December 5, 2023

Is Online Banking Safe? 8 Ways to Protect Yourself

With online banking, you can access many financial services and transactions anytime, anywhere — which makes managing your money easier and more convenient than ever before.

Still, many people wonder: is online banking safe? Are online savings accounts safe?

Generally speaking, yes. But, online banking does invite different security risks than a traditional bank, and those risks are important to understand. Let’s dig into the issues, including how to secure your bank account from hackers.

Potential risks of online banking

There are several risk factors unique to online banking. Keep these in mind when you conduct digital financial transactions:

Sensitive data transmission

Online banks ask their clients to transmit sensitive financial information over the internet. Cybercriminals can exploit vulnerabilities in a bank’s security systems to gain unauthorized access to personal and financial data, like your credit or debit card information. Phishing attacks, malware, and data breaches pose risks to account holders, leading to problems like identity theft, fraud, and financial losses.

To combat these attacks, banks implement advanced security measures (more on those below). Still, you should follow cybersecurity best practices, like using strong passwords, avoiding public wifi for sensitive transactions, and regularly monitoring your accounts for suspicious activity.

Technical glitches

Online banking relies on digital technology, meaning glitches or system outages can disrupt those products and services. During these incidents, you might have trouble accessing your accounts, making transactions, or reaching customer support. It can be frustrating and inconvenient, especially at time-sensitive moments, like during after an overdraft.

Limited personal interaction

Online banks can’t provide the in-person touch that physical branches provide. Many online banks offer customer support through chat or phone, but some people prefer face-to-face interactions for sensitive topics or complicated issues. These meetings aren’t as readily available with digital banking.

Benefits of online banking

The features of online banking are vast, offering a wide range of benefits. Here are some reasons you might choose to start an account with an online bank:

Convenience

One of the biggest advantages of online banking is the convenience factor. You can access your account, make transactions, and manage your credit card all from the comfort of your home or on the go through mobile apps. This 24/7 accessibility eliminates the need to visit a physical branch during business hours.

Cost savings

Some online-only banks have lower operational costs compared to traditional brick-and-mortar banks. This lets them offer higher interest rates on savings accounts, lower fees, and reduced charges for certain services.

Helpful digital tools

Online banking platforms often come with handy tools you can use to manage your money. You can track spending, set budgeting goals, deposit checks, and receive alerts for account activity. These features give you more direct control over your finances and can help you make more informed decisions with your money.

Paperless transactions

Online banking eliminates the need for paper statements, checks, and physical documentation. For starters, this is more environmentally friendly, but going paperless has other benefits too. Electronic statements and digital paperwork are easily stored and retrieved, reducing clutter and the risk of losing essential documents.

Are online banks safe? How they protect your money

Safety and security should be top concerns for anyone considering online banking. Fortunately, online banks work hard to ensure customers' funds and sensitive information remain safe. Here's what they do to keep you and your funds secure:

1. Encryption

Online banks use advanced encryption technology to protect the data they send. Encryption scrambles your private information, making it virtually impossible to decipher until it reaches its destination.

2. Secure authentication

Online banks require multi-factor authentication (MFA) to access accounts and perform transactions. Common verification methods include passwords, security questions, authenticator apps, and biometric data.

3. Fraud monitoring

Online banks use advanced fraud detection systems to watch account activities for suspicious patterns and purchases. If they detect something fishy, the bank takes immediate action to prevent unauthorized access.

4. Regular auditing

Online banks undergo regular audits and security assessments by outside experts. These assessments make sure the bank's security measures are up-to-date and effective at protecting customer data.

5. Federal regulations

Online banks are subject to the same U.S. federal regulations and oversight as traditional banks, including the Gramm-Leach-Bliley Act, the Bank Secrecy Act, and the USA PATRIOT Act. These laws impose strict standards for data privacy and prevent money laundering.

6. FDIC insurance

Most reputable online banks are FDIC-insured up to $250,000 per depositor. This insurance protects customers' deposits in the event of a bank failure, all the more important for smaller banks.

7. Cybersecurity expertise

Online banks invest heavily in cybersecurity experts to stay ahead of emerging threats. They hire dedicated teams to monitor for vulnerabilities and address any security issues.

Risks exist in any digital environment, but the combination of technology, tactics, and federal regulations ensures online banking is a secure option for managing your money.

How to stay protected when online banking

Despite all the protections out there, it’s important to stay proactive to keep your online banking experience secure. Here are some smart ways to protect bank accounts.

1. Use strong passwords

Create unique and complex passwords for your online banking accounts. Use a mix of uppercase and lowercase letters, numbers, and special characters — and try not to repeat.

2. Enable two-factor authentication (2FA)

Whenever possible, enable 2FA for your online bank accounts. This adds an extra layer of security by requiring a second verification method, like a code sent to your phone.

3. Regularly update software

Keep your device's operating system, antivirus software, and applications up to date to protect against security vulnerabilities.

4. Beware of phishing

Don’t trust unsolicited emails, texts, or calls asking for sensitive information. Avoid clicking on links or providing personal details unless you're sure the sender is legit.

5. Use secure networks

Avoid using public wifi for online banking. Instead, use a secure and trusted network to prevent unauthorized access.

6. Monitor your account activity

Regularly review your account statements and transaction history for any activity you don’t recognize. Report anything suspicious to your bank immediately.

7. Secure your devices

Use strong PINs or passwords to lock your devices. If your phone or computer has biometric authentication (like a fingerprint or face recognition scanner), enable it.

8. Log out properly

Always log out of an online banking session when you're finished. Don’t use the "Remember me" feature on any shared or public computers.

Take charge of your pay online with EarnIn

Looking for other ways to make your financial journey safe and easy? What about an app that prepares you for unexpected expenses and emergencies without resorting to cash advances or credit cards?

The EarnIn app offers valuable tools to help you take control of your money. Like our Cash Out tool that lets you access your pay as you work — up to $100 a day and up to $750 every pay period — so you have what you need to keep moving forward, whatever life (or your banking apps) send your way.

Download the EarnIn app today and experience money at the speed of you.

Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.

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