How to Keep Your Money Safe When Online Banking
How to Keep Your Money Safe When Online Banking
Ashley Kilroy Wed, January 31, 2024
Bank failures and economic turbulence have made bank depositors nervous – but what about banks where you can’t visit a branch or speak to a teller? Can you withdraw your money when needed and protect yourself from risks? While the rise of online banks has given customers increased savings and a higher APY, it also raises questions about accessibility and safety. However, online banks are safe as long as they are insured by the FDIC. Because online banks can get the same coverage as brick-and-mortar banks, their customers aren’t at risk of losing their deposits.
What Are Online Banks?
Online banks are banks without physical locations. Instead, they run their financial services solely on the Internet. Therefore, they have fewer overhead costs and offer customers lower fees and better interest rates.
Because online banks don’t have branches, you can access your bank account through your mobile phone app or the bank’s website on a computer. In addition, most online banks offer free ATM usage at thousands of machines across the country.
How Online Banks Protect Your Money
Physical and online banks alike face the challenge of securing their customers’ deposits. Online banks have a unique situation because of their digital business model. Fortunately, they protect your money in multiple ways.
Encryption and Two-Factor Login Authentication
You’ve probably heard about different companies being hacked for their data. Online banks have learned from data breaches in the last two decades and implemented the industry-standard 256-bit advanced encryption standard (AES) common to banks of all types. The U.S. military encrypts data similarly, meaning your banking information is well-secured.
Because encryption locks away data, hackers sometimes try to log directly into customers’ accounts by guessing passwords. As a result, online banks and many other companies have two-factor authentication. As the name implies, you need two login credentials to access your account.
For example, you’ll enter your username and password. Then, the bank sends a one-time login key to your phone or email address. You can only log in when you enter the key and you must complete this extra step each time you access your account. This way, hackers can’t get into your account if they happen to crack your password.
FDIC Insurance
In addition, online banks have Federal Deposit Insurance Corporation (FDIC) insurance. Traditional banks have identical coverage. This protection means the government will reimburse customers for deposits up to $250,000 if their bank goes out of business. Married couples with joint accounts receive $500,000 protection. As a result, you can bank without fear of losing your money if your bank goes belly-up.
Remember, traditional and online credit unions don’t receive FDIC coverage. Instead, they receive similar insurance from the National Credit Union Association (NCUA). This way, both bank and credit union customers have deposit insurance whether they bank in person or online.
How to Determine If an Online Bank Is Safe?
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https://www.yahoo.com/finance/news/online-bank-now-keep-money-130020645.html