taboola code
Cheese Logo
Back to Blog

Traditional Banks vs. Online Banks: Which One is Better?

By
Elizabeth

36% of families in the United States use an online bank, yet only 8% of them report that the online bank is their primary bank. With so many options today in terms of where you open a bank account, challenger banks are becoming more and more popular, offering various perks that traditional banks can’t offer.


But, there’s a lot to know about online banks and whether or not they might be the right fit for you. From taking advantage of reduced banking fees and better interest rates to learning how to select the right internet bank for you, we’ve got all of the details for you in our guide of traditional banks vs. online banks.

What is an Online Bank?

So, what is an online bank? Well, it’s important to first clarify that you can engage in online banking functions via a traditional bank. This means that if you have a BOA or Chase checking account, you can access your account and funds online while also performing various other tasks. But, you also have the option to visit a physical branch to deposit funds via an ATM or to speak with an employee or financial advisor.


This is the main difference between a traditional bank and an online bank. With online banks, there are no physical locations you can visit if you need assistance in-person, which also makes depositing a bit of a hassle sometimes. However, due to the lack of overhead costs, online banks can usually offer lower monthly banking fees and higher interest rates on savings accounts.

Pros & Cons of Online Banks

What’s the same between traditional banks vs. online banks? Both offer FDIC-insured accounts and nearly the same level of security. Encryption methods are taken by both to ensure that your identity, sensitive information, and money are all safely protected. However, aside from that, there are a few key differences.

Pros of Online Banks

Perhaps the biggest benefit of opening an online bank account instead of opting for a checking or savings account with a traditional bank is the fact that online banks usually offer way better interest rates. This is because they’re not paying overhead fees for employees in physical branches around the country.


And, sure, you can sometimes snag a great interest rate on a savings account at a traditional bank, but they’re usually only for savings accounts or certificates of deposit. With online banks, you’re able to access 1 to 2% more back on interest or in APY by having a normal account.


On top of that, monthly banking fees are practically nonexistent with online banks. Traditional banks charge monthly maintenance fees that you can waive by meeting a minimum balance amount or by setting up a direct deposit. Online banks are able to waive these fees due to the fact that their overall costs are lower, too.


The best part about banking with an online bank? The seamless digital experience it offers you. Because there are no physical locations for you to visit, online banks work hard to ensure that your online banking experience, whether it’s via desktop or a mobile device, is seamless.

Cons of Online Banking

The biggest drawback of an online bank is what actually makes it so possible for this banking option to be so cheap. The lack of physical locations is really the only gripe that some customers seem to have regarding online banking.


Why? Two reasons. For starters, it feels a bit cold and impersonal to some clients. Secondly, it makes depositing cash difficult sometimes. While you can withdraw cash from a partner ATM when using your online banking card, it’s harder to make deposits. Depending on which bank you use, you’ll find that your options range from wiring cash to the account, mailing in deposits, or making e-deposits via another traditional bank.


If you don’t plan to deposit checks or cash a lot, this might not be a problem for you. However, we’d still recommend checking out each online bank’s policy and fees related to making deposits, wiring money (if it’s even possible), and other associated fees.

Choosing the Right Online Bank

As long as you don’t require in-person service and don’t deposit a lot of cash, an online bank actually makes a lot more financial sense, in most cases, than a traditional bank. And, because you’ve got so many options, it means that you can find the right online bank for you.


The Cheese Debit Card comes with zero banking fees, savings bonuses, cashback, and it’s FDIC-insured. Not only is it online banking made easy, but it’s a great way to earn more for your money while enjoying other perks such as our Double Cheese reward and so much more. 


Click here to join our waiting list and begin your online banking experience today.

Cheese Debit Card
Cheese Debit Card


You May Also Like

How to Write a Check: A Step-by-Step Guide

We’ll walk you through a step-by-step guide to check writing so that you can send a check smoothly.

Read Story

How to File Your Taxes for Free?

Here’s how much it costs for tax filing in 2020, what to know about tax brackets this year, and how to file your taxes for free to make the most of your return.

Read Story

Understanding Forbearance

What else is there to know about forbearance and is it right for you? We’ve got the answers.

Read Story

What are you waiting for?

Get early access to the perks of banking with Cheese.