Smart Money: Is Banking Stable, and Traditional vs. Online Banks

·4 min read

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode starts with a recap of the banking crisis that started with Silicon Valley Bank.

Then we pivot to this week’s money question from a listener who left this voicemail: "Hi, I've been listening to the podcast for a long time and recently I listened to the episode about high-yield savings accounts and did some research this weekend and realized that all the online banks are the ones that give you great rates. Traditional banks give really poor rates, including checking, whereas other banks give up to over 2% for checking accounts. Just wanted to get some information on online banking versus traditional banking. It seems like online banking is the way to go and the way of the future and has more perks to it, but didn't know what your thoughts were and if it's worth having maybe one of each or just kind of going all in on the online banking. Thanks for your help, and I look forward to listening."

Check out this episode on either of these platforms:

Our take on the recent banking crisis

The collapse of Silicon Valley Bank, followed by Signature Bank, has many of us concerned about the security of our money at our own banks. However, a broader failure of more banks seems unlikely as the federal government has already intervened to stabilize the system. The FDIC took over SVB and Signature Bank and said that all deposits would be covered, even those above the FDIC’s $250,000 insurance limit. The Federal Reserve also created the Bank Term Funding Program, which will give banks one-year loans in order to safeguard customers’ deposits.

If you’re still worried about getting access to your cash in the bank, you can do a few things to minimize your individual risk. Consider spreading your money across different banks, especially if you have more than $250,000 in one bank. You might also double-check that you have your money in a bank that is FDIC insured, or if you use a credit union, that it’s insured by the National Credit Union Administration. Keeping some cash on hand may also give you peace of mind — but make sure that money is stored safely to survive theft or damage to your home.

Our take on online vs. traditional banks

Online banks have recently received a lot of positive attention as their interest rates have largely risen in tandem with the Federal Reserve’s funds rate. Online banks have other merits, too, including low or zero monthly fees, early paycheck direct deposits and user-friendly apps. But brick-and-mortar banks have their own benefits, making traditional banks far from obsolete. It’s easier to deposit cash, make international wire transfers or get a cashier’s check from a traditional bank. And sometimes, in-person service is invaluable. Given that online and traditional banks have their own unique sets of benefits, it often makes sense to have money with both.

Our tips

  1. Know your needs: If you like to bank in person, a traditional bank or credit union could be a good option. But if you want the best savings rates and don’t require a brick-and-mortar bank, online banks could be a good fit.

  2. Think about a hybrid approach: Both traditional and online banks have their benefits and drawbacks. By taking a hybrid approach, you could get the best of both worlds.

  3. Shop around: If you’re in the market for a new high-yield savings account, take the time to look at a few banks. NerdWallet’s roundups are a good place to start.

Have a money question? Text or call us at 901-730-6373. Or you can email us at To hear previous episodes, go to the podcast homepage.

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Jae Bratton writes for NerdWallet. Email:

Liz Weston, CFP® writes for NerdWallet. Email: Twitter: @lizweston.

Sean Pyles writes for NerdWallet. Email: Twitter: @SeanPyles.

Sara Rathner writes for NerdWallet. Email: Twitter: @sarakrathner.

The article Smart Money: Is Banking Stable, and Traditional vs. Online Banks originally appeared on NerdWallet.