If you’ve faithfully stuck by your branch bank, it may be time to kick it to the curb.
The number of online banks in the U.S. is growing. And the number of consumers using branches has fallen over time. According to a study from J.D. Power, 29 percent of retail banking customers haven’t visited a branch in the past 12 months, up from 22 percent in 2015.
While the line between online banks and their brick-and-mortar competitors is beginning to blur, digital financial institutions still offer some unique advantages.
The convenience online banks offer makes them attractive to consumers. As long as you can connect to the internet, you’ll be able to review your bank statements, pay bills and transfer funds on your own time.
Stopping by a branch to make a deposit or complete an application is something you can permanently remove from your to-do list. That’s helpful, especially if you’re constantly on the go.
“Getting out to a branch is not always the easiest thing to do on an otherwise busy day,” says Nicole Lorch, chief operating officer of First Internet Bank of Indiana and its parent company. “With the branch hours that are somewhat restrictive anyway, it works just as well for them to do their banking remotely.”
Compare rates now if you’re ready for a new checking or savings account. Before committing to any online bank, check out its website. Look for features like live chat that give you the chance to easily connect with representatives when you have questions.
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No need to switch banks when you move
Once you trade in your brick-and-mortar account for one that’s mainly available online, you may never have to switch banks again.
If your bank serves customers nationwide, you can keep your accounts even if you leave town.
“You don’t have to worry about changing banks if you change jobs or move across the country or whatever it may be,” says Damian Dunn, founder of NextGen Financial Life Planning, based in Auburn, Indiana. “Your money follows you everywhere.”
With a regional bank that only has local branches, keeping your account when you move might not be so easy.
“If you’re dealing with smaller banks — like you know regional credit unions and so forth — if you move out of their network, that could create substantial problems with getting access to your funds,” says Jeremy Walter, founder of Fident Financial, a fee-only investment advisory firm in Lancaster, Pennsylvania.
Look for online banks with tools that make it easy to find ATMs when you’re in different cities. That’s an important step to take in addition to reviewing products like loans and money market accounts.
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Savers can earn a higher yield
Without the expenses that come with running a network of branches, online banks save money. That gives many of them the chance to offer savers better interest rates.
“By and large, the online banks are just able to pay a higher percentage rate on savings accounts than the brick and mortars can, just because they have so much less overhead,” Walter says. “They’re not paying leases or mortgages. So you see those saving rate yields be a little higher than what I’ve seen from the brick and mortars.”
“Some people move money around and don’t really do the math,” says Mark Wilson, president and founder of MILE Wealth Management in Irvine, California. “Is it worth their time to move it from the one that’s giving them $20 a year to the one that’s moving it to $30 a year?”
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You’ll avoid high fees
Some brick-and-mortar banks have accounts with high fees. And waiving those charges isn’t always easy.
Switching to an online bank can eliminate that problem altogether. Fewer operating costs can translate to fewer fees.
“I recommend for most of my clients — either millennials or even some older clients — to go with a bank account that’s not going to nickel and dime them, that’s going to have no or low fees,” says Ben Brown, founder and CEO of the fee-only investment advisory firm Entelechy. “Typically those are going to be online banks.”
Before switching to an online bank, read the terms and conditions to understand whether there are hidden fees or expectations tied to savings and checking accounts.
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They’re usually technologically advanced
Online banks tend to cater to digitally savvy customers who thirst for innovation.
“In terms of technology and trying new things and adding new services, an online bank is going to be able to do that much more efficiently and with much more success than a traditional bank,” says Timothy Michael, an associate professor of finance at the University of Houston-Clear Lake.
Many traditional banks are beefing up their online and mobile product offerings. But online banks continue to make strides in providing advanced tools and services.
“Even as the brick and mortars adapt to more updated technology, it’s not like the online banks are sitting still,” Walter says. “They’re still progressing more and more.”
Reduced overhead costs also give online banks the chance to invest in cutting-edge products. But don’t assume they’re all on the same technological level.
If you want a great digital experience, don’t open an online checking or savings account without first visiting bank websites and reviewing app ratings.
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Online banks can help you meet your financial goals
When you can access your accounts day and night, setting goals — and tracking your progress toward meeting them — is often easier.
The ability to bank from anywhere is an advantage. On the flip side, not being able to physically enter a branch could be a useful barrier for those with a bad habit of dipping into their savings.
“(If) you don’t want to have immediate access to that money, it’s just another little barrier for you getting in there and sabotaging yourself,” Dunn says. “If it’s online, it’s a little harder to access that cash. You can get to it obviously, but it’s another good way to implement a savings plan.”
In addition to comparing rates for CDs and money market accounts, consider experimenting with the tools and calculators that many online banks offer before breaking up with your traditional bank.
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Online banks make money management a breeze
Online banks make managing money simple. You can seamlessly complete certain tasks — like paying bills — when your accounts are mostly or all in one place.
If you’re in the process of choosing a bank to switch to, make sure it fits your lifestyle and meets your individual needs. Ease of use is critical.
“I’d be looking for the ability — from that home page — to be able to not only look at your account balances but to pay a bill, transfer money, send a person-to-person payment, without having to go to a special tab,” says Mark Schwanhausser, director of digital banking at Javelin Strategy & Research.
If you need multiple savings accounts for various purposes, choose an online bank that lets you open a series of accounts at once that you can assign different names.
Using a 1,000-point scale, J.D. Power found that overall satisfaction among direct banking customers (865 points) is higher than it is for branch users at retail banks (824 points) and non-branch users at retail banks (797 points).
An online-only experience isn’t for everyone, however.
If you still enjoy meeting with a teller face to face, find a bank that offers that kind of service with a branch nearby. Or, locate an adviser who can address some of your financial concerns.
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You could still get great customer service
You can still receive quality service even if you choose a bank without a branch.
“It’s going to be more critical for them — for a purely online bank — to have the best customer service known to mankind,” Michael, the associate professor of finance, says.
As digital financial institutions, they can easily collect data and make changes based on what customers want.
“From the time someone visits our website to look at products and services to learn more about First Internet Bank, we’re able to take all of that data and really use it to drive our decisions,” Lorch, of the First Internet Bank of Indiana, says. “Because we are able to really follow the customer journey, we’re able to take those insights and put them back into building a better experience.”
Trying to reduce your carbon footprint? That’s another reason to make the switch to an online bank.
Brick-and-mortar banks tend to use a lot of resources compared to online banks.
“All-digital really usually means far less paper is involved,” says John Buran, president and CEO of Flushing Bank. His bank’s new online division, BankPurely, plants a tree in New York state for every verified email sign up and each new account it opens.
Besides saving paper, online banks use less energy overall.
“You save on the lighting. You save on the air conditioning,” says John Stewart, Flushing Bank’s chief of staff. “All those little costs that add up to quite a bit when you try to serve customers in a branch network.”
Going with an online bank to help protect the environment could be a good move. Just don’t forget to look for a bank that’s a member of the Federal Deposit Insurance Corp. You’ll want your deposits to be safe if your bank goes out of business.