Five things to know about online banking

Posted in: Banking, Personal Finance
By Joe Wallace
Dec 22, 2008

Online banking can be a convenient way to keep your accounts in order, pay bills and keep track of your spending. Online customers, however, need to protect themselves by safeguarding passwords, anticipating technical problems and being aware of bank policies about transaction times.

There are five main aspects to be aware of in order to fully protect your personal data and account information. Many new users seeking online banking options are already aware of one or more of these. Using the tools you are already aware of in combination with other techniques will give you a much safer and simpler online banking experience.

Understand Bank Policies For Errors or Interruptions

Many online banking systems allow you to set up automatic deposits, withdrawals, account transfers and other transactions. No two online banking systems are alike, but one factor is common for all systems—errors will occur.

Whether it's a because of a power outage, a sudden loss of your Internet connection, or a problem with the online banking servers themselves you should know your bank's policies and how complaints should be directed.

If you were in the middle of a transaction interrupted by a technical problem, your account may wrongly indicate a completed transaction when no debit or credit actually occurred. How does your bank handle such situations? Know the policies before you commit.

Password Protection is Your Responsibility

It is very important to safeguard your user name and password information. Some institutions may require you to change your password on a regular basis to prevent identity theft or fraud, and you will need to remember and protect your passwords. Use a "strong" password as recommended in the online banking advice section of your institution's website.

Strong passwords are usually combinations of letters and numbers that do not use standard "dictionary words" that can be guessed by a computer program trying out endless combinations of real words and numbers.

If you suspect that your password has been compromised or your account has been accessed without your permission, change your password immediately and call the bank's customer service hotline to file a report.

Know Your Bank's Communication Policies

Some unsuspecting online banking customers can fall victim to a scam when they get an e-mail supposedly from their bank customer service department requesting "account verification" or something else along those lines.

The message often starts with a generic "Dear Customer," and goes on to say, "In order to maintain secure online banking, you must verify your account by providing your user name and password." This online scam usually includes a link in the body of the e-mail which leads to a website that is not actually part of your online banking system.

People fall prey to this scam because they don't know their bank's actual policy for routine maintenance of secure online banking details such as your password or user ID. Chances are your bank will never contact you for a change of password request and will never contact you using the opening phrase "Dear Customer."

Official bank e-mails are often personalized and may require you to go to the main page of your online banking interface, log in as usual, and then change your password or other information once you are inside the system.

When in doubt, always call the customer service phone number and get independent verification of a request for account data such as your password or account number.

You can also protect yourself simply by refusing to click on any link sent to you in an e-mail. Access your account as you normally would, and access your account to make changes.

Know Your Bank's Transaction Waiting Period

As with most transactions, online banking transactions may be noted on your account right away, but funds may not be debited or credited for a certain amount of time. Do you know what the standard waiting time is before transactions have cleared after online activity?

You can avoid overdrafts and service charges by knowing the standard time you should wait before new activity becomes "official."

Know Your Service Charges and Transaction Fees

Some banks may charge a fee for account transfers, ACH debits or credits, automatic bill pay or other features. Know your service charges and other costs before trying to do your banking online. You can avoid accidental overdrafts by calculating your fees or surcharges per transaction and adding them into your records the same as any other check or ATM transaction.