Are Online Banks Safe? How To Increase Banking Security

Online banks are safe to use as long as they are federally insured and you take some simple steps to protect your information. By taking appropriate security measures, online banks can provide you with the opportunity to earn high rates on loans and other financial products.

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What is an Online Bank?

A bank that provides services mostly online is known as an online bank. Online banks can save money since they don’t have to incur the normal costs associated with running a branch office. This enables internet banks to provide annual percentage yields that are competitive.

You communicate with an online bank through its email, mobile app, online chat on the bank’s website, or by calling the customer care number rather than speaking to bank tellers and bankers.

Are Online Banks Safe To Use?

Online banks are secure, yes. As long as it is protected by the Federal Deposit Insurance Corp., an online bank will offer the same security as a nearby FDIC-insured bank. The FDIC insures each individual customer’s accounts up to a maximum of $250,000. Using the FDIC’s BankFind service, which enables searches by bank name or web address, you may determine whether a bank is FDIC insured.

It’s possible that a well-known traditional bank has ties to an internet bank with a high yield. A brick-and-mortar bank’s internet subsidiary may occasionally share the same insurance with it. Examples include Investors eAccess or Citizens Access:

Citizens Access is a banking division of Citizens Bank. It provides online banking services to customers. The two are treated as single entities for FDIC insurance purposes. Investors eAccess is an online bank that is a subsidiary of Investors Bank. Investors eAccess deposits are deposits made with Investors Bank for FDIC purposes.

Investors eAccess is an online bank that is a subsidiary of Investors Bank. Investors eAccess deposits are deposits held at Investors Bank for Federal Deposit Insurance Corporation (FDIC) purposes.

Since these banks are related to other entities, their FDIC insurance may only cover up to $250,000. Ask your bank if your money is covered under FDIC insurance. The FDIC’s EDIE Estimator can help you figure out if all your money is covered.

How to Maintain Online Security for Banking

Online banks contribute by offering excellent security, but it’s up to you to ensure the safety of your online banking and safeguard against identity theft. Consequently, you must be aware of the vulnerabilities that hackers exploit and take steps to prevent them. What you should do is listed below.

Select an online bank with the highest level of security. This is the first (and most crucial) characteristic you should investigate when selecting an online bank. Take a quick look at the bank’s website address. The word “HTTPS” (as opposed to “http”) should appear at the start. The address is secure because of the little S. You can continue your investigation into the bank if it passes the first test.

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Next, find out if it requires two-step verification to access your account. This method is employed by online banks and other businesses to safeguard their consumers (also called two-step authentication). Your account number and password are entered when you check the website. That completes step one. In order to move on to step two, you must submit more details, frequently the response to a question like “What is your mother’s maiden name? ” You may use a passcode sent to your mobile device or your fingerprint to unlock your device.

This second set of information offers you additional security because it isn’t nearly as simple to steal. Furthermore, you want your online bank to act as a fictitious Fort Knox when it comes to your money. Go somewhere else if an online bank has insufficient privacy and security policies. You have too many options to continue with one that only offers the same amount of security as your mother’s blog.

Don’t do your banking on public Wi-Fi. You have no control over who is near you when you are in a coffee shop or library. Like the hacker who is watching every key, you press while you type. It’s referred to as “keylogging,” and it exists. Another method is to use a video camera that records everything you type. The filthy snakes then review the video in order to obtain your personal information.

One method hackers may use to access your account while you’re using public Wi-Fi is keylogging. Just avoid using online banking while you’re out in public because you can’t anticipate every scenario that might happen.

Use your debit card with caution. Nobody is surprised by the fact that some people are dishonest. Don’t make it simpler for scammers and con artists using your debit card; they’re always seeking methods to get their hands on some of your money. Don’t speak your PIN while typing. Your PIN shouldn’t be kept in your wallet. Because, you know, people steal. Aside from that, you should never, ever publish images of your actual debit card on social media. That only serves to invite a hacker to access your account.

Alter passwords frequently. Yes, we understand. It’s annoying to change your passwords frequently. Who has the time to remember all the many passwords you use for various online accounts? Email. The internet. Accounts for shopping. Website for your school. As infinite as the internet itself, the list is boundless.

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Using the same password across all your accounts can be tempting, but doing so would be like handing a hacker a stack of $100 bills. The issue is that once they know your preferred password (and its variations), they can access anything.

Your online accounts will eventually get caught with their trousers down (metaphorically speaking) if you don’t frequently update your passwords, which is unfortunate because the solution is easy. On a piece of paper you leave at home, keep a list of websites and passwords that you frequently update. The day is saved by low-tech!

Protect yourself against identity theft. Regardless of the bank you use, you need identity theft protection, often known as fraud monitoring. A corporation will notify you if it notices a breach in your personal information, such as someone else using your social security number or a new credit card being created in your name, for a small monthly (or yearly) cost. In the event that you experience ID theft, the top monitoring businesses will aid in your recovery.

Online banks have a unique monitoring system. For instance, when a sizable transaction hits your account, some will text or email you. This way, the bank will be aware that you and not some online jerk, spent the money.

Additionally, some banks provide free fraud monitoring services. In today’s hacker-happy world, fraud protection and detection, along with identity theft protection, are essential, even if you have to pay a tiny monthly price for them.

Advantages of Online Banks

Lower costs

Online banks typically have little or no costs because they don’t have to pay for branch upkeep. For instance, many online accounts don’t charge monthly service fees, and some don’t even charge overdraft fees.

For comparison, large brick-and-mortar banks frequently impose a $10 monthly service charge on accounts. Still, they might remove it if you fulfill certain criteria, like maintaining a $1,500 minimum daily amount. A 2019 NerdWallet survey also found that large banks charge an average overdraft fee of $35.

Better Rates of Interest

Deposit accounts typically provide greater annual percentage yields at internet banks. For instance, the best online savings accounts offer APYs of about 0.45%. Compare that to the 0.13% national average savings rate and the 0.01% APY savings accounts offered by some of the biggest brick-and-mortar institutions.

A difference of a few percentage points might not seem like much, but the bigger your balance, the more important it is. At 0.01% interest, a balance of $10,000 deposited for a year would earn $1; at 0.45%, it would earn slightly over $45.

Another way to earn interest is through online cash management accounts. Brokerages and other nonbank service providers supply these financial goods. They frequently incorporate the benefits of checking, savings, and investment accounts and can also offer competitive yields.

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Regular Banking Services

Although most online banks have lower costs and greater rates than traditional banks, many nonetheless offer the same standard financial services, such as:

Access to ATMs A reputable online bank will be a part of a network with thousands of fee-free ATMs across the country, such as Allpoint or MoneyPass. Some online banks will also cover any costs the ATM owner charges if you need to withdraw money from a non-network machine.

Security. Online banks with conventional security precautions are equally as safe as traditional banks. Before opening a bank account, check for features like encryption and fraud monitoring and confirm that the funds are covered by the Federal Deposit Insurance Corp. You can also take precautions to ensure secure online banking, such as avoiding public Wi-Fi networks and maintaining up-to-date antivirus software.

Accessibility. Anywhere there is internet connectivity, you may always use your computer or a mobile device to access your bank accounts and bank services. Customer care can also be reached by phone, sometimes around the clock, on all seven days of the week.

Do You Need Online Bank Services?

Going entirely online could make it harder to use some banking services, such as cash deposits, but having at least a portion of your banking with an online bank can make managing your money more convenient and come with additional benefits.

High-yield checking accounts are offered by several online banks. These accounts offer competitive returns, free checks, access to a sizable ATM network, and no maintenance costs.

If you’re concerned about keeping your rainy-day fund distinct from your spending money, an online bank is a wise choice for your emergency fund. You may be less likely to move or withdraw that money if you don’t see it in the same location as your checking account.

As long as you go by FDIC restrictions and regulations, FDIC-insured online banks pay competitive APYs and safeguard your funds.

Conclusion

For customers looking for a competitive rate and reduced monthly fees, an online bank is a great option. There is no difference between online bank accounts that are guaranteed by the federal government and physical bank accounts when it comes to safety and insurance. Exercising caution when securing your personal data is always a good idea. Keep your account information private, especially passwords, and consider getting antivirus or anti-identity theft software.

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