If you visit your local bank branch to manage your accounts, you're in rare company. In 2023, the American Bankers Association found that only 9% of people preferred to handle their bank transactions in person — via traditional banking. By contrast, 71% preferred online alternatives.

In the past, traditional brick-and-mortar banks were the only option available. But now, most banks offer a combination of traditional services and online banking, so you can choose to manage your account online or by visiting a physical branch. However, if you're looking to lower your bank fees or earn higher interest on your deposits, you might want to try an online-only bank.

What is online banking?

Online banking, or digital banking, is done over the internet, whether through an app or on your computer. If your financial institution offers online banking, or if it is an online-only bank, you can generally conduct all of the following activities electronically, 24/7, from any location with internet service:

• Log in to your bank account(s)

• Transfer funds

• Deposit checks by uploading check photos

• Review account transactions

• Set up automatic bill payments

• Apply for bank accounts, loans, and credit cards

In recent years, many banks have shifted to these kinds of online and mobile offerings and away from in-person services. Between 2021 and 2023, a net of 6,191 bank branches closed in the U.S. Wells Fargo alone closed 293 branches in 2023, according to S&P Global.

Online banking versus traditional banking: Key differences

The main difference between traditional and online banking is the ability to conduct banking activities in person.

With a traditional bank, you can visit a branch during business hours to do things like get a money order, withdraw funds, or use a safe deposit box. Some traditional banks also offer in-person wealth management services or financial advising.

You probably won’t get those services if you switch to an online-only bank, but there is a major upside: Online banks have fewer overhead costs, so they tend to pass savings on to customers through low or no bank fees, high deposit rates, and better credit card rewards.

Should you choose traditional or online banking (or a mix of both)?

You don't necessarily have to choose between traditional and online banking since many banks offer both options. But if you currently rely on traditional banking only, you could benefit from moving some of your money to an online bank. The mix of both banking types gives you the best of both worlds: In-person support when needed, plus 24/7 banking services, competitive rates on your deposits, and lower fees.

For example, you may want to open a checking account at a traditional bank for day-to-day transactions but deposit your emergency savings into an online high-yield savings account.

Traditional and Online Bank Comparison: Starting APY

Despite what you might assume, moving your deposits to an online bank can also improve your account security. According to Comparitech, a company that provides information and reviews on cybersecurity services, banks represented almost half of all companies that experienced financial data breaches in 2023, but online banks experienced less than 0.5% of data breaches.

Whichever way you choose to go, make sure you can answer these questions before opening an account at any bank:

• Location: For traditional banks, is there a bank branch in your area?

• Insurance: Is the bank FDIC-insured, per BankFind Suite? For a credit union, is it NCUA-insured per NCUA.gov?

• Security: Do the accounts come with essential security features like two-factor authentication and facial recognition?

• Fees: Are there monthly accounts fees and/or fees for dropping below the minimum balance requirement?

• APY: Can you earn competitive interest rates on your deposits?

• Speed of transactions: Does the bank use a payment service like FedNow that lets you access your paycheck deposits and transfer payments within seconds, or is there a 1-3 business day delay?