FAQ Friday: How do I choose between a digital and traditional bank?

April 28, 2023

On the last Friday of every month, we answer some of the most frequently asked questions (FAQ) from the hundreds of consumers who contact us. This month, we explain what you should know when trying to decide between a digital and a traditional bank.

I need a new current account; what are the main differences between a digital and traditional bank?

Whether you are switching your current account or opening a new one, it can be difficult to decide between a digital or traditional bank. If you choose a traditional bank, you:

  • Get in-branch and in-person customer service
  • Do not need to rely on technology or internet access
  • Have the ability to set up an overdraft or lodge cash

With a digital bank:

  • It’s quick and easy to set up an account
  • You may have lower or no monthly account fees
  • Transferring money to someone is simple and usually instant

You should bear in mind that, with a digital bank, you have limited options if you’re looking for a mortgage or a savings account. However, as digital banks grow, more products and features may become available. For example, certain digital banks now allow you to set up a joint account with your partner, family members or a friend.

Top Tip

You should look at our current account Money Tool to compare the current accounts that are available in the market before you decide which one is best for you.

Is my money safer in a traditional or digital bank?

You should check which country regulates the digital bank. If it is an EU country, such as Lithuania or Germany, then your money is protected in the same way as a traditional bank regulated by the Central Bank of Ireland. Under the Deposit Guarantee Scheme, your first €100,000 with the bank is covered in both traditional and digital banks if they are regulated in an EU Member State.

You should also do a bit of research into the security features that come with digital banks before signing up, such as:

  • Instant freezing of suspicious activity on your card
  • Single-use virtual cards for extra security when shopping online

Regardless of whether you have a traditional or digital account, you should always be aware of potential scams that target your money. Be wary of any phone calls, texts or emails claiming to be from your bank, asking for your personal details, account numbers or PIN codes. Check out our golden rules for spotting a scam for more tips and advice.

If I have a problem, is it more difficult to complain to a digital bank?

It can be more difficult to make a complaint to a digital bank if it is covered by the laws of another EU country. In that case, they don’t have to follow the Central Bank of Ireland’s complaint handling procedure. Also, the Financial Services and Pensions Ombudsman (FSPO) in Ireland may not be able to help with your complaint. Instead, you may have to bring your complaint to the relevant complaints handling body in the relevant EU member state of the digital bank.

With a traditional bank regulated and based in Ireland, you may find it easier to resolve your complaint in person, in your local branch. If not, you have access to stronger redress options such as the FSPO.

If you have more questions about choosing between a digital and traditional bank, see if they are answered in our Money Clinic.

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