Are online banks safe? Is online bank safety really a problem, and if so, how big of a problem is it? Online banking is a fairly new idea that is changing the way people all over the world bank.
All of this started in the US in 1999 with the launch of First Internet Bank, the first “extended value online bank.” Since that bad day, the number of online banks has increased.
They are not perfect, though. Online banks have pros and cons, just like everything else. Safety and security are two good reasons to worry about online banks.
How Safe Are Online Banks?
Your money is safe in an online bank, but you should only use an online bank that you know you can trust.
Look for a bank that is protected by the Federal Deposit Insurance Corp (FDIC). When your money is FDIC-insured, your accounts are covered up to $250,000.
As smartphones and other devices keep getting better and the internet keeps getting faster, it’s possible that online banks will continue to grow and more and more people will use them to manage their money.
What are the biggest dangers of banking online?
No method is foolproof, and online banks are no different. Realistically, the best online banks have the same safety issues as the best credit unions and traditional banks.
Is the bank subject to rules?
Checking to see if the bank is controlled at the state or federal level can give you an idea of how safe it is.
Are funds protected by the FDIC?
When you bank with a bank that offers FDIC-insured accounts, you can relax knowing that if something bad happens to the bank, your money is protected up to $250,000. If you’re not sure if a bank is FDIC-insured, you can use the FDIC’s BankFind tool to find out.
How safe is their app for banking?
When it comes to internet banking, one of the most important things to keep an eye out for is app security. This includes things like encryption and authentication. internet security is a common concern about the safety of internet banks, and to some extent, this is true.
Being online is always risky, and internet banks are no different. It’s important to note that standard banks don’t store all of their customers’ information on paper in a drawer.
Still, data is stored on servers that are tied to a network. This means that, in theory, online banks shouldn’t be more dangerous than regular banks.
Obviously, it’s up to each bank to keep up with important security measures to keep customers’ information safe. This is why it’s important to make sure the bank is controlled and to take the time to learn as much as you can about it before joining.
It is also important for you to keep things safe. Most of the time, it’s much easier to get into a customer’s gadget than it is to get into a bank’s network. To keep everything safe, it’s important to reduce security risks.
In the next part, we’ll talk about what you can do to make sure your online life is as safe and secure as it can be.
How To Minimize Security Risks?
To minimize security risks when using online banking, follow these steps:
Step 1: Secure your device:
- – Keep your device’s operating system up to date, particularly regarding security updates and patches.
- – Update all installed software regularly to mitigate potential security risks.
- – Install reputable anti-virus software and ensure it remains updated.
- – Be cautious when installing apps and avoid obscure or suspicious ones.
- – Use strong and unique passwords for your online banking accounts, incorporating a mix of upper and lower case characters, numbers, and special characters.
- – Avoid using public Wi-Fi networks, as they are often insecure.
Step 2: Leverage the bank’s security features and follow their policies:
- – Familiarize yourself with the bank’s security policies. Some banks make an effort to present policies in a clear and understandable manner.
- – Enable two-factor authentication if the bank offers it. This provides an additional layer of security by requiring authentication through multiple means.
- – Be cautious about sharing personal information over the phone or via email. Most banks do not request sensitive information through these channels.
By taking these precautions, you can enhance the security of your online banking experience.
What To Look For When Choosing An Online Bank?
When selecting an online bank, there are several factors to consider that can help you make an informed decision and ensure the safety of your account and funds. Here’s an improved version of the points to look for when choosing an online bank:
1. Offers and Promotions
Look for online banks that provide attractive offers and promotions for new account holders. These can include cash bonuses, higher APY rates, or better terms for credit cards.
2. Mobile App Reviews
Check customer reviews of the bank’s mobile app on the respective app stores (Google Play Store or Apple App Store). This will give you insights into any recurring issues or problems faced by existing customers.
3. Account Fees
Pay attention to the account maintenance fees charged by the bank. Consider opting for free checking accounts or accounts with fee waivers, such as lower minimum balance requirements to avoid monthly charges.
4. APY Rates
Annual Percentage Yield (APY) is the interest rate the bank pays on the money you keep in your account. Compare APY rates among different online banks to find the one that offers the best returns on your savings. Also, check how frequently the interest is compounded and paid out.
5. Account Types
Determine which type of account suits your needs. Whether you require a personal checking account, savings account, business account, or specialized account, choose an online bank that offers the account type that aligns with your financial goals.
6. Products and Services
Evaluate the range of products and services offered by the online bank. Besides bank accounts, consider other financial products like loans, mortgages, credit cards, and investment options. Opting for a bank that can cater to multiple financial needs can streamline your banking experience.
7. Customer Service
Since online banks lack physical branches, reliable customer service and support are crucial. Look for online banks that provide various ways to contact their customer support team and have extended availability hours. This ensures you can receive assistance when needed.
By considering these factors, you can make a well-informed decision and choose an online bank that meets your specific requirements while prioritizing security, convenience, and beneficial financial offerings.
Pros & Cons
We’ve already talked about how online banks have their own pros and cons. Obviously, not all online banks are the same, and what works for one might not work for another.
Here are some of the pros and cons of online banks in general:
Pros:
- Rates that are better: Most of the time, online banks have better rates than standard banks with buildings.
- No fees. Online banks are known for having lower fees, like not charging monthly maintenance fees. Some even don’t charge NSF fees.
Cons:
- They’re not the only ones – Many traditional banks have good online or mobile banking apps and websites that let you do most, if not all, of the same things that online banks let you do.
- No track record. Most traditional banks have been around for decades or even centuries, but the oldest online bank is only a few years older than a teenager.
- No real locations – Since there are no bank offices, people can’t get help from the bank in person, which some might miss.
What makes an online bank different from a regular bank?
- Online banks are the same as any other kind of bank, except that they are only available online. Traditional banks have branches you can go to for face-to-face talks, but online banks do everything from start to finish online.
- Most of the time, you can access your online accounts by using both a mobile banking app and a PC website. Most internet banks first work on their apps for smartphones.
What do online banks provide?
- You can expect online banks to give the same kinds of services as banks with physical locations. This includes different bank accounts, debit cards, credit cards, loan options, and mortgages.
- Online banks also have goods and services for businesses. This means that if you own a business or work as a freelancer, you can also use the online bank for your business financial needs. Depending on what type of loan you want, the bank may need to check your credit score.
- Since most of our shopping, from groceries to clothes to electronics, is done online, it was only normal for banks to do the same. Like online shops, online banks tend to offer better prices and better interest rates.
- This is partly because online banks don’t have to pay for all the branches, staff, and other things that are needed to run real locations.
- This also means that you never have to stand in a bank line, since you can’t do that if you don’t go to a store. Theoretically, this should mean less time spent, as long as the online bank is good at communicating, whether it’s through email, the phone, or live chat.
Best Online Banks
Since the first online bank accounts came out, many new online banks have opened. Some are brand new, while others are connected to old-fashioned banks that have been around for a long time.
Here are some of the best banks you can use online.
1. Bank of Ally
At Ally Bank, you can find a variety of financial goods, such as High-yield Savings Accounts, Checking Accounts, Money Market, and CDs, among others. The highest APY for the Savings account is 0.50%. There are no annual maintenance fees, and the bank is a member of the FDIC, which protects deposits.
2. Capital One
Capital One has a wide range of financial services and goods, such as savings, checking, and IRA accounts. Their highest APY for savings accounts is 0.40 percent. There are no fees and there is no minimum amount. Accounts are protected by the FDIC, so you can feel even safer.
3. Chime
The APY for Chime’s Savings Account is 0.50%, and there are no regular service fees, which is great. In fact, there are no fees at all. There are no ATM fees at more than 38,000 ATMs, and there are no fees to send money to someone else.
You can get your pay up to two days early and get alerts about how much money is in your account. There is no minimum amount, and you can set up round-ups through the mobile app to save money for you automatically.
If you sign up for direct transfer, you can get your paycheck up to two days before your coworkers if you use Chime. And who wouldn’t want to get their paycheck a little bit early?
4. Discover Bank
The annual percentage yield (APY) for Discover’s savings account is 0.40%, and interest is added every day and given out every month. There are no monthly fees or minimum deposits needed to start the account, and ATMs are free.
Discover also doesn’t charge NSF fees, which means there won’t be any unpleasant shocks if your account balance is low.
