Online Banking Security: How to Protect Your Online Banking Information

Digital banking, either online or by mobile app, is convenient, inexpensive, and typically offers better interest rates on savings than traditional banks. Although your money in an online bank is insured by the Federal Deposit Insurance Corporation (FDIC) and protected as well as your money in a conventional brick-and-mortar bank ($250,000 per depositor, per bank), online banking security remains a concern for many people.

Online banks, such as Discover, use the same security features online shopping sites use and offer almost all of the traditional banks' amenities, except face-to-face customer service. Online banking is becoming more popular daily because you can deposit checks, pay bills, and transfer money from your computer or mobile device.

Ways to protect your online banking information

Here are 10 ways to protect your personal and financial information when banking online. Most are easy to implement, providing a solid defense against hackers.

1. Password-protect all banking access

Make sure to password-protect any computer or device you use for online banking. This includes desktops, laptops, tablets, and mobile phones. If it contains access to or information about your bank, ensure it is locked when you are not using it.

2. Choose strong and unique passwords

The passwords you choose for your device and for online or app access to your bank accounts should be strong (a random mix of eight or more characters) and unique. Do not reuse the same password for multiple devices or accounts. Consider using a password manager that creates unique passwords for you and stores them so you don’t have to write everything down.

3. Enable two-factor authentication

If your bank or credit union offers multi-factor authentication, use it. Multi-factor, or two-factor, authentication requires the use of two pieces of information—such as a password plus a numerical code you obtain through text or email—when you log in.

4. Log out when you finish banking 

You wouldn’t deposit a check at a traditional bank and then stand around offering to withdraw money for anyone who wants it. That’s almost exactly what you are doing if you leave a device logged on to your bank account, especially if you have also failed to password-protect the device. Log out of your bank account when you finish. Every. Single. Time.

5. Avoid public Wi-Fi

It may be convenient to deposit a check or transfer money while having a latte at your favorite coffee shop, but it may not be secure. Hackers can “eavesdrop” from a nearby table. You may accidentally use a criminal hotspot and malware may find its way onto your device. If you have no choice but to use public wi-fi, make sure the site’s URL begins with “https,” a security feature, or consider setting up a virtual private network (VPN) through your mobile device or laptop.

6. Don’t use a shared computer

Worse than banking while logged on to public wi-fi is doing it on a shared computer, such as those found in a library or business center of a hotel. All of the above cautions apply, plus you may not have permission to set up a VPN. When it comes to online banking, only do so from a device that only you use.

7. Sign up for banking alerts

Online banking sites let you set up alerts when certain things occur such as a withdrawal or transfer above a certain amount, account balance, transactions, password changes, failed logins, and more. Alerts typically come in the form of an email or text message. If you receive an alert to an activity you did not authorize, contact your bank or credit union immediately while simultaneously changing your password.

8. Guard against phishing scams

Phishing is a scam that tries to trick you into revealing personal information, typically by using a text or email message that appears to come from your bank. Avoid clicking on email or text links unless you know the message came from your bank. Don’t guess. If you’re not sure, call the bank or go to the known website and logon to see if the message appears there. You can also hover over any links to see where the link would take you.

9. Choose trustworthy financial apps

If you use mobile apps for banking make sure they came from your bank or credit union. Only download them from trusted sites such as the bank’s website, the App Store or Google Play. Before downloading, check developer details and read reviews.

10. Report lost or stolen cards immediately

If your credit or debit card, or device, is lost or stolen, contact your bank or credit union immediately. The sooner you make contact, the sooner protection kicks in and your liability becomes zero.

Online banking: pros and cons

The table below lists some of the most important advantages and disadvantages of online banking. They can help you decide whether the benefits outweigh the risks.

Advantages of online banking

Online banking institutions have several advantages over traditional banks, many associated with lower operating costs and innovative technology.

Convenience

Online banks let you make deposits, transfer funds, view balances, and more without leaving your home. You can bank virtually anywhere you have cellular or internet service.

Flexibility

In today’s world, banker’s hours (9 a.m.  to 5 p.m.) don’t exist with online banking. That’s because your online bank is open 24 hours a day, seven days a week, 365 days a year. Some online banks even offer 24-hour customer service via live chat or phone.

Accuracy

Let’s face it, bank tellers and clerks are only human, and mistakes do happen. Online banking features computerized accounting and the ability to double-check every transaction, limiting the chance of errors.

Tools

Online banks live and profit through apps and feature-laden online programming. While it’s true that most traditional banks also have apps, online entities tend to be more innovative and ahead of the curve feature-wise. CIT bank, for example, even though it doesn’t offer paper checks, does offer eChecks or payments through the bank’s automated clearinghouse (ACH) network.

Higher interest rates

Thanks to lower operating costs, online banks typically offer higher interest rates on savings, CDs, and money market accounts. The best  high-yield savings accounts are typically offered by online banks.

Fewer fees

Lower operating costs also translate to fewer and lower fees for online banks. It’s common to see online banks with zero fees for most account types. It’s also typical for online banks to waive monthly service fees and, in many cases, overdraft fees.

Low minimums

Online banks seldom require a high initial deposit or high account minimum balance. Automation and computerization allow online entities to handle and process small-dollar accounts with little human interaction, making them as cost-effective as large accounts.

Risks of online banking

Fake banks

The number-one thing you should do when opening an online bank account is to ensure that the bank is legit. There’s no impressive brick building, smartly-dressed tellers, or free coffee in the lobby—just a website. The easiest way to do this is to look the bank up on the FDIC’s BankFind site to confirm that the bank is FDIC-insured.

Security 

Online banking presents several other security concerns, even when the bank is real. Phishing or gathering personal information by posing as your bank or credit union is a significant problem as are malware and viruses. Malware and viruses exploit software vulnerabilities and infect your computer. If your bank doesn’t use secure software, malware and viruses could corrupt your entire system. Your responsibility includes installing anti-virus and anti-phishing software.

Outages 

Digital banks are subject to outages and maintenance issues. Fortunately, these types of problems are not common. When you research an online bank, read reviews to see if outages are a problem. You can also use a site such as Downdetector.com which tells you when a website is down and also provides some historical information about issues with the site.

No face-to-face service

Another missing element of online banks is face-to-face customer service. Many offer phone-based customer service, online chat, even the use of social media to resolve problems. When selecting an online bank, make sure you are comfortable with its customer service offerings.

ATM fees

Online banks, by definition, do not have branches or ATMs. This means the bank has to either not offer ATM access or partner with a traditional bank or ATM provider. In some cases, the online bank (or ATM provider) charges a fee for using the ATM. In other cases, the online bank offers free access or reimbursement of fees paid to certain ATMs. Quontic Bank, for example, offers access to more than 90,000 fee-free ATM locations. Before using an ATM to access your online bank account, make sure it is fee-free.

Lack of full-service options

One positive aspect of most traditional banks is that of one-stop-shopping when it comes to financial services. This is not always true with online entities. For example, some online banks don’t offer paper checks or permit you to use checks produced by an outside vendor. If you want a bank that provides everything from basic banking to investing, mortgages, and credit cards, you may prefer a traditional bank.

Lack of cash deposits

Many online banks don’t accept cash deposits or have a complex process for doing so. Some require you to deposit cash in a traditional bank account and transfer it to your online account. Another option would be to purchase a money order with cash then deposit it through your online bank mobile app. Some online banks accept cash through deposit-accepting ATMs. 

One online bank that accepts ATM cash deposits is Axos. The bank also partners with the Green Dot network which accepts cash deposits at retail locations such as 7-Eleven, CVS, RiteAid, Dollar General, and Walmart. Green Dot retailers typically charge a fee of about $5.

TIME Stamp: With proper measures, online banks are secure

Most online banks are as secure as their traditional counterparts, some even more so. By taking the steps outlined above and researching your banking options with emphasis on the security features offered, you can rest assured that your digital bank will provide top-notch service and all the security you could ever hope for.

If you’re still not convinced, you always have the option of opening an account at a traditional bank that also has an online presence. One such entity is U.S. Bank with physical branches in 26 states. Another, Chase Bank, with branches in 48 states, is widely considered to be among the most secure banking institutions in the world.

Frequently asked questions (FAQ’s)

What is data security at banks?

The primary goal of data security in a bank is to protect customer personal information from unauthorized access. Measures used include:

• Multi-factor authentication.
• Encryption.
• Privacy policies and training.
• Fraud prevention monitoring.

Banks are required to report a data breach to regulators within 36 hours if that breach is likely to materially affect banking operations.

Which bank has the best reputation for secure online banking?

Chase bank is one of the most secure financial institutions around. The bank offers Zero Liability Protection, so if unauthorized transactions are made under your name, you won’t be held responsible. Chase also offers 24/7 fraud monitoring, as well as temporary suspension of your debit or credit card in the event that you lose it. Chase also offers next-day cash reimbursement.

What is an online bank?

An online bank is a financial institution that lets customers conduct various banking transactions online and has no brick-and-mortar branches customers can visit physically. Customers can check account balances, transfer funds, pay bills, and apply for loans or credit cards from virtually anywhere with an internet or cell connection. Online banks typically offer competitive interest rates and lower fees compared to traditional banks.