Why do I need a physical bank?
Pros of brick-and-mortar banks:
More access to cash and check services. If you often deposit cash or use checks, you probably want a brick-and-mortar bank. Online banks, by virtue of being internet-based, don't focus on these services and many don't have a way to deposit cash or every type of check.
Online banks are better than traditional banks when it comes to minimizing fees and securing the most competitive rates. These banks also tend to offer superior websites and mobile apps with more features. When it comes to finding a full range of financial services all in one place, traditional banks tend to win out.
Online banks have some perks, including offering lower fees than brick-and-mortar banks in many situations. There are certain things local banks can offer that online banks can't. Having a local bank could give you access to a notary, a safe deposit box, and in-person customer service.
For some banking needs, there's simply no substitute for being there in person. Large cash withdrawals or transfers. Banks have daily limits for how much you can withdraw from an ATM (for Regions personal check cards, the daily limit is $808) or transfer online.
To be sure, banks are not doing away with branches altogether. Most bankers say that even their most tech-savvy customers want physical bank offices at which they can seek financial advice, open new accounts or manage major transactions such as large loans.
Online Banks (Digital Banks)
Digital banks have fewer fees and better rates on account of their lower overhead costs due to their lack of a physical location. And since an online bank can only be accessed through its app and website, you can expect a superior digital banking experience.
Some disadvantages of online banking include: No physical branches when you need help. Challenging cash deposits. No access to foreign currency.
The biggest risk of online banking is that someone could access your account by getting their hands on your username and password, hacking your account, exposing you to a virus, or using your debit or credit card to make a purchase. These risks exist for online and traditional banks offering online banking services.
- Customer service lacks personal touch.
- Not an option for those lacking access to the internet.
- ATM options may be limited.
- Greater due diligence required to vet the bank.
Is it OK to not have a bank account?
Bottom line. If you don't have a bank account, you could be paying unnecessary fees to pay your bills or otherwise manage your finances. Not only that, you may be missing out on some of the convenience and consumer protections that banks offer.
Your bank account could become dormant if you make no transactions for a period of time. At that point, your bank might charge you an inactivity fee or close your account. In some cases, your funds could end up being turned over to your state.
If you want higher rates and lower fees and don't need frequent branch banking services, an online bank may be worth considering. Keep in mind, you can choose to open an online account without giving up an existing account at your local institution.
Cons of brick-and-mortar banks:
They charge higher fees and have a wide variety of them. Loans and other products may cost more. They pay lower yields on savings and other deposit products. Visiting a branch takes longer than banking online.
- Problem of Management: Under the branch banking system a number of difficulties as regards management, ...
- Lack of Initiative: ...
- Monopolistic Tendencies: ...
- Regional Imbalances: ...
- Adverse Linkage Effect: ...
- Inefficient Branches: ...
- Other Defects:
- More Account Fees. Traditional banking is normally associated with higher account fees. ...
- Open Accounts In-Branch. You may be required to provide documentation at your local branch to open your first account at a physical bank.
- Lower interest rates.
The overall pace of bank branch closures slowed in 2023, but certain banks still slashed the size of their brick-and-mortar networks substantially. U.S. banks closed 2,118 branch locations between January and the end of October, according to data from S&P Global Market Intelligence.
- Lloyds 60.
- Halifax 47.
- Barclays 34.
- NatWest 21.
- Bank of Scotland 16.
- Ulster Bank (NI) 10.
- RBS 1.
Over a few weeks in the spring of 2023, multiple high-profile regional banks suddenly collapsed: Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank. These banks weren't limited to one geographic area, and there wasn't one single reason behind their failures.
| Type | Characteristic |
|---|---|
| Credit Unions | Member-owned, non-profit organizations |
| Online Banks | Internet-based banks |
| Neobanks | Digital-only financial institutions, no physical branches |
| Regional Banks | Banks that serve specific geographic regions |
What's better than a bank?
Credit union advantages
Typically offer slightly higher interest rates on deposits than brick-and-mortar banks. Tend to offer lower interest rates on loans. Emphasis on community.
Checking account
Checking accounts are best for individuals who want to keep their money safe while still having easy, day-to-day access to their funds. ATM and other transactional fees may apply.
You also need to be on the alert for phishing scams that try to trick you into revealing your account information. Are online banks riskier than brick-and-mortar banks? No. Online banks use the same encryption and FDIC insurance that brick-and-mortar banks do to protect their customers.
As of 2022, 78% of adults in the U.S. prefer to bank via a mobile app or website. Only 29% of Americans prefer to bank in person.
Free checking accounts are just that: free to own. They don't charge monthly maintenance fees or impose requirements in order to have the fee waived. Free checking accounts can be found at banks, credit unions, and online-only financial institutions.
