January 15, 2020

Are Online Banks Safe to Use

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For the highest interest rates and lowest banking fees, you may want to consider banking online. But many people worry about how safe it is. Read on for what you need to know about online bank safety.

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Are banking apps safer than websites?
Banking via the bank's website from your home computer with proper protection and your own Wi-Fi is typically the safest bet. If you are out in public, though, using the bank's app and a 3G or LTE connection is a safer bet than jumping on a public Wi-Fi connection.

Many Americans are worried about the safety of online banking. The good news is that online banks ARE safe—provided they have FDIC insurance. If a bank is FDIC insured, each account has coverage up to $250,000.

Banks charge fees to cover the cost of FDIC insurance, which then protects you. In reality, the primary difference between an online bank and brick-and-mortar bank is the presence or lack of a physical branch you can visit.

In fact, many people use online and traditional banks since the risks are the same. Before you do any banking online, though, check with the bank's security measures.

Do they encrypt your data, use firewalls, and anti-virus software? What other security measures are in place? A few options include:

  • Two-factor authentication
  • Fraudulent activity alerts
  • Automatic account freeze if suspicious activity is suspected
  • Regular account monitoring
  • Automatic time-out after a certain amount of idle time

You won't find all these precautions at every bank. But knowing the steps a bank takes and the features they offer can be reassuring.

Make sure you're comfortable with the safety measures a bank takes. If anything makes you uneasy, there are hundreds of other banks to try.

Which browser is best for online banking?
The best browsers for online banking are Firefox, Google Chrome, and Safari. But the best browser is also the one you update regularly. Most online banks require at least Firefox 51 or higher or Chrome 56 or higher for maximum security. And be sure to take necessary precautions like using appropriate anti-virus software.

The Risks of Online Banking

Online banking carries some risk, but if you have an FDIC-insured account, your money is protected. Banks that get hit by hacking attempts often increase their security after such an incident.

If you are a victim of hacking, report the incident to your bank immediately. This ensures that you get proper reimbursement.

Federal law requires you to report the incident within 60 days, but the sooner you report it, the better. Sometimes the longer you wait, the higher your liability in the transaction becomes.

Just how do hackers get access to your online accounts? Here are a few ways:

  • Phishing
    Hackers often send emails that look legitimate but aren't from the bank itself. If you click on the link, it gives the hacker access to your computer or sends you to a website that asks for personal information. If you provide the information, you give access to your accounts.

  • Keylogging
    Conducting your online banking in a public space may put you at risk of keylogging or a hacker monitoring your keystrokes. They use the information you enter to hack into your accounts and get access to your bank funds.

  • Shady Apps
    Third-party apps that seem harmless may hold spyware that gives hackers access to your bank accounts. Before you download any apps, including innocent game apps, look at the reviews and consider the source. Even the most legitimate-looking apps can be dangerous.

There are literally hundreds of ways hackers can get to your information; the key is to protect yourself. Yes, your money is protected with an FDIC-insured bank, but it's up to you to protect your information.

How to Protect Your Online Banking

It's possible to protect yourself from online account hacking. Here are a few simple ways:

  • Update Your Software
    Always update your operating software and anti-virus software. Don't ignore notifications when they pop up on your computer.

  • Have the Latest Anti-Virus Software
    Be sure to install a new anti-virus program every year—or renew your current one. You never want to be without anti-virus software.

  • Update Your Apps
    If you bank on a mobile app, make sure you do all of the latest operating system and app updates.

  • Add Two-Factor Authentication
    Most banks offer two-factor authentication. On your computer, you may add the option to email or text a code to yourself. On your mobile app, you can do the same thing or add face recognition as your second authentication factor.

  • Avoid Banking in Public
    Using an internet connection other than your own safe Wi-Fi network can put you at risk of fraud. If you have to conduct a banking transaction in public, ensure that the connection is secure before doing so.

  • Don't Click on Links
    If you receive an email or text message that looks like it's from your bank, confirm it first. Don't click on the link without verifying, as you could be opening the door for hackers.

The Reasons Online Banks May Be Better

Online banks have many benefits. While you should shop around to compare features, you'll often find many of the following benefits:

  • Lower Fees
    Online banks have lower overhead, which allows them to charge fewer (or no) fees. Look for free checking and savings accounts online and enjoy the savings.

  • Higher Interest Rates
    The lack of overhead also allows online banks to offer higher interest rates. Many have minimum balance requirements or offer tiered rates (the higher your balance, the higher the interest rate).

  • 24/7 Options
    Since you don't have to visit a branch, you never have to wait until the bank is open. You can bank any time of day or night that's convenient for you.

  • Better Technology
    Online banks often have the edge in security, since they only operate online. Physical branches have more to worry about and may not offer the highest level of security for their online and mobile services.

  • More Customer Service Options
    Online banks typically offer phone, email, and online chat options for more hours than you'd get from a physical bank branch.

Bottom Line

Online banks are safe as long as you choose the right one. Do your research and ensure that a bank uses top-of-the-line security and is FDIC insured. In addition, make sure you do your part in keeping your information safe, making it difficult for any hackers to get to your information.

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