Online banking has become very popular over the year and it is an ideal way to take control of your finances as well as an easy way to ensure that you are keeping up to date with payments.
With online banking, you can keep track of your balance and make payments via your smartphone, tablet, or computer without even going to a bank’s branch. But how does online banking work?
What is Online Banking?
Online banking simply means you can access your bank account and carry out financial transactions via the internet on either your mobile device, tablet, or computer. It is often referred to as internet banking or web banking.
Online banking is quick, usually free, and lets you carry out different tasks like paying bills and transferring money without even paying a visit to your bank.
Most banks also have apps that allow you to use these services from your mobile phone or tablet. With your online account you can:
- Check your account balance any time, any day
- Check your bank statements
- Pay bills and send money to other accounts
- And many more
How does Online Banking work?
Internet banking is designed to be convenient, saving you time and allowing you to do banking on your own schedule rather than only during the open hours of your local bank branch.
Almost all the things you can do at a traditional bank, you can also accomplish them online. You necessarily don’t need to visit a bank branch to complete these basic banking transactions you can do it all at your own convenience either at home, at work, or on the go.
If you are a customer of a bank that offers online banking, you can register for online access via that bank’s website. You’ll need the following items to get started online:
- An active internet connection
- A smartphone, tablet, or computer
- Your bank account number
- A debit card
- Personal info to verify your identity
In order to access the online banking service, you need to register for your bank’s online banking service by providing your email address and setting up a password. And once that’s done, you can use the service to do all your banking.
Banking transactions offered online vary by the financial institution. Most financial institutions generally offer basic services like transfers and bills payment. Some let customers open up new accounts and apply for credit cards via online banking portals. While others let customers order checks, put stop payments on checks, or report a change of address.
Some banks allow customers to deposit checks online through a mobile app. The customer just needs to enter the amount, then take a photo of the front and back of the check to complete the deposit.
Internet banking doesn’t permit the purchase of traveler’s checks, bank drafts, certain wire transfers, or the completion of certain credit applications like mortgaged. Transactions like these still need to take place face-to-face with a bank representative.
Pros and Cons of Online Banking
1. Convenience – Online banking is designed to be convenient i.e. banking transactions such as transferring of funds and paying bills can easily be done 24/7 whenever and however you want.
2. It is fast and efficient – You can quickly transfer money to another account in minutes. You can also open and close several accounts online from fixed deposits to recurring deposit accounts that usually offer higher rates of interest.
3. Keep track of your spending – You can monitor your account regularly this way you know your account is safe.
1. Increased risk of fraud – Even though online banking security is continually improving, some accounts are still vulnerable when it comes to hacking. In order to prevent unauthorized access, it is advisable for customers to use their own data plans rather than public Wi-Fi networks when using online banking.
2. Some banks offer less features – In some banks, you can’t access large amounts of cash via online banking and still have to visit a branch to get the rest of the money.
3. Connectivity issues – Online banking solely depends on a reliable internet connection and at times connectivity issues from time to time may make it difficult to know if the banking transactions have been successfully processed.
Is Online Banking Safe?
Accessing your bank account online is totally safe as long as you ensure you enter in all the right details when making a transaction and follow some rules like:
- Checking your statement regularly and reporting any strange activity to your bank.
- Do not reply to emails claiming to be from your bank that asks for personal details or passwords
- Only makes use of secure Wi-Fi connections to access your online bank account.
- Always log out of your online banking session
- Keep your Operating System and anti-virus software up-to-date
- Create a strong password by combining three random words and do not re-use the same password for different accounts.
Financial institutions take a lot of precautions such as encrypted websites, timed log-outs, and lots of authentication processes to make sure your online account is safe. So there’s no need to worry, however, in order to be safe, follow the rules and don’t reply to emails or messages from people claiming to be from your bank.
Aside from traditional banks offering online banking services, there are some banks that operate exclusively online with no physical branch.
These online banks handle customer service by email, phone, or online chat and their online banking service is frequently performed on mobile devices or computers.
Online banks may not provide direct ATM access but will make provisions for customers to use ATMs at other banks and retail stores. These banks may reimburse consumers for some of the ATM fees charged by other banks.
Reduced overhead costs associated with not having physical branches usually let online banks offer customers significant savings on banking fees. Online banks also offer higher interest rates on accounts.
Online banking allows you to manage your bank account using a smartphone, tablet, or computer. Through online banking, your visit to a bank branch will be limited and you may only visit a bank when sending large sums.
You can choose to bank online with a traditional bank, credit union you have an existing relationship with, or open an online account with an online bank.
Online banks typically pay higher interest rates on deposits and charge lower interest rates on loans but may not offer the variety of services a traditional financial institution does.