Online or branch accounts: Which are the best?

Tuesday, 25 October 2011 10:01

By Kate Saines

It’s official – more of us bank online than log onto our Facebook and Twitter accounts.

In fact as many people – 77 per cent to be precise – go online to do their banking as to do their shopping, new research by Nationwide Building Society has revealed.

But rather than suggesting Facebook and Twitter are moving out of favour, this survey is a testament to just how many of us are running our bank accounts online these days.

Richard Searle of Nationwide, admitted even the building society was surprised online banking beat social media to top spot. He added: “Online banking really has taken off over the last few years.”

One of the reasons for this might be down to the fact so many of us own laptops and smartphones, many of which have the ability to download apps which allow us to do basic banking.

So not only do we have the flexibility to run our bank accounts at any time, we can also do it at any place – on the bus, in the supermarket queue, even in bed.

But while internet banking is soaring in popularity, there are still accounts out there which are ‘branch-based’.

Particularly in the savings market, there are many products which can only be opened by walking into your local branch and speaking to another human.

So which is better, which provide the best rates, and which offer the best service? We’ve weighed up the pros and cons of each to get to the bottom of the traditional versus modern bank account debate.

Basic banking – withdrawing cash and checking your balance

If you hold a branch account you will rely on receiving statements through the post to check transactions.

Unless you are meticulous about keeping receipts, remembering direct debit and standing order dates and keeping cheque stubs there’s a danger you could lose track of what’s going into and out of your account.

You can check your balance at ATMs, and get details of the last few transactions, but you’ll need to make the effort to go the ATM.

Withdrawing cash – whether you have a branch account or internet account – is no different.

With an online account you can check your balance and transactions whenever you wish, provided you have access to the internet.

Most banks allow you to access information on transactions going back months, even years, so you need not rely on your paper statement arriving in the post.

If you have a smartphone, some banks, NatWest among them, provides apps which allow you to view your balance and check your last few transactions. You can also arrange for SMS text alerts to keep you updated.

Transferring money, making payments and managing your account

With a branch-based account paying bills, transferring money, setting up direct debits and standing orders or paying by BACs must all be done by visiting your bank, and very often waiting in a queue.

Many people like to do their banking in their lunch hour or while they are shopping and prefer doing these more complex banking tasks face-to-face with a bank employee – so branch banking can be a major plus for these customers.

However, you are relying on bank opening times and having access to a branch. If you are on holiday, for example, and remember you need to pay an urgent bill there’s little you can do.

Meanwhile, pretty much all online banking allows you do all the above online. You can set up direct debits and standing orders, and cancel them whenever you wish.

If you want to make a one-off payment to someone through their bank account you can do so online and save that person or organisation’s details should you ever wish to make a payment again.

You can transfer money between accounts, pay off your credit card and even check your mortgage statement if it’s with the same bank.

If you are away from the country and have forgotten to pay your credit card bill, you can access your account and make a transfer if you can gain access to the internet. And you can even do this via your smartphone if you are a customer of a bank that provides apps for this purpose.

Paying in cheques

It doesn’t matter whether you have a branch or internet account, you’ll still need to visit the bank or post your cheque to the relevant address to pay the cheque in. Here’s one area internet banking does not necessarily come out on top.

Current account deals

In terms of current accounts all the big banks and building societies will provide you with online banking facilities with most of their top products these days.

Topping many of the current account Best Buy lists at the moment is Santander’s Preferred Current Account, which offers £100 cashback to new customers who switch to this account. There is an interest rate of five per cent on balances up to £2,500 for the first year and a zero per cent overdraft rate for 12 months for switchers.

The Halifax Reward Current Account is offering £5 a month to customers whether in credit or in their overdraft provided they pay in £1,000 per month.

Meanwhile the First Direct is offering £100 cashback when you switch to its 1st Account, provided you pay in £1,500 per month.

The Co-op is also offering a £200 cash incentive to customers that switch their main current account to the Co-op.

All these accounts can be run via branches, online or even by phone. So there really is very little competition between the branch or internet versions when it comes to the deals.

Use the comparison tools to find the best deal on a new current account

Savings Accounts

There is competition when it comes to savings rates, however.

Currently topping the easy access savings accounts best buy lists is the Nationwide My Save Online Plus account.

It has a 3.12 per cent interest rate. And while this rate includes a 1.58 per cent bonus for the first year only and is not inflation-beating, it is still healthy for the currently dismal savings market.

The catch? This product is available online only. As is the Post Office’s Online Saver which is currently offering interest of 3.01 per cent for the first year.

The same is true of the cash ISA market – many of the best deals at the moment are available online only. The fixed rate bond market is slightly less exclusive but there are still a number of accounts run online.

Some competitive ‘branch only’ deals have come on the market recently. You’ll need to visit your local Bank of Scotland branch, for example, to take advantage of its Incentive Saver account paying 2.5 per cent interest.

The account provides unlimited access to funds and needs just a £1 deposit to open. The rate is fixed for 12 months.

So why have an account which can only be operated via a branch in an age where internet is so dominant?

Because, it turns out there is still a demand for branching banking. A spokesperson for Bank of Scotland said: “A very high proportion of our customers still value the availability of face-to-face contact.”

She added: “Benefits to branch users versus online is effectively fitting in with their daily routine. Not everyone feels comfortable online or wants to shop online even if they research there.

“[Branch banking] also provides customers with the opportunity to discuss any other banking needs they have while they are in branch.”

Use the comparison tools to find the best deal on savings bonds


This brings us on to the pressing matter of security. Many of those reluctant to bank online are put off by the fear of fraud.

While most banks have hi-tech methods in place to combat this, many people are not confident to go online even with these measures in place.

However, even where fraudulent activity does slip through the net, most banks have systems in place to limit the effects on customers.

Pete Corrie, Nationwide’s head of financial crime, explained: “Nationwide customers who bank online automatically benefit from our Internet Banking Promise.

“This means if a customer ever innocently suffers any fraud while using our Internet Banking service, we will refund any money taken from their account.”

Best of both worlds

Still confused about your options? Well, you needn’t be. With so many accounts offering availability both online and via branches (not to mention by phone or post if you prefer) you can enjoy the best of both worlds. You don’t simply have to limit yourself to one method of banking.

A spokesperson from Bank of Scotland summed it up by explaining it offered a range of products with different features to suit customers’ individual needs.

She added: “Whilst there are some customers who use only one channel, the majority transact across them to fit in with their location or needs.”

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