You may have heard the stories. Someone loses thousands of dollars by someone hacking their online bank account. So how safe is online banking? Since online banking debuted, banks have become more and more safety-conscious.
Millions of people do their banking online these days, from personal accounts to corporate banking. In fact, according to Forrester Research, by this year, 76 percent of U.S. households with Internet access will bank online. About 43% of people who use the Internet, some 63 million Americans, do some banking online, according to a 2006 survey by the Pew Internet & American Life Project. But how safe are your online banking transactions? After all, you have just disclosed personal information and your finances online to the bank of your choice. It is hard to estimate, but any online dealings are subject to hacking and identity theft. The best action is to be cautious.
Consumer Reports spokesperson Rachel Zuckerman recommends these precautions:
- Don’t use your mobile. "Consumer Reports advises against doing banking online with your cell or smart phone," says Zuckerman.
- First make sure the bank is legitimate and your deposits are federally insured, which will be noted on the bank's website. It should be insured by the FDIC, (Federal Deposit Insurance Corporation), which is an independent agency created by the U.S. Congress to maintain stability and public confidence in the nation's banks.
- When going to the bank’s site, make sure it is the real one. There are copycat websites that deliberately use a name or Web address similar to, but not the same as, that of a real financial institution.
- Check out the insurance policy for the bank. You might be able to find this information on the website. It may have links directly to the FDIC’s Web site to verify the FDIC insurance protection of the bank’s deposits. Not all banks operating on the Internet are insured by the FDIC. If your account has less than $250,000, you don’t need to worry about insurance. You are automatically covered. But if your accounts total $250,000 or more, you will need to find out the bank’s insurance limit.
- How is the bank protecting your information? Today, to protect users from hackers and viruses, many online banks use the direct-modem connection. These transactions are not actually transmitted over the Internet. However if you do make transactions that do take place over the Internet, make sure that the bank uses high-end encryption. Methods using 128-bit encryptions are the highest level of security allowed in the U.S.
- Change your login password often. Since its debut just a decade ago, online banking has become one of the fastest-growing Internet activities -- even more than make travel reservations online.