Key Takeaways
- The vast majority of consumers prefer to do their banking online or via a mobile app.
- While online banking is usually safe due to a high level of encryption, banks can still fall victim to data breaches.
- Using strong passwords, enrolling in multifactor authentication and signing up for alerts are ways you can protect your personal information while banking online.
Online banking gives customers real-time access to their finances. The convenience and ease of access to information makes online banking great for everything from long-term financial planning to dealing with emergencies. Most traditional banks offer some form of digital banking in addition to their brick-and-mortar locations, while other banks are online-only. According to a November 2024 survey from the American Bankers Association, 54% of consumers prefer to use an app to bank, while 22% prefer to use their bank’s website. Only 8% of consumers prefer to visit a bank branch.
Mobile banking apps and online portals might provide extraordinary access to your finances, but some consumers are still worried about the security of online banking. Here is everything you need to know about protecting your information when banking online.
Is Online Banking Safe?
One of the main benefits to banking online is convenience. Many banks’ services, such as verifying account balances, transferring funds between accounts, depositing checks and paying bills, can be done from a computer or mobile app at any time of day and from anywhere. That eliminates the need to go the bank branch. Online-only bank banks can typically offer their customers better interest rates and lower fees, since these banks have a smaller footprint and lower overhead.
These benefits don’t come at the expense of safety. If the bank is online-only, it can have all the federal protections afforded a brick-and-mortar institution. Before opening an account with an online-only bank, you should verify the bank’s FDIC insurance, which covers up to $250,000 of an individual’s deposits.
Your bank website should use strong encryption to protect your data when accessing your account. The current standard is 256-bit encryption, and the bank’s site should block you from using a browser that doesn’t support its security standards.
5 Ways to Ensure Online Banking Security
While your bank will deploy industry-standard security measures to protect your data, you will still have to safeguard it from identity thieves and hackers. When it comes to securing your own data, there are some basic but crucial steps you can take protect yourself.
Use Strong Passwords
Even if your bank requires a strong password, if you store banking data on your computer or mobile devices, make sure they are password protected. If your computer or phone is ever lost or stolen, it will make it that much more difficult for would-be thieves to access your data.
If you have trouble remembering all your passwords, rather than risk getting a written password list stolen or misplaced, you can use a password manager app that will store all your passwords. That way, you will only need to remember the password for the password manager.
Turn on Multifactor Authentication
Your bank should require multifactor authentication to access your account online. This means asking for more than just a username and password to access your account. Added steps could include answering a security question or entering a code sent to your phone. Accessing your account with a mobile app should require a passcode or biometric scan.
Never Share Your Passwords
Hackers and identity thieves can use sophisticated tricks to get you to reveal personal information. They can create fake websites that look like your bank, emails that appear legitimate and phone calls that will try to scare you.
Your bank will never send you a request asking for your personal or banking information. Contact your bank directly using the contact information you already have if you receive any type of request. Don’t reply to an email or phone call, even if it seems legitimate.
Don’t Bank on Public Wi-Fi Networks
Even if your computer and devices are secure, if you access your bank from an unsecured network, your data can be compromised. Connecting to the public Wi-Fi at your local coffee shop might be free, but using it can expose your personal data to thieves. Wait to access important sites, such as your bank or email account, from your home network.
If you need to access your bank while away from home, use the bank app on your phone while you are connected to your mobile provider. You can secure your connection to the internet by using a virtual private network, or VPN. Reliable VPN software will usually come with a monthly fee but is a necessity if you need to access your banking information from unfamiliar networks.
Sign up for Alerts From Your Bank
Most banks will allow you to set up alerts for unusual activity through their web portals or mobile apps. You can receive alerts as texts or emails. Common alerts are for large withdrawals, account closure or new check orders. You can even set alerts for debit card activity.
Use this free savings calculator to project how your money can grow over time.
Risk of Online Banking
Following the steps above will help ensure your online banking information is protected, but unfortunately there is no guarantee. Notable data breaches at banks and established financial institutions have happened as recently as July 2024, when Evolve Bank and Trust disclosed a data breach in which hackers gained access to the personal information of over 7.6 million customers.
Another risk of online banking is losing a device you use for online banking or getting it stolen. Even if you have multifactor authentication and a strong password set up for your online bank account, someone may be able to access your email to either change your password or bypass your bank’s security measures. If a device you use for online banking is ever lost or stolen, call your bank to have your accounts temporarily frozen so no one can access your funds.
