What Online Banking Can’t Do For You

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Online banking really is awesome. Anyone who manages an online account knows the great joy in 24/7 access, online bill-pay and automated banking services. There’s a lot online banking can do for you, but what’s less promoted is what it can’t.

The online banking experience is only as great as the account holder makes it. If you don’t take the proper steps to maximize your account and protect what’s in it, you really aren’t benefiting from online banking at all.  So if you’re ready to make the most of your online account, review what you can’t expect online banking to do for you and be sure you’re doing it yourself:

Manage Your Money

When you have an automatic bill payment for $100 scheduled, but your balance is only $95, your account isn’t going to tell you, Hey, this payment should be canceled or you’re going to overdraw. Fund the payment from another source or give me some more money. No, that payment will go through unless you are keeping close attention to what’s going on in your account and recognize the balance is getting too low. Automated services are great and can make things like managing bills much simpler, but that doesn’t mean you can ignore your account completely. You are fully responsible for keeping track of transactions and maintaining a positive balance.

If you’re truly averse to actively monitoring your own accounts, you can at least set up alerts that will notify you when your balance has fallen below a certain point or an especially large transaction has occurred.

Protect Your Identity

You wouldn’t leave your bank statements lying around in public or share your pin number with strangers, would you? Of course not. It seems obvious when it comes to sensitive financial information, yet you have to maintain that same level of precaution, if not more, when you bank online.  Conducting your banking over the internet offers up your sensitive info to a host of potential threats. The FTC estimates as many as 9 million Americans have their identities stolen each year. That doesn’t mean you have to be a victim, too. It’s up to you to ensure you’re sending information over a secure connection, protecting your computer with anti-virus software and being very cautious about who you provide account information.  If you need help, consider signing up for an identity theft protection service.

Choose the Best Investment Option

Generally, online accounts offer much higher interest rates than their brick and mortar counterparts. Still, not all accounts are created equal. Just because the interest rate is higher than average does not mean the actual account is a sound investment choice.

There’s a lot to consider when opening any account beyond what you could earn:

  • Fees: Banks love to charge fees and will find all sorts of reasons to do so. Find out what kind of fees are associated with your account, like a monthly service charge.
  • Restrictions: Certain types of accounts, like savings or money market accounts, allow a specific number of transactions per month or limit check writing. You should know ahead of time if these restrictions are going to conflict with your investment plans.
  • Minimum Balance: The minimum balance can be tricky. Sure your account is totally free, as long as you keep $5,000 in it. If not? Fee!

Online banking is only beneficial when you understand its advantages and limitations. There is no substitute for taking an educated and proactive approach to your banking.

This guest post was written by Go Banking Rates, bringing you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide. Follow them on Twitter at @gobankingrates.

Published or Updated: September 19, 2010

Comments

  1. Briana @ GBR says:

    With some online banking, they have options where you can categorize your spending and set budgets on it, so that’s helpful. But I agree; it can’t actually manage it for you. It can help though

  2. Mr. GoTo says:

    In my opinion, online banking – even if you use a brick and mortar bank as I do – is far more secure than paper banking. I access my account information by a fully encrypted, secure connection, with a 13 character password that is stored in one location – my head. There is no paper with account info and other identifying information to lose, have intercepted in your mailbox, found in your trash, or stolen from your house. So “identity theft” is a non-issue and actually favors online banking.

    BTW – I earn 3.3% on my balances using an online account at a community bank. Best of both worlds.

  3. Great points in this article! In any banking scenario, it’s dangerous to have a “set it and forget it” mentality with your money. Find a bank with 24/7 support (online or phone), clearly explained terms and conditions, and a robust FAQ section with easy to understand answers. That way if you are unsure of something you can always ask.

  4. Cheryl @ Swap Savers says:

    Great article. One option that is good about on-line bill pay is that Citizens Bank pays you 10 cents per on-line bill paid and for every debit purchase made.

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