about, most banks these days will have an online service, but online-only banks are different. Without any branches for their customer to visit, online only banks need to offer a greater array of features through their digital interfaces.

Online only banks typically have larger ATM networks.

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Pros and Cons

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The pros of online banking are:

• Higher interest rates on savings accounts
• Typically better checking account and cards reward programs
• Fee free! Many don't charge any fees at all
• Better accessibility for everyone
• Typically better digital-by-design customer service
• Typically better access to ATMs
• Greater access

The cons of online banking are:

• Depositing cash into your account can be difficult
• The type of accounts you need may not all be available in one place

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Who are Online Banks Best for?

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Some people may prefer online banking over a traditional bank if they:

• Do almost everything and prefer to do as much as possible online
• Value better, more intuitive mobile banking + technology experiences
• Don't love visiting banking branches
• Physical branches aren't convenient or offer limited hours of service
• May only need a simple savings, checking or investment services
• Want to pay bills online
• Are comfortable with technology
• Want to pay less in bank fees and benefit from more competitive interest rates

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Are Online Banks Less Secure?

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This is a common question. Online banks are not less secure than a traditional bank. You'll of course want to make sure your money is FDIC-insured and the banking provider has strong security protocols in place, including two-factor authentication to protect your account and password.

If you use a physical branch or an online bank, the reality is that your money is never sitting at the branch anyway.

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Where Can You Open an Online Bank Account?

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Atmos is a leading online only banking provider in the US. Beyond offering nationally leading savings rates and checking with up to 5% cashback on your spend at values-aligned businesses, Atmos offers another benefit. It is the only banking provider in the world committed to using 100% of your money to support climate-positive loans, reducing your carbon footprint allowing you to combat climate change while using a best-in-class banking service.

Open your account in less than two minutes. Please contact us or apply now today.

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