Are Online Banks Safe?

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Last updated on August 26, 2022 Comments: 16

Online banking is a reality for everybody. Even traditional banks with branches offer account access online. But are online banks safe? Here are several tips to help keep your money secure online.

This article was first published several years ago. At that time, most individuals were still doing their banking transactions in person or over the phone. Today, online banking and online banks (those without physical branches) are ubiquitous.

It’s difficult to find a bank that doesn’t at least allow for online banking. Sure, maybe you don’t have to do all your transactions online. However, chances are that you can do at least some transactions in and online format–if not even through a mobile app.

And the benefits are big. In a low interest rate environment, online banks are able to offer higher interest rates for their customers. They don’t, after all, have a huge infrastructure of employees and brick-and-mortar buildings to maintain.

But with more and more news stories of major hacks and breaches of online information, the question still remains: is online banking safe?

Let’s explore this question here.

Is It Safe to Move Money Online?

We’ll explore the question of actual online banks second. For now, let’s look at this separate question. Is it safe to do financial transactions of any sort online?

The answer to this question is generally, yes. Banks have the highest levels of security online, since they’re an obvious target for hacking. In short, it’s as safe to bank online, generally, as it is to do anything else.

But that doesn’t mean you should be silly about how you choose to conduct online business with a bank. Take these steps to keep yourself safe when banking online:

  • Choose a good password. Ideally, this is a password that includes letters, numbers, and special characters. And it should be long enough that it’s difficult to guess.
  • Don’t use a public computer or public wi-fi. You might be tempted to head to your local coffee shop to balance your budget. But that’s not a great idea. Accessing your banking information from a public computer or wi-fi connection gives hackers potentially easier access to your information.
  • Be smart about emails. If you get an unsolicited email or text from your bank that says your account has been locked or you need to log into the site, ignore it. It’s most likely a phishing attempt to get your password information. You should only receive emails like this if you are the one asking to reset your password. If your concerned, contact your bank directly. Do not click any links in the email.
  • Stay on top of your accounts. You may not balance your checkbook with a physical register any more. But log in frequently to check past transactions and ensure you know where your money is going.
  • Keep your computer up-to-date. Take the time to run anti-virus scans on your computer, and update these scanners when prompted. Many of the updates pushed out to your computer are to fight against hackers and keep your system secure. So accept these updates to ensure you stay secure.

If you take these steps, your money is safe online, and you can conduct banking transactions online.

What About Online-Only Banks?

So what about banks that are exclusively online? You may still feel uncomfortable banking when you don’t have a brick-and-mortar place to visit.

I understand this feeling. There’s something comforting about walking into a physical bank branch. Perhaps it’s seeing the large, steel vault, a security guard, and employees that makes us feel safe.

The reality, however, is that online banks are just as secure as those banks with branches. In fact, many online banks are now household names. You’ve probably heard of Ally Bank, American Express Bank, Discover Bank, and Capital One 360.

Furthermore, online banks are FDIC-insured just like traditional banks. Of course, you should make sure your online bank is FDIC-insured. This insures your money up to $250,000 if the bank goes out of business. You should, in fact, make sure that any bank, not just the online-only kind, is FDIC-insured before you decide to deposit there.

The bottom line here is the online-only banks are just as safe in cyberspace as brick-and-mortar banks with online account management tools. You’d be hard-pressed these days to find a bank that doesn’t allow for at least some account management and access online.

Just be smart about your personal practices with online banking and choose an FDIC-insured bank with good encryption. Then, you can take advantage of online-only banks’ often superior interest rates and account offerings.

Getting Help From an Online Bank

Most if not all online only banks have live customer service representatives, so you can still talk with a real person about your banking needs. Check out bank reviews before choosing a bank to ensure that this is the case with your online bank.

In this digital age, I tend to communicate with my online banks for email. I find it more convenient than a phone call. But there are representatives to talk with if need be. Ironically, I rarely go into the banks I use that do have branches. I speak with them via phone or email as well.

My Experience with Online Banks

I’ve banked with several online banks. Currently, we use CIT Bank, Ally, and Capital One 360. We turned to online banks for their higher savings account and CD rates and low fees.

Over time, we’ve transferred hundreds of thousands of dollars online. These transfers are typically between our brick-and-mortar bank and the online bank. It’s extremely easy to do and we’ve never had an issue.

Article comments

Anonymous says:

i have had ING since 2004 and have had zero issues. in fact, i have had more account issues with my brick and mortar, albeit it was only one issue. this is similar to the shopping online/buying in store debate that still goes on for some reason.

Anonymous says:

I recently switched to online banking for my finances and I am very happy with the move. I am banking with FlagstarDirect. They just added a new feature to their online banking which is designed by quicken. It is pretty much having Mint tracking software in your bank account and allows you to track your spending not only from your account from Flagstar but any other financial account.

Anonymous says:

I have a small saving account online but a regular bank. I have been thinking about changing to mostly online only. I never pull out more than $100.00 a week from the ATM and usually not that much. Our company will separate ou checks into separate accounts so maybe I will send the majority to an online account and a little to my credit union.

Donna Freedman says:

I use a brick-and-mortar bank, too — keep a certain amount of liquid cash and a checking account. But I’ve been using online banking for the majority of my savings for several years now. Wish the interest rate were what it was when I started, though.

Anonymous says:

Have used ING for years….no problems. I am also thinking of opening an account with Ally, and I wouldn’t hesitate. The brick and mortar banks use computers too. As to the comment by nimrodel about access, most online accounts are also accessible by telephone.

Anonymous says:

I love using online banks. My mom, however, would probably never use them. I’ve mentioned them, and she’s worried if her computer ever broke down, she’d be stuck without access to her money.

Anonymous says:

My Pc Went Out It Was 10 Years Old Went Out And Got A New HP Laptop Need It For Banking Get On Line Banks Phone Numbers Good Luck

Anonymous says:

I still like doing business with a brick and morter bank! It supposedly helps to get to know your banker in person when you go in for a loan…not sure that is really true, but it might help – all other things being equal.

Donna Freedman says:

A relative of mine was saying she wished she could get a better interest rate than the 0.25% she’s getting on savings. I suggested an online bank. She won’t even consider it because she doesn’t trust the notion of money being sent around online. I told her that even regular banking is pretty virtual these days.
Then again, she doesn’t have a computer and doesn’t want one. She and her spouse seem proud, somehow, that they don’t use the Internet.
Unless, of course, they want to order a CD from some obscure musical group, or buy an airline ticket. Then they get me to do it for them.

Anonymous says:

I love the caveat at the end. Its become much more burdensome to not use the Internet for many things. I guess as long as they don’t feel its an issue to get you to do those things for them. Money and savings are a different breed though because I can certainly imagine relatives who would rather not have members of the family know their account balances.

Anonymous says:

this just makes me shake my head. i understand there is a generational issue here, but still, it almost bothers me. more so that they ask for your help when it benefits them. i do not pretend to know what the future will hold, but it will be interesting when this “old guard” is gone and the youngest generation is in “power.”

one of the most irritating issues for me right now is the whole freedom of the internet issue. there are members of congress who have never even used a computer writing and trying to pass laws that will determine the future of the internet. how can this be? sigh.

Anonymous says:

I stay out of banks as much as possible, and have instructed my own kids to do the same. And as Geoff commented, any account at a bank that’s connected to the internet is at risk of hackers. At least if you bank online, your physical well-being isn’t in jeopardy.

Anonymous says:

I can see the proable end of the road with this online concept. The picture isn’t too pretyy.

Luke Landes says:

What do you mean? Online banking is the way forward.

Anonymous says:

Many things appear to be the way forward. In my opinion the way forward gives others easier access to my resources. I am not so quick to give others control over what we worked hard for. Our vehicles were (I’m retired) always conservative. Because of this attitude, when I retired, just when everything began to decline, I didn’t loose anything. I am a risk adverse personality.

Anonymous says:

Some people also seem to think that not accessing your accounts online is safer because they’re totally safe from hackers. But if you are using any major bank or a bank that’s connected to the internet, then your account information is already there on their network. Not accessing it online doesn’t keep it outside of their networked system.