Brick-and-mortar banks vs. online banks: Pros and cons

Core Insights - The competition between traditional banks and online banks is intensifying, with many traditional banks investing in digital tools to enhance customer experience [1] Group 1: Comparison of Banking Types - Traditional banks offer physical branches, making cash deposits and withdrawals easier, while online banks operate solely online [2][3] - Brick-and-mortar banks typically provide a wider range of financial products, including mortgages and loans, compared to online banks [5][18] - Online banks generally offer higher annual percentage yields (APYs) on savings accounts, with rates between 3% and 4%, compared to traditional banks that may offer as low as 0.01% [9][8] Group 2: Advantages and Disadvantages - Advantages of traditional banks include in-person service, which can be reassuring for customers with complex issues [6][20] - Disadvantages of traditional banks include higher fees and lower interest rates on deposits due to higher operational costs [7][8] - Online banks attract customers with low or no fees and a sophisticated online experience, but they may lack cash accessibility and in-person service [13][14][17] Group 3: Customer Considerations - Customers who frequently handle cash or require personalized service may prefer brick-and-mortar banks [20][25] - Those looking for higher interest rates on savings may benefit from online banks, but should consider the trade-offs in service and product variety [20][22] - A hybrid approach, maintaining accounts at both types of banks, can maximize benefits by combining high yields with in-person services [21][22]