Choosing between online banking vs. traditional banking

The evolution from brick and mortar to smartphones


Imagine if you could travel back in time 200 years. You’d tell your relatives that people can now bank using a tiny gadget. No more long horse rides into town to visit the bank—just take out a smartphone and voila, your bank is right there in your hands.

Banking has come a long way. Now, you have your choice of whether to bank in person or remotely. What’s more, smartphones make it easy for you to do everything from check balances to pay bills from just about anywhere. Today, there are even banks that are online only. There was a time when you had to decide between online banks vs. traditional banks. But now, many banks have both options, so the difference between online banking and traditional banking boils down to personal choice. Some people prefer walking into a traditional bank branch while others want the convenience of connecting 24/7.

Online vs. traditional banks

These days, there’s really not a huge difference between traditional banking and online banking. If you compare online banking vs. traditional banking, you’ll see they usually offer pretty similar services.

The main difference is the option to bank in person. With banks that are online only, you may only be able to do your banking over the internet, through an app, at an ATM or by telephone. But most traditional banks offer online banking options, too. At traditional banks, you can do things like check balances, deposit money and pay bills. Most traditional banks also allow you to open accounts online, too. Traditional banks have added online banking in order to give their customers the best of both worlds: in person and online access.

What are online banks?

Most online banks are just like traditional banks in that they try to offer easy options for depositing money and paying bills. With an online bank, you can typically access your account on the internet or through a mobile app. ATMs may also be an option, but there may be fees in some cases.1

One benefit of most online banks is that they usually don’t have the same costs as physical locations. Because of that, they might be able to pass some of their savings to you with lower fees and higher interest savings rates on your deposits.1

Online vs traditional savings account

A big difference between online savings vs. traditional savings accounts is how much interest you can earn. Online banks often offer higher interest rates on savings accounts than traditional banks.1 Before deciding where to open a savings account, compare the APY. The APY is the annual percentage yield, and it represents the amount of interest your savings will earn in a year.2

Another contrast between online and traditional savings accounts is that with a traditional account, you can bank in person. Because of that, some people still prefer traditional banking vs. e-banking (which is what some people call online banking). Others simply are not comfortable doing their banking online.

Are online banks safe to use?

Yep, online banks are considered safe if they are a member of the Federal Deposit Insurance Corporation (FDIC). Savings accounts at both traditional and online banks, covered by the FDIC up to allowable limits, protect you from bank failure. Online banks in the U.S. have to follow the same rules and regulations as traditional banks.3

While online banks are typically just as safe as traditional banks, it’s important to make sure that your transactions are secure. That means choosing passwords that are hard for anyone to guess. You also should protect your personal information and take precautions when using public Wi-Fi. And if you see anything suspicious, like emails from bank addresses you don’t recognize, be sure to contact your bank right away.

While your great, great grandparents may have had their minds blown, online banking has become a popular preference for anyone who wants access to their bank anytime and from just about anywhere. Choosing between an online and traditional bank really comes down to personal preference. While some online banks offer higher interest rates, the gap between online and traditional banks is getting smaller. For some people, being able to go into a branch is important. But for others, the ease of online banking is all they really need.


This site is for educational purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

  1. The pros and cons of brick-and-mortar banks vs. online banks (October 13, 2021). Retrieved January 20, 2022, from https://www.bankrate.com/banking/savings/online-vs-brick-and-mortar-banks/
  2. Glossary of Banking Terms and Phrases - Annual Percentage Yield (APY) (undated). Retrieved January 20, 2022, from https://www.helpwithmybank.gov/glossary/index-glossary.html#a
  3. FDIC Consumer News: Is Digital Banking for Me? (April 2020). Retrieved January 20, 2022, from https://www.fdic.gov/consumers/consumer/news/april2020.html.

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