The Disadvantages of Traditional Banking


Despite technological innovations, like mobile banking and the increase in online banking, traditional bank branches have still managed to stay relevant. An FDIC white paper confirmed that consumers like the convenience of going into a physical bank branch, thus traditional bank branches will likely continue to open and operate. While traditional banking has its privileges and benefits, you should also understand the disadvantages of maintaining this type of banking relationship.

About Traditional Banking

  • Traditional banking is the process of handling common bank transactions, including making withdrawals and deposits, at a bank that maintains a physical location. It may involve visiting a human teller, dropping money in a drop box, or visiting an ATM owned by the bank. Traditional banks also make loans for consumers. One indication of a traditional bank is the word "bank" expressly included in the name.

Expensive Fees

  • Traditional banks are privately owned for-profit organizations with many costs, including overhead like rent and utilities. They are in business to maximize profits. To make money, they often charge expensive fees to consumers. Many traditional bank accounts charge monthly account maintenance fees and penalties for falling under a certain balance. You may also have to pay per-item fees when you use an ATM not owned by the bank to withdraw money. Bank overdraft fees can cost as much as $30.

Low Interest Yields

  • Traditional bank accounts don't commonly offer you the best deal available when it comes to saving your money. It is difficult to build wealth if you keep all your funds in a traditional bank savings account. Interest rates offered by online banks and also credit unions are commonly higher than the ones offered by traditional banks.


  • Despite the disadvantages, traditional banking is a convenience for many consumers. You can walk into a branch when needed and talk to a human for assistance. If you do choose to keep a traditional bank account, shop around to find banks that offer low or no monthly fees. A few online services offer updated reviews about national and local banks. Listen to the advice of current account holders to make a decision. If after your research the disadvantages outweigh the benefits, apply to a credit union or open an account with an online service instead.


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