Person using online banks safe

Are Online Banks Safe?

Everything is going digital these days, including your banking. It’s definitely handy to have access to your finances on your phone, but it leaves a lot of people wondering whether online banks are safe and about the protections in place to keep your data — and hard-earned money — secure. 

Online banking first became available in the mid-1990s and has only grown in popularity as people increasingly prefer its speed and simplicity. If you use online banking, you should check to make sure your institution is working hard to protect your money and your personal information. If it’s not, you may need to consider a new online bank.

This guide will walk you through everything you need to know to determine if the financial institution you’re using is doing everything it can to keep your data safe.

Understanding Digital and Online Banking

Nearly every financial institution offers a digital component these days to keep banking convenient for customers, but that can make it difficult to know which is the right one for your funds. First, it’s helpful to note there are two types of banks offering online banking:

  • Traditional brick-and-mortar institutions with online banking options
  • Digital banks that only operate online

Both hold your money for you, allow you to make banking transactions, and give you digital access to your checking and savings accounts. However, digital banks don’t have any physical locations. These online-only entities save a lot of money because they don’t have brick-and-mortar buildings to maintain, which enables them to offer more competitive interest rates and lower fees.

Competitive rates does not necessarily mean more secure operations, however. That makes understanding what goes into digital security even more important.

4 Ways to Know Your Online Bank is Safe

Many traditional banks and credit unions have been around so long their names have become highly recognizable and trusted. Sometimes it’s hard to compare that reputation to an internet bank you’ve never heard of, but there are several basic safety features you should look for when choosing any bank — with or without name recognition.

If your online bank makes it a priority to protect your Social Security number, account numbers, and other information, it will have these protocols and precautions in place:

1. It’s insured by the Federal Deposit Insurance Corp (FDIC).

Traditional banks are insured by the FDIC, and reputable online banks are, too. If you’re not sure, use the FDIC’s BankFind Suite to double check. The FDIC insures up to $250,000, but you should keep in mind that sometimes banks share insurance. If you have money in two related banks, you might only have protection of up to $250,000 in total—not in each. Talk to a customer service agent at your bank to see if that’s a consideration for you.

2. It uses a secure website.

Your bank’s website should start with https, not http. Furthermore, the site should use at least 128-bit encryption, the industry standard.

3. It requires strong passwords and two-step verification.

When you create your online bank account, the bank should have a list of requirements for the password you create. That might mean having at least one capital letter, one number, and one special symbol, for example.

Two-step verification essentially means you have to pass two tests to get access to your bank accounts. Your username and password is the first test. The second step may require you to enter a code that is texted to your cell phone, or you may have to answer a security question like, “What was your first pet’s name?” This makes it harder for someone to gain unauthorized access to your accounts.

4. It uses some form of identity theft monitoring.

This may be as simple as sending you an alert after a large purchase or an unusual spending spree to ask for clarification that you did, indeed, spend that money. You might also get an alert after logging on to your account from a new device or location, or after changing your password. Sometimes this service is offered for free, while other internet banks charge a small monthly fee.

If you’re not sure which of the above your institutions uses — if any — ask! Banks want to be your financial partner for years to come, and reputable ones will want to talk to you about the steps they’re taking to keep your accounts and personal information secure.

A computer mouse plugged into piggy bank

How to Prioritize Your Security While Banking Online

In addition to the steps the bank should be taking to protect you and your data, there are also a few things you can do to protect yourself when you bank online. Keeping the following steps in mind as you access your financial accounts will go a long way toward keeping hackers at bay:

Don’t use public Wi-Fi to log on to your account.

Hackers could be logging your keystrokes, recording your activity, and more. It’s not worth the risk. If you simply have to access your accounts outside the safety of your home network, use your phone’s data plan instead of logging on to the Wi-Fi in the coffee shop.

Change your password frequently.

Protect your accounts by regularly changing your password. Always create complex passwords that can’t be guessed and would take a long time to hack.

Update security and anti-virus software.

Make sure your devices feature the most up-to-date security software available to protect against the latest threats. This should be part of your regular maintenance routine, like removing old data from a hard drive or deleting any old files that may serve as a treasure chest for thieves.

Protect your debit card.

Never write your PIN or account number anywhere, and avoid saying it aloud. When you enter it, cover the keypad as best you can.

Watch for scams.

Thieves send texts and emails that may be designed to look like they came from your bank. Keep in mind that your bank or credit union won’t ask you to confirm any personal information via email. Look closely at the sender’s email address or double check the phone number. If in doubt, call the bank’s customer service phone number directly and ask them if they send the message in question.

The bank’s safety measures combined with having your own precautions in place means your online banking experience will likely be a positive one. Such safeguards also means the convenience and other benefits of online banking will outweigh the minimal risks associated with accessing your accounts on a mobile device.

Common Questions and Concerns for Online Banks

If you’re considering opening an account with an online bank instead of or in addition to a traditional bank, there are a few questions you may want to ask:

How do you protect my funds? 

Look for them to give the answers listed above.

Are there any service fees? 

Many online banks offer lower fees than a brick-and-mortar bank, and often no fees at all.

Who can I call if I have money questions? 

You won’t be able to sit face-to-face with a teller or banker, but there should be a dedicated customer service line you can call to get help when needed.

What are my ATM options? 

Since online banks don’t have physical locations, these banks often don’t have ATMs, either. Instead, they may have a partnership with an ATM network you can use, or they might reimburse any ATM fees you accrue.

While it’s important to weigh the pros and cons of online banks, you may find that the convenience of banking on-the-go is worth the small security risk —particularly if you work with a reputable, federally insured online bank and take control of what you can to reduce that risk. 

Bonus Security Tip: Permanently Delete Your Sensitive Files

Hacking an unsecured online banking site or digital bank is not the only way cybercriminals can make off with your data, however. Here’s what you need to know:

  • Your personal computer and other digital devices contain treasure troves of information that could lead to an attack.
  • The bad news is that simply deleting these files doesn’t mean they’re gone for good.
  • Deleted files still exist on your hard drive, which means skilled hackers can recover them and use them to perpetrate their schemes.

Concerned about how best to keep your data safe? It may be time to purchase a digital file shredder that can ensure your old downloaded banking documents, financial statements, and more are permanently removed from your hard drive — and thus unable to be recovered by bad actors should a breach occur. Contact Shred Cube today to speak with an expert about any questions you might have about your digital file shredding needs.