Online Banks vs Brick-and-Mortar Banks

You have a lot of choice when it comes to banking. Do you go with a local credit union or do you choose a bank? And if you opt for the latter, is your choice based on the proximity of a local branch or the fees charged and the products offered?

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One of the biggest decisions that consumers are making is whether to opt for an online bank or a traditional one. It all depends on the sacrifices you want to make, as well as the perks and benefits on offer, and that’s what we’ll discuss in this guide.

Online Banks vs Traditional Brick-and-Mortar

An online bank is one that operates exclusively online. Obviously, this is the 2020s, and no self-respecting brick-and-mortar bank is going to turn its back on the internet. However, an online bank isn’t simply one that operates online, but one that only operates online. 

The lack of any physical branches means the bank isn’t paying high rent or monthly maintenance and doesn’t have to pay wages and other fees to cover face-to-face banking costs. As a result, they’re able to pass some savings onto the customer, offering better interest rates, lower monthly fees and overdraft fees, and more.

Online banks offer a wide spectrum of services, including direct deposits, loans, checking/savings, and credit cards, and they can tap into the country’s vast ATM network. They are also backed by the FDIC and carry many of the same anti-fraud features offered by a traditional bank.

The only downside to all of this is that you can’t simply visit your local bank if you have an emergency, need to withdraw/deposit a large amount of cash, or wish to speak to a manager. What’s more, there’s no guarantee that you’re getting better rates and paying lower fees, as the traditional banking sector has fought back and become very competitive in recent years.

The Best Online Bank Accounts

What follows is a list of online-only bank accounts. These providers offer high rates of interest on savings accounts, in addition to up to 1% for checking accounts and a host of credit cards and other financial services.

Ally

Ally was founded as a division of General Motors and initially offered car loans. It launched as Ally Financial in 2010 and currently offers a wealth of services.

  • Checking Account Interest Rate: 0.1%
  • ATM Access: Over 50,000 ATMs
  • Credit Cards: Ally Cashback Credit Card
  • Savings Accounts: Up to 2% on CDs
  • Other: Use Ally Invest to make investments

American Express National Bank

American Express is one of the biggest names in the financial sector and one that offers a wealth of services. AmEx is best known for its credit cards, but consumers can also open an online savings account and secure a high rate of return.

  • Checking Account Interest Rate: N/A
  • ATM Access: N/A
  • Credit Cards: Some of the best travel reward credit cards around, including the AmEx Gold, Platinum, Everyday Cash, and Everyday preferred.
  • Savings Accounts: Up to 1.8% on CDs and high-yield savings accounts
  • Other: Personal loans and other financial services available

Axos

The Axos checking account offers one of the highest APYs and is also one of the highest-rated checking accounts of all online-only banks.

  • Checking Account Interest Rate: 1.25%
  • ATM Access: Over 50,000 ATMs
  • Credit Cards: N/A
  • Savings Accounts: N/A

Capital One

Capital One is one of the biggest financial institutions in the United States. In 2012, it purchased one of the very first online  banks and has since merged those products into the Capital One brand.

  • Checking Account Interest Rate: 0.75%
  • ATM Access: Over 40,000 Allpoint ATMs
  • Credit Cards: A wide selection that includes travel and cash back cards, such as the Venture and VentureOne.
  • Savings Accounts: Up to 1.99% on CDs

Charles Schwab

Charles Schwab is one of the biggest names in the financial sector and is trusted by millions of Americans. You can use all ATMs without paying any fees and there are no monthly fees for savings or checking accounts either.

  • Checking Account Interest Rate: 0.15%
  • ATM Access: Worldwide ATM use without ATM fees
  • Credit Cards: Provides credit cards via American Express
  • Savings Accounts: Up to 1.85% on CDs
  • Other: Manages close to 1.5 million accounts.

Chime

Chime is somewhat limited as a bank, offering online-only services that will benefit the digital age and most smartphone users, but make life difficult for many consumers seeking traditional banking services like checks.

  • Checking Account Interest Rate: 0.1%
  • ATM Access: Over 35,000 MoneyPass and Visa Plus Alliance
  • Credit Cards: N/A
  • Savings Accounts: Up to 1.6%
  • Other: Online account and mobile app access

Discover

Discover is a name we have mentioned many times on this site, highlighting its many great unsecured and secured credit cards. Discover also offers bank accounts and other financial services.

  • Checking Account Interest Rate: Up to 1% in the form of debit card cash back
  • ATM Access: Over 60,000
  • Credit Cards: The Discover It series of credit cards includes cash back secured and unsecured versions
  • Savings Accounts: Up to 2% on CDs
  • Other: Multiple types of savings and investment accounts available

Marcus by Goldman Sachs

​Goldman Sachs is over 150 years old and currently offers higher interest rates than most online banks and traditional banks. Marcus by Goldman Sachs is the institution’s online banking arm, with a host of services available.

  • Checking Account Interest Rate: N/A
  • ATM Access: N/A
  • Credit Cards: N/A
  • Savings Accounts: Up to 2.05% on CDs and 1.70% with high yield savings accounts
  • Other: Personal loans also available

Synchrony

Synchrony Financial was founded in 2003 but can trace its roots back to the 1930s. It offers a huge range of credit cards (branded with store names) and high APY savings accounts and is one of the fastest growing online banks in the US.

  • Checking Account Interest Rate: N/A
  • ATM Access: No ATM fees; all charges reimbursed
  • Credit Cards: Provides a host of store and retail cards on behalf of big chains, including Amazon, JCPenney, GAP, Sam’s Club.
  • Savings Accounts: Up to 2% on CDs

Best Traditional Banks

Traditional banks are ones that operate physical bank branches, allowing you to pay them a visit to discuss banking issues, make a deposit/withdrawal, or transfer money. For customers who grew up without the internet and still rely on cash transactions, these banks can be essential. 

Even if you grew up in the online age, you may still want to bank with a traditional provider for your main account and then work with an online provider for everything else, including your savings and credit cards. Whatever the reason, it’s worth comparing both options, so take a look at this list of the best traditional banks.

Chase

Chase has close to 5,000 branches across more than 30 states and it is one of the country’s biggest banks. In addition to a host of services aimed at personal, small business, and big business customers, Chase also provides a wide selection of credit cards, including leading travel and cash back cards like the Chase Freedom, Chase Freedom Unlimited, and Chase Sapphire Preferred.

Pros 

New Chase customers have been offered numerous bonuses over the years. At the time of writing, we’re nearing the end of a promotion that offers up to $200 to all new checking account customers and $150 to all new savings account customers.

There’s a good chance this promotion will have ended by the time you read this, but we’re sure another one will come along before long.

Chase also has a huge range of services, including loans, credit cards, bank accounts, and more.

Cons

One of the few downsides to Chase is that the APYs are not the best. You can typically get much higher rates on your savings accounts and CDs if you take your business elsewhere. As a result, we wouldn’t recommend Chase for savings accounts, but would definitely recommend them for credit cards and checking accounts.

Citibank

Citibank is part of the Citigroup, which can trace its roots back over 200 years and is one of the biggest financial services companies in the world. In addition to checking accounts and the popular Double Cash credit card, Citibank offers stocks, bonds, retirement savings, and much more.

Pros

Citibank “only” has 700 or so branches in the United States, but it has over 1,700 in other countries. Citibank offers high signup bonuses and other perks, and also has a strong mobile app and a host of digital features. 

Citibank customers can also tap into a vast ATM network and benefit from regular offers and bonuses.

Cons

As with the other traditional banks on this list, Citibank doesn’t have the best rate of return on its savings accounts or its checking account. You’ll get much better rates elsewhere, especially with online lenders, but you may struggle to find an online lender that offers bonuses as higher as those provided by Citibank.

HSBC

HSBC is a globally recognized brand, one of the biggest in the world and one of the few truly international banking operations. It is British, but it has such a strong brand that few realize its name stands for Hongkong and Shanghai Banking Corporation, dating back to its launch in British Hong Kong back in the middle of the 19th century.

HSBC has close to 4,000 offices in 65 countries and has nearly 40 million customers. It offers a wealth of services and features across these many countries and territories.

Pros

The HSBC checking account has a $15 monthly fee, but this can be avoided by establishing a direct deposit. It also offers a high yield of 1.85% for its savings account and doesn’t require a high minimum deposit on account opening.

Cons

As a HSBC customer, you can rest assured that you’re dealing with a global bank that has branches in many countries. However, HSBC doesn’t have much presence here in the United States and you may struggle to find ATMs. What’s more, HSBC doesn’t offer great yields for checking accounts.

Bank of America

Bank of America has a little under 4,500 ATMs, but these are spread across 40 states, which is higher than Chase. Bank of America, like Chase, offers customers a wide selection of services, although it has fewer credit cards and those cards can’t compete with the ones offered by Chase.

Pros

Bank of America is a leading, trusted provider with some of the best and most accessible customer support in the banking sector. You’ll also find Bank of America branches in 40 states and shouldn’t have an issue finding one near you.

Cons

Bank of America has decent rates for savings accounts and checking accounts, but these can’t compare to what many online banks are providing.

Barclays

Barclays is a huge international lender that was founded in the United Kingdom. It can trace its roots back to the late 1600s, making it one of the oldest banks still in existence today. Barclays has a global presence and has major listings on the London and New York Stock Exchanges.

Pros 

Barclays offers up to 1.70% for savings accounts, making this one of the highest rates of all traditional lenders. Barclays also provides a wide selection of other banking services, including personal and business loans, and the global presence means you can find branches and ATMs all over the world.

Cons

One of the biggest issues with Barclays is that it doesn’t have the same presence in the United States that it has elsewhere, such as the United Kingdom. There are also no checking accounts and you can’t withdraw cash from ATMs, making Barclays a very limited provider.

Bottom Line: The Best for You

If you’ve spent your life with a single bank, switching can be a little daunting. You feel like you have developed a personal relationship with that bank, understand the services offered and benefits provided, and are keen to avoid the hassle of switching.

But making the switch is easier than ever. What’s more, if you’re looking for a new account, be it a joint account, savings account or checking account, you don’t have to side with your usual provider and can make the switch to online banking services.

Whatever you do, make sure you review your options, compare the features, and base your choice on the actual benefits that these banks provide, as opposed to rejecting them because you’ve never banked with them before or are unfamiliar with online banking.

It’s really not complicated and taking the time to learn could introduce you to a new and exciting world.