Online banking: How it works and safety tips

Quick insights

• Online banking can be a useful tool in an age when smartphones and other internet-ready devices are evermore popular.
• Protecting your account when you bank online is a partnership with your bank and requires steps on your side to further enhance security.
• Although risks remain, they can be lessened with strong passwords, multi-factor authentication and vigilance against scams.

Online banking provides a service you can use on different devices as long as you have an internet connection. Most transactions you’d complete at a branch can be done from your couch. You can’t withdraw cash, for example, but there’s plenty of money management tasks you can accomplish.

How online banking works

In many ways, online banking has revolutionized how we manage finances. Although there are risks when doing things online, you can take various security measures to help reduce them. To enjoy the benefits of online banking, it’s important to understand how it works and how you can help keep your information protected.

Primary functions of online banking

The things you can do with online banking include:

• Checking account balances
• Viewing transaction history
• Downloading account statements
• Transferring money between accounts
• Paying bills electronically

Additional features have also become commonplace. Through most online banking portals, you can complete mobile check deposits, set up account alerts and message with customer service in real-time.

Types of bank accounts that use online banking

Almost all types of bank accounts are now accessible through online banking. This includes checking accounts, savings accounts, money market accounts and more. Financial institutions that offer investment accounts and credit cards also allow you to manage them electronically.

For example, if you have a high-yield savings account, online banking may break down your interest earnings and allow you to set up automatic transfers. With a checking account, you could view yesterday’s transactions or write an eCheck (electronic check) to pay a bill.

Online banking security tips

Here are some tips you could follow to reduce your risk of exposure to online banking fraud and scams.

Use strong, unique passwords

Use a unique passphrase comprised of multiple words. Avoid using information that could be guessed easily, such as birthday or relative’s name. In addition, as tough as it might sound, don’t reuse passwords across different websites.

Keep software updated

Regular updates to your computer and mobile device software often have new security measures that protect against threats. Other programs that should be updated regularly include your web browser and banking app.

Beware of phishing and other scams

Phishing can happen by email, text or phone calls. Be skeptical when someone you don’t know asks for personal information, particularly for your bank account. Verify the person’s identity before clicking links or sharing data. Some companies will never ask for sensitive information over certain channels.

Avoid banking over public Wi-Fi

Use a secure, private internet connection when accessing your bank account. When you’re away from home, this might limit where you can log in. However, following this tip is generally better than banking over public Wi-Fi, which may be unsecure.

Monitor your accounts regularly

Check settings, devices, transaction activity and account statements often so that you can detect and report unauthorized activity as early as possible. You might be able to set up alerts for all your transactions, as well, which helps you know every time money in your accounts is deposited, spent, withdrawn or transferred.

Sign out when you’re done

It might be easy to get distracted or intentionally time-out during an online banking session. However, always log out manually when you’re done, especially on shared and public devices. This simple step can prevent unauthorized access to your account.

Online banking risks

Although online banking can be a safe way to manage your accounts, it’s not completely risk-free. Here are some common threats:

• Scams: Scams, like phishing, can trick or pressure people into providing sensitive information like passwords and account numbers. They might pretend to be a trusted entity, such as your bank, and give you instructions that put your accounts at risk. If you are unsure, pause and talk to someone you trust.
• Malware: Malware, or malicious software, is software that can be remotely installed on an electronic device. Malware might capture keystrokes or mine sensitive login information from apps and websites you use most often.
• Public Wi-Fi: These may be unsecured networks, which makes them more vulnerable to hacking. Information transmitted over an unsecure network can be more easily intercepted than it can on secured networks. 

To help reduce your exposure to these risks, it’s important protect yourself when banking online.

In summary

Most financial institutions offer online banking that you can use to manage your accounts and money. It’s a convenient tool that typically requires a mobile device or computer. However, you can use it to manage day-to-day spending, long-term savings and more. You can take several steps to help keep your information safe when banking online, such as using secure Wi-Fi, strong passwords and staying vigilant in spotting scams.