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Online banking: 10 tips for getting started

| Money Rates Columnist.
min read

The ability to conduct your banking activities online can be a major convenience. It is a hassle to have to visit your branch every time you need to transfer money, deposit a check or find your balance, but today nearly all bank transactions can be done through a secure online banking platform.

Making a successful entry into online banking requires knowing a few key things, but these 10 tips can help you smooth the process.

1. Ensure security

When you sign up for online banking, your bank will provide you with instructions on setting up a password, security questions and possibly a PIN, all of which are designed to help keep your banking data safe. Frequently, security problems arise not from the bank's server being hacked, but from users not adequately protecting their sensitive data.

To bank safely online, use firewalls, anti-virus software, strong passwords (containing both letters and numbers) and frequently clear your Internet browser history. When visiting your bank's website, always look for the digital certificate padlock in the bottom right-hand corner of your browser that helps verify that the website is legitimate. A little diligence can go a long way with online banking security.

2. Consider the features

If you are comparing bank accounts, it is important to find a bank that offers a full array of online features. Free checking, direct deposit, online bill payment and online statements are some of the basic requirements that every online banking customer should expect out of their bank.

While most banks offer some sort of online banking platform today, some are much easier to use than others. Even worse, some charge fees for what should be free online banking services. So don't get fooled by an imitator: Find a bank with a full complement of free online banking features.

3. Read the fine print carefully

Banks can make it a challenge to earn the best rate. Many of their best rate offers have qualifiers and requirements that are not clear from their promotional pages or ads. Make sure you fully understand the terms of any bank deal before opening a CD, checking, money market or savings account online. Often a small detail can turn a great deal into an average or worse offering.

4. Consider bill pay

If you want to save money, look into paying your bills online. Firstly, it is a great way to avoid being charged late fees. Secondly, it is also eco-friendly. Think of all the extra energy that is expended when you mail physical checks across the country, not to mention the extra paper generated.

Finally, paying bills online can help you maintain better control of your money. It is easier to maximize investment income and lower debt payments when you know exactly when your bills will be paid. If you've been considering the move to online bill pay, make the switch now. With today's technology, it's likely to be easier than you think.

5. Watch for fees

When interest rates are very low, bank fees can eat into and even destroy your income from interest on CDs, savings and money market accounts. Bank profits have slumped in the last couple of years, so can you take a wild guess an area where banks are looking to increase their revenue? That's right: fees.

While online banks often have a significantly better fee structure for consumers than traditional banks, you should still check all the fees that your bank plans to charge for activities. Make sure basic services such as viewing electronic statements, retrieving check copies and ATM withdrawals are all free.

6. Know your FDIC insurance limits

If you deposit funds at a bank in CDs, money market, savings or checking accounts, the FDIC insures your deposit up to $250,000. This means a husband and wife could hold $500,000 of insured money in a single bank. If they opened a deposit account for their two kids, the same family could have a million dollars at one bank and have it all be FDIC-insured.

FDIC-insured online banks are treated the same as brick-and-mortar banks when it comes to deposit insurance. The only tricky part is that many online banks have an online identity that is different from their official bank name listed on their FDIC charter. For instance, Redneck Bank is an online bank with a very humorous tongue-in-cheek website, but this is only their online identity. Depositors at Redneck Bank are actually depositing funds at the FDIC-insured bank Bank of the Wichitas.

The same principle applies with the online social savings site Smartypig.com. Depositors at Smartypig.com are actually insured at BBVA Compass Bank. If you open an account with an online bank, pay close attention to the exact bank that will be holding the deposits to ensure you do not exceed FDIC insurance limits. You can check the FDIC's website at FDIC.gov for more detailed information on FDIC insurance and the deposit coverage offered with online banks.

7. Watch for phishers

Have you ever received an email from a bank you don't have an account with? If so, you have probably received a phishing email. Unfortunately, countless people are fooled by these official-looking emails every year and give up their online account information to criminal enterprises.

Remember to never click on an embedded link in an email that you receive from a bank. It could be a cleverly disguised phishing operation that will take you to a fraudulent website that's designed to look like the real thing. Instead, take the extra few seconds to type in the bank's website URL or have the site bookmarked on your browser for quick access.

8. Look for perks

A potentially fun part of the online banking experience is searching for the best bank deals and rates. Sites such as MoneyRates.com make it easy to find banks offering great perks for opening a new bank account with them. You might find cash bonuses, free iPads, frequent flier miles, great merchandise, gift cards and more attached to the opening of certain accounts. Just check for the latest bank deals before you open a new account to see what kind of perks may be out there for you.

9. Consider more management tools

An important component of online banking is the ability to incorporate your banking data into personal financial management software or a financial management website. This allows you to easily see your household budget, investments and expenses without having to organize paper files and statements.

Online bank statements can be downloaded into most personal accounting software packages, as well as financial sites such as Mint.com that aggregate your financial data. If you want to organize your personal financial information, signing up for online banking is a great first step, but don't hesitate to go even further.

10. Go remote

The ability to deposit checks with your computer and a scanner is a feature that can be very useful to the self-employed and small businesses who process a large volume of checks. Banks will typically charge initial set-up fees and monthly fees, but reducing the number of trips you make to the bank and cutting down your check float can save you money in the long run. Check with your bank to see if they offer this online banking service, and then weigh whether the terms are worth it to your business.

Susan Machine 19 August 2011 at 4:32 am

I learned a lot from this post, great help for me, thank you!

Laura Sewing 14 August 2011 at 3:09 am

This post is very useful for me, much appreciated! :)