Online Banking

There was a time, not so long ago, that all personal banking was conducted at a bank. In recent years, face-to-face time with your friendly neighborhood bank teller has increasingly given way to electronic banking via the telephone, ATM and now – the Internet.

For the uninitiated, on-line banking is simply conducting financial business over the Internet using a personal computer. Most of these on-line banking web sites are electronic versions of their physical namesakes, such as Wells Fargo, Bank America or Fleet. A few others exist only as “virtual” banks, having no physical counterpart outside of cyber space. But whatever form these on-line financial institutions take, there is no doubting their growing popularity. Studies have shown that more households are banking via the Internet than ever before, and they estimate that an estimated 25 million users will be banking via keyboard by the end of 2003. And with good reason.

First and foremost, Internet banks never lock their doors. They’re open twenty-four hours a day, seven days a week for your banking convenience. Most of these “brick and click” Internet banks also offer a majority of the same services found at your local “brick and mortar” institutions. A customer can check account balances, make money transfers, monitor financial investments and even pay the bills– all without leaving home. No driving. No ATMs. No standing in long lines.

Sampling of Services offered through Online Banking

  • Checking and Savings accounts. One nice benefit here is that you can monitor your transaction history at your leisure.
  • Money Market accounts. Another online nicety is the ability to access these accounts online and take the time to scrutinize and analyze them from home or work.
  • Certificate of Deposit accounts. Purchase and monitor them.
  • Access Lines of Credit.
  • Access Credit Card information. You can check your current balance, last payment and payment due as well as your check transaction history.
  • Examine Posted Checks. One great thing about this service is that it provides you with the ability to view both front and backs of checks.
  • Integrate Account Information. With personal financial management programs such as Quicken or Microsoft’s Money, it’s not that hard.
  • Pay bills electronically. Payments can be set up as a one-time, recurring or future-dated transfer.

In addition to these on-line conveniences, some banking web sites allow customers to apply online for credit cards, personal lines of credit, overdraft protection and mortgages. Also, those institutions offering investment services can provide their customers the very same services over the Internet. Stocks and mutual funds can be bought and sold, real time quotes obtained and stock exchanges can be accessed. It’s no coincidence, therefore, that on-line investment brokerages like Etrade are now turning the tables on the banking world, offering their own customers traditional financial services like savings accounts, checking accounts and check writing.

While studies reveal most consumers tend to feel more comfortable banking on-line with institutions they have traditionally done business with in the neighborhood, the virtual banks such as ETradebank.com and Netbank.com do offer one significant advantage. Because they exist only in cyber space, an Internet bank enjoys a much lower overhead than “brick and mortar” institutions. As a result, savings can be passed on to their customers in the form of higher interest rates paid on checking, savings and CD accounts– as much as three times higher. A drawback to these virtual banks is ATMs are required for cash withdrawals (check to be sure you are not being charged per withdrawal) and cash deposits– to put it literally– are virtually impossible (or at least discouraged via the mail).

Despite the explosive growth of on-line banking, most customers still prefer to get in the car and drive to their local bank or ATM. The reason, in a word, is “security.” The Internet is a public place, and instances of personal information theft, from social security to credit card numbers, have been well documented. It should be pointed out, however, that Internet banking is safer than most credit card transactions. How?

  • Unauthorized entry to these online sites is protected by “firewalls.”
  • Transactions are encrypted to prevent fraud.
  • Customers are issued passwords and user ID’s.

Rules of Thumb for Online Safety

  • Never reveal your password, logon ID or PIN to anyone.
  • Use a secure browser such as Netscape, America Online or Internet Explorer 4.0 or higher. These browsers support secure on-line transactions.
  • Never leave your computer unattended while conducting business.
  • Always log-off after your transaction has been completed.
  • When creating a password, be sure to mix letters and numbers. Change the password regularly and don’t use passwords that are easy to figure out.
  • Check all financial statements each month for discrepancies.
  • Keep virus protection software updated.
  • Make sure your online financial institution is insured by the Federal Deposit Insurance Corporation (FDIC).
  • Discuss security with your financial institution. Learn what safeguards are protecting your information when transacting business.

Closing Thought

When logging on to an Internet bank, your personal and financial information is often gathered and shared by the institution with marketers who want to target you with products they offer. By law, institutions must tell you what information is gathered and with whom they share it. You have the right to prevent your bank, credit union or brokerage firm from sharing your personal and financial information with any outside party.