The Pros and Cons Of Digital Vs. Traditional Banks

You’ve probably seen ads for banks like Tangerine and PC Financial. They boast about their low-fee or no-fee chequing accounts and entice clients with higher interest rates on savings accounts, but are they all that they’re cracked up to be? Are there any downsides to banking with these virtual banks? When it comes to digital vs. traditional banks, which is best?

The answer depends on the sort of person you are, but here are some of the pros and cons of virtual banking to consider:

Advantages

1. Low Fees

- It costs far more to run physical brick and mortar stores than it does to run a virtual business. Thankfully, these savings get passed down to the customers.

2. Higher Interest Savings

- Because it's cheaper to run a digital bank, the savings you receive often come in the form of higher interest on your savings. This means that with a digital bank, your money can work harder for you.

3. Less Mail

- Although you can have this option with traditional banks as well, a virtual bank is set up to get everything done with no paper.

4. Fewer Fees

- Brick and mortar banks have fees for just about everything, unlike the digital options that are available.

5. Minimum Balance Options

- Sticking to minimum balances can be a great habit to get into for your financial security and these requirements are not exclusive to virtual banks. You’ll find them at most brick and mortar banks, too.

Disadvantages

1. No Physical Locations

- Sometimes it's nice to have a face-to-face conversation with a human being. While nearly every banking task can be accomplished with a device in the palm of your hands, some of us feel more secure dealing with another person. With a virtual bank, you'll only get people over the phone.

2. ATM Fees

- Virtual banks don't have as many of their own ATMs, so you'll be forking over extra cash when you have to use another bank's ATM.

3. Minimum Balances

- Some virtual banks require a minimum balance in your chequing account in order to unlock low or no-fee accounts.

4. Transfer Fees

- Some virtual banks charge fees for moving money around.

As you can see, there are plenty of upsides to virtual banking. We've tried to include the main differences between digital vs. traditional banks, but the decision is yours to make.

Have you tried an online-exclusive bank? Was your experience good or bad? Let us know in the comments!