Benefits Of Banking Online

GENERIC Online internet banking
CBS/AP
Banks have been offering customers the ability to bank online for over six years. Although the industry saw a slight upsurge after the fall's anthrax attacks, less than a quarter of Americans are logging into their bank accounts.

Financial advisor Ray Martin believes people who are yet to bank online are missing a great opportunity. He visits The Saturday Early Show to explain.

A matter of convenience
The elderly man who visits his neighborhood bank teller may see no reason to bother with the Internet. But when he breaks his hip or becomes ill, who will do his banking? What about the mom with three young kids? Wouldn't it be easier for her to jump online in the kitchen to bank instead of packing the kiddies into the car? Or, how about the young employee who simply can't find the time to go to a branch when it's open?

Martin encourages people to get started now, before they run into a situation that makes them think, "Gosh, I wish I could do this at home."

A great thing about online banking is that you can access information that's not easily available at your branch. Check, view and print account activity for any date range you specify - no more waiting around for a monthly statement. Online banking also allows you to transfer funds, re-order checks and pay bills - whenever you want.

A way to save money
Choosing to pay bills online can save the average consumer about $6 a month in stamps according to an e-commerce research firm and about four hours of time.

Despite all of these bonuses, less than 25 percent of Americans are banking online. Some banks say they saw a rise in online customers after the fall's anthrax scare. Martin predicts that more and more people will move online. In his Marketwatch column he writes:

"But at some point, banking online will be unavoidable for all of us as banks continue to squeeze administrative costs by coaxing their customers to the net with their electronic offerings ... My sense is that at some point, their persuasion will turn into pushing ... their strategy is to move existing customers to the Web and then share the household information with affiliated companies that cross-sell additional products to these customers."

Addressing security issues
Security of personal information may be keeping many consumers off-line. According to a Consumer Reports article on the subject, breeches of security have been rare. And, if a cyber crook steals your money, the bank is obligated to replace the cash just as it would if an armed robber stole the money.

All of the banks Consumer Reports investigated used a special encryption, which scrambles data in transit between Web browser and the bank's Web server. The banks also had firewalls and virus-detection programs.

"If you think banking online is still too risky, ask yourself this," Martin says. "Is sending all your checks and account information through the mail, which includes your address, phone number, signature and checking account number MORE secure?"

The negatives
Of course, online banking does have some negatives. Trying to open a brand new account online can be tedious. Sometimes the process still includes paper forms and, customers complain that bank Web sites often "time out" which kicks them off and forces them to start over. This is why it's best to bank online with the bank at which you're already a customer.

Getting started
Getting started is easy. Log onto your bank's Web site and go from there. Signing up usually involves providing basic info like your address and bank account number, signing a privacy agreement and agreeing to pay any fees associated with the account. Typically, if you have enough money in your account, there are no fees. Otherwise, you may have to pay a monthly fee for the banks' online bill-paying service. This varies from bank to bank.

There are a couple of other things that are important to know about paying bills online. When you write a check and drop it in a mailbox, you know that you have at least two or three days before the check is processed. When you pay a bill online, the money is taken out of your account immediately. But, this does NOT mean the utility company or credit card company receives the money immediately. In most cases it takes three to five days for the money to reach the company although it can take up to ten days.

"This requires good cash management and paying bills a little early to avoid late charges and fees," Martin says. "Also, a payment authorized online cannot be stopped the way a "stop payment" can be issued on a personal check. For this reason it is advised to limit the use of online bill pay for routine household bills and not use for large purchases or merchandise."

For monthly, fixed expenses you can set up your account to automatically pay the bill and deduct the money from your account. This will continue every month until you instruct otherwise. Or, you can go to your online account each month and pay your bills. Of course, you can do a combination of these.

What to look for:
If you do decide to begin banking online, Martin suggests looking for four things:

  • LOW FEES: All banks allow you to check your account activity online for free. As mentioned earlier, there may be a fee for bill-paying services. You shouldn't have to pay more than $7 a month - and you should be able to pay closer to $5.
  • CUSTOMER SERVICE: In case you do run into trouble, make sure it's easy to reach a real person at the bank or the bank's help center. Some banks have 24/7 customer service reps on call, others promise to respond to e-mails within 24 hours.
  • PRIVACY POLICY: The key to knowing how your bank will use your personal information is to read their Privacy Policy. Most state that they won't sell your info to third parties but they will pass it along to their "affiliated companies" - usually sellers of insurance and investments. Ideally, you want a policy that allows you to veto passing along your info to any company, affiliated or not.
  • ADVANCED FEATURES: Not all banks offer these extras but they are definite bonuses.
    Cancelled Check Images: This allows you to call up miniature electronic pictures of your cancelled checks and even print them.
    Electronic Bills: This allows companies (phone, utility, credit card) to send a bill directly to your account instead of a paper bill. Pay, file and print the bill, all online.
    E-mail Alerts: The bank will alert you via e-mail if your bank account reaches or falls below a level you specify. Wouldn't it be nice to know you are low on cash before bouncing a payment?

Even total converts to on-line banking make the occasional trip to the teller or write spur-of-the-moment checks. Martin recommends doing your online banking with a bank that also has a neighborhood branch. Some banks are only on-line - they have no brick and mortar branches. Martin says there's no reason to be scared away from these banks; however, very few people use them. If you're interested, make sure you find out first how to make deposits, get a certified check and other services you would typically need to visit a teller or ATM to accomplish. Check on ATM fees and procedures.