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Online or Traditional Banking: Which is Better for You?

There are a few options to consider when opening a checking account. You can opt to manage your account with a traditional bank or choose a bank that offers online banking as well. 

A good online banking system will offer just about every traditional service available through a local branch. A third option to consider is an Internet bank that only provides services online. The benefit of this option is that the bank can offer you lower fees and higher interest rates because it does not have the expense of paying for a physical branch and branch staff.

If you have a “trust” issue with online banking—and you don’t think you'll be able to get past it—the traditional route may be more your speed. Either way, the following tips will help you make the decision that's right for you.

Benefits of Online Banking

  • Convenience: Because the bank is open 24/7, you'll have real-time access to your accounts from anywhere. That way, you can check your accounts and pay bills while traveling.
  • Speed: The Internet allows you to make online transactions at or quicker than ATM processing speeds.
  • Fund transfers: Online banking makes "paying yourself first" even easier because you can set up automatic transfers to your savings account.
  • Online bill pay: Many banks have a low monthly bill-pay service fee that enables you to pay most utilities, loans, etc., online. Setting up automatic monthly payments helps you avoid late fees and makes sure you meet all bill due dates. You'll also save money on postage.
  • Technical tools: Many banks offer extra tools with alerts, such as notifications for when your account balance is low or your account if showing unusual activity. These tools are often compatible with money managing programs such as Quicken and MicrosoftMoney.
  • Additional services: Opting to enroll in overdraft protection services and the like may make sense, but be sure you understand all the fees involved in programs like these. If you do put them in place, use them as a precaution—not a safety net. If you rely on overdraft services instead of tracking your spending and staying within your budget, you could end up accruing a lot of service fees.
  • Security: Your online accounts will be password protected. Be sure to follow all your bank's tips and procedures to keep your account safe. Don't fall prey to online scams from hackers trying to get your account information.

Benefits of a Traditional Checking Account

  • Human interaction: Interacting with the bank teller, bank manager, or accounts manager on a regular basis may make you more comfortable.
  • Peace of mind: The traditional bank has walk-up depositories, a vault, and a security staff to ensure that your money is safe and protected.
  • Paper trail: Maintaining a checkbook register, receiving paper statements in the mail or email, and receiving deposit receipts all provide a record of your banking history.

(Any reference to a specific company, commercial product, process, or service does not constitute or imply an endorsement or recommendation by CashCourse or the National Endowment for Financial Education. These courses and related resources may be used only for nonprofit, noncommercial educational purposes. CashCourse makes every effort to keep the information in these courses current, but, over time, new developments as well as legislative and regulatory changes may date this material. If you discover inaccurate information, please contact us.)

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