Online Banking versus Traditional Banking – A Comparison

Posted by MoneySavvy on Aug 9th, 2010 | no comments home title

Online banking has been around for a while – since the mid 90s. However, it’s only recently begun to really take off. If you’re trying to decide between an online bank account and a traditional one, this article will help. Let’s take a look at the pros and cons of both online and traditional banking.

Traditional Banking

Traditional banking is great because you can develop relationships with your bank representatives. This is helpful when you’re borrowing money, looking for sound advice or just like to know the people who are managing your money.
Traditional banking also offers the convenience of easy deposits and withdrawals. You know that your deposit will be in your account the same day or the next day. And you can withdraw money during regular banking hours.
Traditional banks offer a number of features like money orders, wire transfers and travelers checks, often without a fee. You can still get these from banks where you don’t have an account but there is usually a high fee involved to process.
Traditional banks have security in the form of surveillance cameras and occasionally they employ security guards.

The downside to traditional banks is that you have to stick to their business hours, which aren’t always convenient. You cannot access your bank account when you’re out of town, and every time you need to process a transaction you have to go to the bank.

Online Banking

Online banking means you can access your account from anywhere at any time. You can get into your account, transfer money, pay a bill, and make withdrawals and deposits from other accounts.
Online banking is fast. You don’t have to leave your couch to process a transaction.
Online banking is often cheaper. In addition to being able to offer competitive rates, many online banks don’t charge hefty fees and you don’t have to pay for the gas to get there. And you save money on postage if you’re paying bills electronically.
Most online banks also send notices and statements via email, which saves paper and notifies you immediately if there is any funny business with your account.

However, the downside to online banking is that you need an internet connection to interact with your account. You also have to be comfortable using the computer. Finally, online banking poses some security and identity theft risks. Most online bank accounts offer advice, assistance and protections to keep your information and your money safe.

With either type of account make sure you get one that is insured by the FDIC. This protects your money up to $100,000.

Ultimately, the type of account that you choose will have much to do with your personality and comfort level. Both types of accounts will likely offer ATM cards, which ultimately means you have access to your money 24/7. Before you make a decision on where to open your bank account, compare fees and features and find the account that is right for you.