The case for banking both locally and online

By Sabrina Karl

Time marching generally leads to us being given more choices. And banking is no exception. Decades ago, where you banked was a simple matter of choosing from a handful of local institutions. Today, the number of choices runs into the hundreds.


What changed, of course, is the advent of the internet. With each passing year, more and more banks and credit unions are opening new accounts online. So now instead of just the institutions that operate branches in your local community, you can conduct numerous banking functions with any one of over 200 institutions that accept nationwide customers.


So should you ditch your local bank and opt for an online bank instead? There are many good reasons to add internet banking to your financial setup. But there are also good arguments for holding a local account.


The biggest reason to go online with your banking is that savings, money market, and certificate of deposit rates are typically substantially higher with online institutions. In fact, the difference might surprise you.


Take savings accounts. The national average rate is currently just 0.09 percent APY. But dozens of online banks are paying 20 to 25 times that average, at over 2 percent APY. And the premium on your earnings is similar for money market accounts and CDs.


But, there are some trade-offs with internet banks. Often, the ones paying the highest rates have very limited product offerings. Some don’t even offer checking accounts. In addition, although depositing checks via mobile app is commonly allowed, depositing cash is something you can’t do with many online-only operations.


So if you want to maximize earnings on your savings while keeping it easy to handle cash and accessing a full array of banking products, consider a combination of banking both locally and online.