As an accountant, one of our top tips for our clients is to keep your business and personal finances separate. It makes it clearer for you to see your business income and expenditure and helps you to gain finance that you might need in the future. So, what is better, online vs traditional banks? Take a look at our pros and cons to find out more.
Traditional banks still offer a personal level of service. You know what to expect when you walk into your local branch. Traditional banks can provide several advantages that you can’t get from a digital bank. Things like cash deposits, in-person experience and a sense of security are all reasons to choose the high street bank over online.
Many people prefer the sense of security you have when holding your money at a location you can physically visit. You may feel more comfortable handling large deposits or withdrawals in person compared to a website or an app.
Visiting your local bank is also far more convenient for you if you frequently deposit cash. If you have cash to bank every day, for example, this would be the better option rather than online.
On top of this, most high street banks do offer online banking. Enabling you to check your account, complete transfers, pay bills and set up automatic payments.
Disadvantages of traditional banks
Your traditional banks tend to offer lower annual percentage rates. Operating costs of traditional banks are higher, which results in limited savings for customers. However, it is worth shopping around if you want to use a traditional bank as some offer competitive rates and saving options.
Most traditional banks will charge a fee for their business bank accounts. This fee tends to be higher than online banks and they may have extra charges for certain activities. Other activities they can charge for are things like depositing cash or cheques.
Some smaller regional high street banks may not offer a full range of online services such as electronic cheque deposits. You may still need to visit your local branch to carry out such tasks.
Digital-only banks such as Starling, Monzo and Tide are forcing high street banks to take notice. People are deciding to open bank accounts with digital banks because of the benefits that come with an online bank.
Online banks will have the same banking process that you will have at traditional banks but with some useful advantages. Some of these advantages are convenience, better interest rates and lower fees.
Online banks are simply more convenient for people. When you have an account with an online bank, you can carry out all your usual banking transactions from your phone or any device connected to the internet.
Most online banks will have lower fees than traditional banks. Some offer free accounts, these do have limited services, but have no charges at all. A Lot of the main online banks will offer a range of business accounts so you can pick the best one to suit your business.
Also, another benefit of having an online bank account is that they tend to offer better interest rates. Online-only banks usually have lower operating costs, this allows them to offer greater savings for their customers.
Disadvantages of online banks
One of the biggest negatives to using an online bank is the lack of personal service. If you have an issue with your account you will typically have to contact online customer support.
Many of the leading online-only banks out there are independent companies. This can be a worry for some people about the security of placing their money with an online company.
The other issue to consider with online banks is cyber security. Although most of the leading online banks use the latest cyber technology and encryption, you may still have concerns.
There’s lots to consider when choosing which route to pick for your business. It all depends on how your business will run. Do you complete everything online? Do you have a store where you take cash? Do you need to deposit/withdraw cash on a regular basis? These are all factors to consider when choosing between online vs traditional banks.
If you need help or advice on which account to go for with your business get in touch today.