Should You Ditch Your Traditional Bank?

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According to a MarketWatch Guides survey, 56% of Americans access their banking accounts primarily through mobile apps, and only 16% regularly visit physical bank branches. The survey also revealed that 13% of Americans never visit a bank.

During the Capital One outage earlier in the year, many banking customers were unable to access their accounts and funds. While online banks and neobanks are gaining popularity, not everyone has an account yet. 

Why should people consider a switch to an online bank or neobank this year? Here are seven reasons you could consider making the switch and how they could benefit your finances. 

You’re Already Banking Digitally

“If you’re like the majority of Americans who rarely visit their physical bank, you’re essentially paying higher fees and accepting lower interest rates to make up for the costs of maintaining physical locations,” said Laurie Sepulveda, a CEPF and MarketWatch Guides banking expert.

If you’re already banking digitally, you may not require access to a physical branch. You’ll want to think about the last time you went in person. The reality is that you could be paying banking fees for a physical location that you may never visit. 

You Can Save Money and Earn Better Rates

“Most neobanks operate without the need to maintain physical branches, which often means lower fees for their services, better interest rates and more savings for end users,” said Roman Eloshvili, a banking expert and founder of XData Group.

Digital banks and neobanks generally offer lower fees and better rates, as they don’t incur the expenses associated with maintaining physical locations to provide in-person banking services. The savings can be passed down to customers, and you could keep more of your money in your account. 

More Security and Innovation

Sepulveda pointed out that online banks lead in digital security because it’s part of their core business model, not an add-on service. “Traditional banks have legacy systems that present more challenges for securing both digital and physical access points,” she said.

Online banks can also offer more advanced features, such as fraud monitoring, biometric authentication and instant account alerts. This additional security and innovation can help you save money by avoiding potential issues with fraud. 

Improved User Experience 

Traditional banks may not always have the best user experience when it comes to apps and online financial transactions. Eloshvili noted that the user experience as a whole is generally better with digital banks, as users can receive instant notifications, full access to a suite of tools and 24/7 support.

Many younger banking customers are accustomed to living on their smartphones and expect to be able to conduct their banking and financial transactions through apps. 

You can start by going over the reviews of online banks or neobanks to see what others are saying to ensure that you have your money stored somewhere where you can easily access it and handle your transactions smoothly. 

Better Alignment With Modern Banking Behaviors

Sepulveda said that, according to a MarketWatch Guides survey, the most popular banking activities are paying bills, transferring funds between accounts and tracking spending. Since online banks make these tasks easier and more efficient, it may make sense to make the switch to match your banking habits. 

Online banks can also offer higher-quality budgeting tools, from spending categorization to financial insights. If you’re looking to gain a better understanding of your finances or get better with your spending habits, you can use these tools to assist you. 

Faster Service

Since online banks and neobanks are built for the digital world, they also do a great job accommodating that demand. The experts pointed out that you can get faster service and greater control over your finances. You won’t have to make an appointment with a consultant or wait in long lines when you have any questions.

Most of the time, all of the financial help you could ask for is available at your fingertips. This means if you’re looking for advice on paying down debt, saving up for a home or figuring out your retirement accounts, you could likely find it easier with a bank that’s set up for the digital experience. 

Greater Flexibility 

Eloshvili emphasized that many neobanks facilitate the management of multiple currencies, including access to crypto assets. Since these accounts are constantly evolving to meet modern financial habits, you’ll likely have greater flexibility over how you manage your finances and investing habits.

Since traditional banks can struggle to keep up, you’ll want to think about making the switch to an account that matches what you’re looking for.