Is my money safe in an online-only bank?

Yes, provided the institution is covered by your country's deposit protection scheme, and the coverage is identical to a branch bank's. In the United States, look up the institution on the FDIC's BankFind Suite, or the NCUA's directory for a credit union. In the United Kingdom, run the brand through the FSCS protection checker. In Canada, find it on CDIC's list of member institutions. The thing that actually varies is not safety but recourse: if something goes wrong, you are dealing with an app and a call centre rather than someone across a desk.

What is the difference between an online bank and a fintech app?

An online bank holds a banking licence in its own name and appears in the deposit insurer's register. A fintech app usually does not, and instead places your money with one or more partner banks behind the scenes. That distinction matters because the protection scheme covers the failure of the licensed bank, not the failure of the app company or the record-keeping in between. If a brand does not appear on the FDIC, FSCS or CDIC register under its own name, find out which licensed institution actually holds the deposits before you park serious money there.

Can I deposit cash into an online bank?

Often not directly, and this is the single most common reason people keep a traditional account open. Some online banks accept cash through retail or post office networks, sometimes for a fee, and some accept cheques through a photo in the app with a hold period before the funds clear. If you regularly handle cash, whether from tips, a side business or a market stall, treat that as a hard requirement and check exactly how deposits work before you switch anything.

Online Banks vs Traditional Banks: Which Is Better?

Put two accounts side by side for a year. One is at a bank with a branch on the high street, charging a monthly maintenance fee and paying a rate close to zero on savings. The other is an app with no branches at all, no monthly fee, and a savings rate several times higher. At the end of the year, one of those accounts has cost its owner money and the other has paid them. That gap is not a marketing quirk. It is the direct arithmetic of a branch network that has to be paid for somehow.

That is the case for going online, and it is a strong one. It is also not the whole story, which is why the sensible answer for most households is not a choice at all.

First, check what you are actually comparing

Before the fee and rate comparison, there is a structural question that catches people out: is the thing you are considering a bank?

An online bank holds a banking licence in its own name and appears on the deposit insurer's register. A fintech app may look identical on your phone and function identically day to day, but it is often a technology company that places customer money with one or more partner banks behind the scenes. Deposit protection covers the failure of the licensed bank. It is not a general guarantee that a company holding your money on its books will always be able to tell you and the bank exactly whose money is whose.

The check takes two minutes:

United States. Search the institution on the FDIC's BankFind Suite. For a credit union, check the NCUA. If the brand does not appear under its own name, find out which licensed bank holds the deposits.
United Kingdom. Run the brand through the FSCS protection checker. It will also tell you which licence the brand sits under, which matters for the next point.
Canada. Look up the CDIC list of member institutions, which shows both members and the trade names operating under each one.

The same register solves a second problem. Protection limits apply per licensed institution, not per brand, and several familiar names share a licence. In Canada, CDIC lists Simplii Financial as a trade name of Canadian Imperial Bank of Commerce, so money at Simplii and at CIBC counts toward one 100,000 dollar limit per insured category, while Tangerine Bank is listed as its own member with its own limit. In the UK, Halifax and Bank of Scotland sit on one licence and share a single FSCS limit between them. If you hold balances near the limit, that detail is worth more than any rate comparison.

The head-to-head

What you are comparing	Online-only bank	Traditional branch bank
Savings rate	Usually the market-leading end	Usually near the bottom, especially on legacy accounts
Monthly account fee	Rarely charged	Common, often waived on conditions you must keep meeting
Cash deposits	Limited, via a retail or post office network if at all	Straightforward at any branch
Certified cheques, bank drafts, notarisation	Often unavailable	Standard counter service
Support when something goes wrong	App, chat, phone	All of that plus a person you can sit in front of
Mortgages, business and complex products	Narrower range	Full range, and a relationship history that can help
Opening an account	Minutes, from your sofa	Sometimes an appointment and paperwork
Deposit protection	Identical, if licensed	Identical

Read that table honestly and it stops looking like a contest. The online column is about price. The traditional column is about physical presence and edge cases. Those are different jobs.

What the gap is worth over three years

Numbers make it concrete. The rates below are illustrative rather than current, but the shape of the gap is the point.

Say you hold 15,000 in savings and pay a 12 a month maintenance fee on your everyday account.

Traditional setup. The fee costs 12 x 36 = 432 over three years. Savings paying 0.01 percent earn roughly 1.50 a year, so about 4.50 in total. Net position: down about 427.

Online setup. No monthly fee. Savings at 4.00 percent, compounded annually, grow to 15,000 x 1.04³ = 16,872.96, which is 1,872.96 of interest. Net position: up about 1,873.

The difference is roughly 2,300 over three years, on the same money, for the same amount of effort after the first afternoon. Most of that comes from the rate rather than the fee, which is why the savings balance is the piece worth moving first. If the mechanics of that compounding are new to you, our explainer on how APY is calculated shows why the quoted rate and the rate you actually receive can differ.

Two honest caveats. Fee waivers are real, so if your traditional account waives its fee on a direct deposit you already receive, that 432 disappears and the comparison narrows to the rate alone. And headline savings rates move, sometimes shortly after you open the account, which is why the high-yield savings account worth having is one from a provider that keeps its rate competitive rather than one that leads a comparison table for a month.

Where traditional banks genuinely still win

Price is not the only currency.

Cash and paper. Tips, a market stall, a side business, a cheque from a relative, a bank draft for a car deposit, a certified cheque for a rental, a document that needs a bank stamp. Online banks handle some of this, awkwardly, and none of it as well as a counter.

Complicated problems. A disputed transfer, a frozen account, a deceased relative's estate, a large one-off payment that trips a fraud rule. These are the moments when being able to walk in and speak to someone in person is worth real money, and the moments when a chat window is at its worst.

Relationship products. Mortgage underwriting, business banking and lending often still favour a customer with history at the institution. If a mortgage application is coming in the next couple of years, do not close the account that holds your longest banking record.

Accessibility. For anyone who is not comfortable running their entire financial life through a phone, or who lives where connectivity is unreliable, a branch is not nostalgia. It is infrastructure.

The setup that gets you both

The realistic answer is a two-account structure, and it takes an afternoon.

Keep one traditional current or checking account for the cash, cheques, counter services and any lending relationship. Push it onto a free tariff if one exists, or meet the waiver condition deliberately.
Open an online savings account and move everything that is not needed within the month. This is where the rate does its work.
Leave one month of bills plus a buffer in the everyday account, and no more, so nothing bounces during the transition.
Automate the sweep on payday so the savings arrive without a decision.
Set a calendar reminder for six months out to check the online rate is still competitive. Rates drift downward quietly once you stop paying attention.

If you decide to move the everyday account rather than just the savings, UK readers have the easiest path: the Current Account Switch Service moves payments, direct debits and the balance within seven working days and redirects incoming payments, under a guarantee. In the US and Canada there is no equivalent guarantee, so the safer method is to run both accounts in parallel for two full billing cycles, watch what actually lands in the old one, and close it only when a month passes with nothing arriving. While you are at it, check the overdraft terms on whatever you keep, because they vary far more than the interest rate does, and our guide to overdraft fees covers what to look for. For the wider question of matching account type to purpose, see how to choose the right bank account.

The bottom line

Online banks are better at holding money and worse at handling it. Traditional banks are the reverse. Split the job accordingly: savings where the rate is, everyday banking where the counter is, and both under licences you have checked on the FDIC, FSCS or CDIC register yourself. That combination captures nearly all of the price advantage without leaving you stranded the first time you need a bank draft or a human being.