Online banking has many advantages and disadvantages. It may be surprising that their security and safety of your money is not something you need to worry about. Read on to see if online banks are safe.
Are Online Banks A Good Idea?
Online banks are just as safe as traditional banks, because they are also typically FDIC insured. This guaranteed reimbursement of your account (up to $250,000) if the bank were to fail.
There are various pros and cons of online banking. One disadvantage is if you would like to talk to someone about your account, you would need to contact the online customer service or call them by phone. In a traditional bank, you can just head to a local branch to get help.
An advantage of online banking is that they typically offer higher interest rates, have less fees, and have the same FDIC insurance.
If your bank is FDIC insured you know your money is safe, but what about your financial and personal information? Most online banks will take the same security measures that traditional banks do.
Most online banks offer the following security features:
- Two-factor authentification
- Fraudulent activity alerts
- Automatic account freeze if suspicious activity is suspected
- Regular account monitoring
- Automatic time-out after a certain amount of idle time
- and more!
The Risks Of Online Banking?
Online banking has some risks, especially with hacking becoming more common. Even when hacking occurs, online banks generally increase their security after such occurrence.
If you have been hacked, you must report the incident to your bank immediately to ensure proper reimbursement. Federal law requires you to report the incident within 60 days, but it is better if you report it as soon as possible.
If you wait longer, your liability in the transaction may become higher.
How do hackers even get access to your online accounts? Here are a few ways:
- Hackers will often send emails that look legitimate, but are not actually from the bank. If you click on the link, the hackers will get access to your computer or it will send you to a website that asks for personal information. If you provide personal information, you give the hackers access to your account.
- If you conduct your online banking in a public area, you may be putting yourself at risk for keylogging. A hacker may be monitoring your key strokes to hack your account and access your bank funds.
- Shady Apps
- Third-party apps may seem harmless, but they may contain spyware that gives hackers access to your accounts. Before downloading any games, be sure to look at the reviews and consider the source. Even if the app looks very legitimate, it may be dangerous.
Although your money may be FDIC insured, it is also important to actively protect your information too.
How To Protect Your Online Banking
There are a few simple ways you can protect yourself from online account hacking.
- Update Your Software
- Always update your operating software and anti-virus software. Don’t ignore the notifications to update when they pop up.
- Have the Latest Anti-Virus Software
- Be sure to install a new anti-virus program every year , or renew your current one. Always have one installed.
- Update Your Apps
- If you are banking on a mobile app, be sure to update the app to the latest operating system.
- Add Two-Factor Authentication
- There are different ways you can do two-factor authentication. If you are on your computer, you can add the option to email or text a code to yourself. On the mobile app, you can use face recognition or touch ID.
- Avoid Banking in Public
- If you are using an internet connection that is not your own safe Wi-Fi network, you may put yourself at risk for fraud. If you absolutely have to conduct a bank transaction in public, be sure your connection is secure.
- Don’t Click on Links
- If you receive an email or text message that looks like it may be from your bank, confirm it first. Don’t click on links without verifying it =s authenticity, or else you may be allowing hackers access to your account.
The Reasons Online Banks May Be Better
Online banks have many benefits. If you compare features you may find this common theme of the following benefits:
- Online banks have lower overhead, so they tend to charge fewer, or even no, fees.
Higher Interest Rates
- With no overhead, online banks are also able to offer higher interest rates. Many have minimum balance requirements or offer tiered rates (the higher your balance, the higher the interest rate).
- Since there is no physical location you can visit with online banking, you can contact the bank any time that is convenient for you.
- Generally, online banks will have tougher security due to only being online. Traditional banks do not have the same level of security since they are not focused on online services.
More Customer Service Options
- Online banks have a wide variety of ways to contact their customer service, such as by phone, email, and online chat options.
Downsides of Online Banks
The downsides of online banking include:
No physical branches
- There is no physical in-person customer support system to aid in depositing cash or similar things. If you prefer to talk to someone in person, online banking may not be right for you.
Fewer product offerings
- Larger, traditional banks often have other financial products, such as mortgages, insurance, and various types of financing. If you want to have multiple products under one bank, it would be best to go traditional.
Recommended Online Bank Accounts
• Earn up to 0.61% APY with interest compounded daily and no monthly fees with the Axos Bank High Yield Savings account
• No minimum balance requirements
• Free ATM card upon request
• $250 minimum opening deposit
• Free Incoming Wires
With the American Express® High Yield Savings Account:
• Earn 4.35% APY as of 12/14/23 on your deposits. Your High Yield Savings account earns interest daily and is posted to your account monthly.
• Links easily with your current bank accounts. No need to switch banks.
• FDIC Insured. Your account is insured to at least $250,000 per depositor.
• 24/7 Account Access
With the CIT Bank Savings Builders account:
• Earn a top tier, competitive APY on your money—one of the top savings rates in the nation. Earn up to 1.00% APY on your funds - grow your savings faster.
• Build a habit of savings. Pay yourself first. Start with $100 per month and build your habit of savings-—all while getting a top rate.
• FDIC Insured
Open a Discover® Online Savings Account for all these features:
• Earn high interest rate of 4.30% APY
• No minimum opening deposit, no minimum balance requirement, and now no fees
• Interest on Discover Online Savings Accounts is compounded daily and credited monthly
• Manage your account online or with the Discover mobile app
• FDIC insurance up to $250,000
• See advertiser website for full details
Online banking is safe if you pick the bank that is right for you. Be sure to do your research and take the necessary steps to, such as ensuring your bank is FDIC insured. Also, take the steps to protect your own information.
However, if you prefer talking to a bank teller in-person and want multiple financial products and easy cash deposits, maybe visit a traditional bank or credit union instead.
For more information on banking, check out the rest of our bank guides right here on HMB!