What Is Hybrid Banking?

Hybrid banking is the practice of blending traditional and online banking to maximize the benefits of both. For instance, you might maintain a checking account with a brick-and-mortar bank while holding a high-yield savings account with an online bank. This approach allows you to enjoy the higher interest rates and lower fees typically offered by online banks, while still benefiting from the in-person customer service and convenience of traditional banks.

When to Choose Online Banking

Online banking offers numerous advantages, including higher interest rates on savings accounts and fewer fees. For example, while the average yield for a traditional savings account was just 0.47% in January 2024, some online banks offered yields as high as 5.35%. Additionally, online banking provides the convenience of managing your finances from your phone or computer, often with access to a large ATM network and reimbursement for ATM fees.

Consider online banking for:

• High-yield savings accounts
• Certificates of deposit (CDs)
• Money market accounts
• Personal loans
• Mortgages
• Auto loans

Before opening an online bank account, ask yourself:

• How do interest rates compare to traditional banks?
• What does the ATM network look like?
• Are there fees for using an ATM?
• Are other account benefits on the table?
• Is there a required minimum account balance?

When to Choose Traditional Banking

While online banking has its perks, traditional banking still offers significant benefits, particularly in-person customer service. This can be crucial if you prefer resolving issues face-to-face or need to deposit cash. Traditional banks can also be a good fit for:

• Checking accounts
• Basic savings accounts
• Credit cards
• Wealth management services

Consider the following before opening a traditional bank account:

• How important is in-person banking?
• Do you plan on making cash deposits?
• Are there bank fees to consider?
• Is there adequate ATM access?
• Are there any perks or rewards for opening an account?

Tips for Balancing Hybrid Banking

Managing multiple accounts at different banks can be challenging, but these tips can help streamline the process:

• Shop around and compare accounts from multiple financial institutions before committing.
• Download banking apps from each financial institution and track your spending.
• Consider a budgeting app that can show all your accounts in one place.
• Mark your budget so you know which accounts are being used to pay which bills.
• Enroll in autopay to set it and forget it, helping to prevent missed payments.

The Bottom Line

Whether you prefer the in-person experience of traditional banking or the convenience and higher yields of online banking, hybrid banking can offer the best of both worlds. The right approach for you will depend on your specific banking needs and preferences. If you choose hybrid banking, be sure to update your budget and keep track of your accounts to maintain financial wellness.

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