Online Banking – 10 Tips for Getting Started
The ability to conduct your banking activities online can be a major convenience. It is a hassle to have to visit your branch every time you need to transfer money, deposit a check or find your balance, but today nearly all bank transactions can be done through a secure online banking platform.
Making a successful entry into online banking requires knowing a few key things, but these 10 tips can help you smooth the process.
1. Ensure security
When you sign up for online banking, your bank will provide you with instructions on setting up a password, security questions and possibly a PIN, all of which are designed to help keep your banking data safe. Frequently, security problems arise not from the bank’s server being hacked, but from users not adequately protecting their sensitive data.
To bank safely online, use firewalls, anti-virus software, strong passwords (containing both letters and numbers) and frequently clear your Internet browser history. When visiting your bank’s website, always look for the digital certificate padlock in the bottom right-hand corner of your browser that helps verify that the website is legitimate. A little diligence can go a long way with online banking security.
2. Consider the features
If you are comparing bank accounts, it is important to find a bank that offers a full array of online features. Free checking, direct deposit, online bill payment and online statements are some of the basic requirements that every online banking customer should expect out of their bank.
While most banks offer some sort of online banking platform today, some are much easier to use than others. Even worse, some charge fees for what should be free online banking services. So don’t get fooled by an imitator: Find a bank with a full complement of free online banking features.
3. Read the fine print carefully
Banks can make it a challenge to earn the best rate. Many of their best rate offers have qualifiers and requirements that are not clear from their promotional pages or ads. Make sure you fully understand the terms of any bank deal before opening a CD, checking, money market or savings account online. Often a small detail can turn a great deal into an average or worse offering.
4. Consider bill pay
If you want to save money, look into paying your bills online. Firstly, it is a great way to avoid being charged late fees. Secondly, it is also eco-friendly. Think of all the extra energy that is expended when you mail physical checks across the country, not to mention the extra paper generated.
Finally, paying bills online can help you maintain better control of your money. It is easier to maximize investment income and lower debt payments when you know exactly when your bills will be paid. If you’ve been considering the move to online bill pay, make the switch now. With today’s technology, it’s likely to be easier than you think.
5. Watch for fees
When interest rates are very low, bank fees can eat into and even destroy your income from interest on CDs, savings and money market accounts. Bank profits have slumped in the last couple of years, so can you take a wild guess an area where banks are looking to increase their revenue? That’s right: fees.
While online banks often have a significantly better fee structure for consumers than traditional banks, you should still check all the fees that your bank plans to charge for activities. Make sure basic services such as viewing electronic statements, retrieving check copies and ATM withdrawals are all free.
6. Know your FDIC insurance limits
If you deposit funds at a bank in CDs, money market, savings or checking accounts, the FDIC insures your deposit up to $250,000. This means a husband and wife could hold $500,000 of insured money in a single bank. If they opened a deposit account for their two kids, the same family could have a million dollars at one bank and have it all be FDIC-insured.
FDIC-insured online banks are treated the same as brick-and-mortar banks when it comes to deposit insurance. The only tricky part is that many online banks have an online identity that is different from their official bank name listed on their FDIC charter. For instance, Redneck Bank is an online bank with a very humorous tongue-in-cheek website, but this is only their online identity. Depositors at Redneck Bank are actually depositing funds at the FDIC-insured bank Bank of the Wichitas.
The same principle applies with the online social savings site Smartypig.com. Depositors at Smartypig.com are actually insured at BBVA Bank. If you open an account with an online bank, pay close attention to the exact bank that will be holding the deposits to ensure you do not exceed FDIC insurance limits. You can check the FDIC’s website at FDIC.gov for more detailed information on FDIC insurance and the deposit coverage offered with online banks.
7. Watch for phishers
Have you ever received an email from a bank you don’t have an account with? If so, you have probably received a phishing email. Unfortunately, countless people are fooled by these official-looking emails every year and give up their online account information to criminal enterprises.
Remember to never click on an embedded link in an email that you receive from a bank. It could be a cleverly disguised phishing operation that will take you to a fraudulent website that’s designed to look like the real thing. Instead, take the extra few seconds to type in the bank’s website URL or have the site bookmarked on your browser for quick access.
8. Look for perks
A potentially fun part of the online banking experience is searching for the best bank deals and rates. Sites such as MoneyRates.com make it easy to find banks offering great perks for opening a new bank account with them. You might find cash bonuses, free iPads, frequent flier miles, great merchandise, gift cards and more attached to the opening of certain accounts. Just check for the latest bank deals before you open a new account to see what kind of perks may be out there for you.
9. Consider more management tools
An important component of online banking is the ability to incorporate your banking data into personal financial management software or a financial management website. This allows you to easily see your household budget, investments and expenses without having to organize paper files and statements.
Online bank statements can be downloaded into most personal accounting software packages, as well as financial sites such as Mint.com that aggregate your financial data. If you want to organize your personal financial information, signing up for online banking is a great first step, but don’t hesitate to go even further.
10. Go remote
The ability to deposit checks with your computer and a scanner is a feature that can be very useful to the self-employed and small businesses who process a large volume of checks. Banks will typically charge initial set-up fees and monthly fees, but reducing the number of trips you make to the bank and cutting down your check float can save you money in the long run. Check with your bank to see if they offer this online banking service, and then weigh whether the terms are worth it to your business.
Frequently Asked Questions
Q: How do I deposit cash into an online bank account?
A: Different online banks have different procedures for handling this. Overall, it is perhaps the one distinct disadvantage of online banking versus traditional, branch-based banking, but it is a disadvantage you might be able to minimize.
Making deposits several ways
For most types of deposits, banks with online savings accounts operate much the same way as traditional banks, and are probably more technologically up-to-date. This means that you can make deposits via wire transfers from other institutions, direct deposits of paychecks, or often via electronic imaging of paper checks.
Cash, however, is more difficult to deposit. Some online banks accept cash deposits via participating ATMs, while others leave you no option but to mail cash in.
Disadvantages to online bank cash deposits
These limitations on cash deposits leave you with certain disadvantages. For one, putting cash in the mail or into an ATM lacks the certainty of handing the money to a bank teller and leaving the bank with a receipt in hand.
For another, mailing in cash will cause a delay in when the deposit is reflected in your account. That delay could be inconvenient if you need to write checks against the deposit, and it also could cost you a few days’ worth of interest.
To some extent, these disadvantages could be reduced by special mailing of your deposit, such as registered mail for security or express mail for timing. However, that would cost you every time you wanted to make a deposit.
How to deposit cash into an online bank account
Here are five options for dealing with the problem of depositing cash into an online account:
1. Minimize cash receipts. This may depend on what you do for a living, but if possible, encourage payment via check rather than cash.
2. Choose an online bank that accepts ATM deposits. These are at least a little better than mailed deposits, but not all online banks accept deposits via ATM.
3. Consolidate deposits to make special handling worthwhile. The costs involved in registered or express mail become smaller as a percentage of a large deposit. If you can stay away from several small deposits in favor of the occasional large one, it may be more worthwhile – as long as this doesn’t entail the risk of leaving large amounts of cash sitting around.
4. Stick with a traditional branch-based bank. Online banking may not be feasible if you have regular cash income.
5. Split your banking for transactions and interest-earning purposes. In other words, maintain a traditional bank checking account, but accumulate savings in an online savings, money market account or certificate of deposit (CD) to reap the interest rate advantage online banks often offer.
Generally speaking, online banking offers consumers several advantages, including advanced technology, low-cost checking and higher interest on deposits. However, the awkwardness of handling cash is a difficulty if you need to make regular cash deposits. This illustrates that there really isn’t one banking solution that is best for all people, but that choosing a bank comes down to matching a bank’s features and capabilities with your needs.
Q: I’ve read some of your articles about the advantages of online banking, and I like the idea of free checking and higher money market rates. However, I’m just unsure about how it all works. Compared to normal banking, where I walk into a branch to make a deposit, and get a statement in the mail, how do these things work with an online bank?
A: At first glance, online-only banks may seem like a strange new world. However, if you think about how banking has evolved over the years, online banks may not seem so strange after all.
For example, whereas once upon a time people went to the bank every week to cash or deposit their paychecks, now they are more likely to have that money directly deposited into the bank. When they need to draw out some cash, they are likely to use an ATM rather than visit a branch, or bypass the cash altogether by using a debit card.
So ask yourself this: How often do you actually walk into your local bank branch? If you realize that those occurrences have become more and more infrequent, then online banking will not seem so strange to you.
Regarding statements, these are typically available online via a password-protected website. You should be able to download them to your own computer for record-keeping purposes, or even print out a copy.
When it comes to transferring money, there are a couple of procedural notes you should think about, because not all online banks are the same. When you are considering online banks you will want to know:
- What is the procedure for depositing money? Look for a bank that makes it easy to do this electronically, by taking a smartphone picture of a check or scanning and emailing the check’s image.
- What is the ATM policy? Since an ATM will be your main point of physical contact, you’ll want to know how convenient their ATM locations are. Even banks that don’t have their own machines may belong to a broad ATM network, or have a policy of reimbursing ATM fees.
As you mull over the differences between online and traditional banking, keep the fundamental advantages in mind. Online banks typically offer higher interest rates on savings accounts and money market accounts.
Still, even if you decide not to go with an online bank, make sure you do some comparison shopping for interest rates and checking account fees. There are big differences between the rates and fees that banks offer, so whether you bank online or at a traditional bank, the key is to shop actively.
Q: A high-interest online savings account caught my eye. If I need money, how could I make a withdrawal without going to the bank? I’m middle-aged and used to doing things the “traditional” way, but I noticed the high interest rate and wanted to inquire.
A: There is certainly a generational change going on in banking. Young adults are confidently taking advantage of mobile apps and other online tools, while older customers are seeing their traditional point of contact with their banks — the local branch — steadily falling more and more out of fashion.
Technology is not an insurmountable barrier though. Younger users may have been the first to embrace the Internet, but online participation rates for older groups are steadily rising.
Of course, you still are not limited to banking online, even if you are in search of higher interest rates. In MoneyRates.com’s most recent America’s Best Rates survey, while the average rate for online savings accounts was more than five times the average for traditional accounts, the top savings account rate was available through a branch system, and there were two other traditional savings accounts in the top 10.
To answer your specific question though, on how you would withdraw your money from an online savings account, the details vary from institution to institution. Typically though, there are three options:
- ATM network. While online accounts may not have traditional branch systems associated with them, you will probably find that they have made arrangements to allow access through various ATM networks. This is an important issue to check out if you choose an online bank. Make sure you will have free access to your account through conveniently located ATMs, as accessing your money through unaffiliated ATMs could get very expensive.
- Electronic transfer. For account transfers, you can provide electronic instructions for the bank to transfer money to another account. For example, if you still like to do most of your banking the traditional way, you could maintain a checking account at a local branch, while taking advantage of higher savings account rates online. Then, you would simply transfer money between the accounts electronically when needed.
- Scheduled transfers. Some banks allow you to set up transfers at regularly scheduled intervals. This would work the same as an electronic transfer, only it would occur automatically.
Ultimately, customers like yourself who favor traditional banking might be induced to change their ways with both a carrot and a stick. The carrot is the tendency of online banks to offer higher interest rates and lower fees and minimums. The stick is that as banks put less and less emphasis on costly branch networks, customers with fewer nearby branches to choose from may be forced to consider online banking.