Updated on 02.23.12

Learn How to Use Online Banking (54/365)

Trent Hamm

When I wrote 365 Ways to Live Cheap in 2007, online banking was a feature that was far from standard, yet well on its way to becoming a standard. I often recommended to people that they seek out banks with online banking because it was a useful and valuable feature to have.

As I write this in 2012, if your bank doesn’t have at least some level of online banking, it’s definitely an outcast.

Learn How to Use Online Banking (54/365)

Still, I have many readers who do not use online banking as part of their normal money management routine.

The biggest hurdle for many is technophobia. They hear of internet scams and it convinces them not to use the service. Others simply aren’t all that adept at computers for various reasons.

Another hurdle is lack of convenient internet access. They don’t have internet access at home, so they don’t use many of the incredibly valuable online tools that can really save them money.

Falling into either group, unfortunately, means that you’re simply leaving money on the table. Online banking is an incredibly valuable resource.

For starters, it makes balancing your checkbook and checking your balance incredibly easy. This simple step alone can prevent many overdrafts. Many of the overdraft stories told to me by readers result from a misplaced digit in their checkbook ledger. Online banking largely eliminates this risk by making it very easy for you to always be aware of your balance and your transactions, both posted and otherwise.

For me, the biggest value in online banking is online bill pay. If I pay a bill online via my bank, I’m not using a stamp. That’s $0.45 saved on every bill I pay using online banking instead of paying via check. It’s also more secure, as I’m not passing my check (with my name, address, signature, routing number, and account number) through the postal service which relies on trust of postal employees (they are trustworthy, but it’s still a security risk).

Also, if you’re willing to bank online, many more banking options become available to you. Many banks, such as ING Direct, operate almost entirely online. To make up for the lack of a storefront, they often pay great interest rates and offer other features that make them quite tempting (like a very robust online bill pay). If you include these banks in your survey when you switch, you’re likely to end up with a bank with lower fees and higher interest than you would have found otherwise.

Online banking is one of the services that pays for my internet connection. Without it, I would most likely mail in my bills and I most likely would have savings and checking accounts with lower interest rates. I’d also be devoting more time to banking practices.

If you’re a technophobe, don’t be afraid to ask for help. Online banking is pretty easy to use, and if you avoid a few basic security pitfalls, you’ll be fine. My quick suggestions: never click on links in your email, use a password with lots of numbers and upper and lowercase letters, and always make sure you’re visiting the correct URL for your bank. Those three steps alone take care of the vast majority of paths to internet fraud.

If you can’t afford home internet access, don’t be afraid to use community resources for internet access. One local bank, for example, has a computer available there that people can use to access their online banking and bill pay features. If your bank offers that, use it. Every bill you pay online saves you $0.45, after all. Just take your bills there a couple times a month.

Online banking is nothing but a value for the customer, as long as you’re careful and use basic security precautions. It provides extra savings, better services, and more convenient access.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

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  1. Johanna says:

    Stay tuned for tomorrow’s tip: “Cancel your internet service.”

  2. Vanessa says:

    I keep up with my balance pretty diligently, but I call my bank’s 800 number if I have a question. And I rarely mail a bill these days, since almost all of them can be paid directly at the business’s website. I don’t bank online because of a lack of internet service or because I’m ignorant about technology, I just don’t have a need for it. I’m not seeing the big savings here.

  3. Mister E says:

    Yeah, other than the stamp I don’t see much in the way of savings.

    But it is very convenient, I’ve been doing all of my banking online for almost a decade, and by phone earlier than that.

  4. lurker carl says:

    On-line banking/bill paying saves time for the consumer, saves money for the bank. The customer does all the work and electronic transactions are far less expensive than the old fashion way. It also ‘captures’ customers by making it inconvenient to easily change banks, setting up new bill paying and automatic payments and direct deposits and learning new systems for performing transactions can be quite laborious and time consuming.

  5. lurker carl says:

    Hmmm, I see Trent posted both article. I guess there will be nothing new this afternoon.

  6. valleycat1 says:

    The only advantage of using the computers at the bank is that the line is usually shorter, but since you’re at the bank anyway why not just deal with a live person? – & you’re potentially at risk because it’s being used by other members of the public.

    You should NOT use public computers (say, at the library)or free public wifi connections for online banking or online purchases.

    I’m not convinced that a person currently without computer access at home would benefit enough from online banking to justify the cost of purchasing a computer & paying for internet connectivity if that’s the only reason they want it.

  7. Ryan says:

    Online banking wasn’t standard in 2007? I opened my first checking account in 2005 when I was 13 and it definitely had online banking. ING Direct has been operating in the U.S since around 2000.

  8. Riki says:

    I have been using online banking almost exclusively since about 2001. Maybe some of the smaller credit unions didn’t have online services in 2007?

    Every major bank in Canada certainly had online banking in 2007.

  9. Jackowick says:

    I’m so glad people can read. He never says it started in 2007, he just states that when he wrote his book in 2007, it was far from standard, which is very true. My credit union’s online banking was archaic; up until 2008 or so, you got a disc for online banking software which allowed a direct private network over your ISP; it wasn’t a website and it didn’t requite an email login. We take progress for granted and now many banks are not into the mobile banking market.

    Once again, people shoot down and poo-poo any article on here that doesn’t apply 100% to them. This is an advice blog, stop treating it like Yahoo.

  10. Icarus says:

    @Jackowick, ah the voice of reason.

    Also, while the techology has been around for a while, banks have to deal with a lot of regulatory hurdles, especially the ole “commerce cross state lines” thing. I’m sure smaller banks didn’t want to swim in those waters until the big banks smoothed the tide a bit.

  11. Johanna says:

    Why must you always be so negative, Jackowick?

  12. Rebecca says:

    My credit union has had online banking since 1999, and while it was slow going with a 56K modem, it was serviceable. They just changed the website layout a little bit about a year ago, and I’m still not used to it!

    The best part for me is being able to check deposits in real time, and get check copies if I need them by clicking on the check#. I can print them on my printer with no fee from the bank. My statements are all archived on my account, all the way back to 1999 when I opened it. I don’t have to keep paper or scanned copies.

    I can also email non urgent questions to the staff, and they get back to me that day or the next, so I don’t have to try to get in touch with someone by phone during the work day.

  13. kc says:

    Here’s a tip for any online site that requires a password and which uses security questions: when setting up your account, do NOT answer the security questions truthfully.

    It’s far too easy for people to creep you, learning your mother’s maiden name, or the name of your high school’s mascot, or the name of the street you grew up on, and so forth.

    Instead, insert a nonsense word in front of the answer (“molasses Jones” instead of “Jones,” for instance) or answer them from the standpoint of your spouse, not yourself.

  14. David says:

    …they don’t use many of the incredibly valuable online tools that can really save them money.

    Online banking is an incredibly valuable resource.

    For starters, it makes balancing your checkbook and checking your balance incredibly easy.

    The adjective “incredible” and the adverb “incredibly” have long ago lost whatever significance they once had, so that now they are meaningless intensifiers with rather less impact than the mundane “very”.

    And yet, an “incredible” thing is a thing that you would not believe. I can believe that online banking will make it easier for me to ascertain my bank balance. I would have little difficulty in appreciating the value of such a service – indeed, I can believe that it might really save me money instead of fantastically saving me money.

    To borrow, not altogether inappropriately for a blog such as this, a metaphor from the world of finance: for a writer, words are valuable coin. If you absurdly misuse the word “incredibly” three times in rapid succession, you debase the currency. Elegant examples of correct usage are not hard to find, for well it was said by the Master:

    Some people claim the parsnip edible.
    Myself, I find such claims incredible.

  15. deRuiter says:

    #14 David, you are correct. It’s a pity some of the profits from the sale of this blog weren’t spent on a copy of Roget’s Thesaurus. On the other hand, that might mean a person with a “passion” for writing would have to do the work of searching for two synonyms, thus cutting into the more important task of writing novels.

  16. Geoff Hart says:

    If you’re using online banking, the weak link in the security process is most likely you, not your bank. That may change when the Mafia et al. decide to get seriously involved in cracking (i.e., black-hat hacking), but we’re not there yet.

    If you routinely download pirated software, MP3 files or programs from dubious sources, and other “warez” of uncertain origin, you might not want to put all of your financial records at risk by using the same computer for online banking. There’s so much malware out there these days it’s just not safe to assume you’re running a clean system. Definitely don’t bank over wi-fi in a public place if you don’t really understand wi-fi security. Even then, you might want VPN software like Witopia.net to protect your connection.

    If you don’t do any of these things, online banking is generally safe. Just be sure you have really good antivirus/antimalware.antispyware security software running. Don’t cheap out on this; check PC Magazine or PC World (Windows) or MacWorld (Mac) for recent reviews of the available products and pick one that’s been around for a while and that has a good review. If you’re a computer geek, you can build your own combination of best of breed tools using shareware or freeware; if you’re not a geek, stick with one of the reputable commercial suites.

  17. Angie unduplicated says:

    Even the best precautions won’t work if organized criminals are hired at the phone/Internet company. This is almost certainly the case at our small-town phone office, the only resource available for a business land line with DSL. I’ve found an amazing number of keyloggers in the past, once three in a single day. Unfortunately, I’ve found none in months and suspect that the local crime family slipped one in the BIOS. We dare not use online banking for the business.

  18. kc says:

    @ David: nicely written. Alas, you’re wasting your time. He simply doesn’t get it, and has a tin ear to boot.

    @Geoff Hart: He’d benefit much more from reading Strunk & White’s “The Elements of Style.” Rather than speed reading two to three books a week (from which he apparently gleans nothing regarding the craft of writing), Trent would be far better off rewriting and condensing several of his own posts. Each post is about 40-50% longer than needed.

    Interesting that the subscriber base at GRS continues to grow (approaching 97K at this point), but TSD appears to have stalled out in the 92-93K range over the last few months. This is still an “incredible” number, but it seems to have plateaued.

  19. Johanna says:

    In other words: “You keep using that word. I do not think it means what you think it means.”

  20. David says:

    Well, not quite, I know it does not mean what you think it means. But you think that “awesome” [a] means “not entirely objectionable” and [b] rhymes with “possum”. I cannot help that, but from time to time I wish it were not so.

  21. Misha says:

    She was using the movie quote in reference to Trent’s use of “incredibly.” She was agreeing with you. I’m very confused as to why you gave a hostile response to that.

  22. David says:

    Oh, I see. I wasn’t actually addressing Johanna, merely developing the theme further. But if it read as hostility, then I expressed myself badly, for which I am sorry.

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