Are Online Banks Reliable for Keeping Your Money Secure?
Online banking has become increasingly popular in recent years, offering high interest rates and convenience for customers. However, many people question the safety of keeping their money in an online bank. With the rise of identity theft and hacking, it’s natural to be concerned about the security of your funds. So, are online banks a safe place to keep your money?
The answer is yes. All legitimate banks, whether online or traditional brick-and-mortar, are covered by the Federal Deposit Insurance Corporation (FDIC). The FDIC is an independent agency that protects deposits in the event of a bank failure. They insure up to $250,000 for each account ownership category, including checking accounts, savings accounts, money market deposit accounts, and certificates of deposit. This means that your money is as safe in an online bank as it is in a traditional bank with physical branches.
While all banks have their security problems, online banking actually experiences fewer breaches compared to traditional banks. In 2018, only 0.5 percent of financial breaches occurred in online banking, while traditional banks accounted for 17 percent. Hackers tend to target banks with large datasets, and financial data is highly valuable to them. Traditional banks with branches and numerous employees are more susceptible to these breaches compared to online banks, which have fewer employees and no brick-and-mortar branches.
But how do online banks guard against these breaches? They employ several security measures to protect your data. First, both online and traditional banks use data encryption, which converts your data into a secret code that can only be unlocked with a password or unique key. This prevents outsiders from reading your personal information. Additionally, most online banks use automatic sign-out or time-out features. If you don’t log out, the bank will automatically log you out after a certain amount of time, preventing unauthorized access to your account on your device.
Furthermore, online banks often use multi-factor authentication, which adds an extra layer of protection to your account. Instead of just requiring a password, the bank may have you answer a security question or enter a number sent to your cell phone or email. This may be seen as inconvenient by some, but it significantly increases the security of your account. Additionally, online banks monitor your accounts for fraud and suspicious activity, just like most traditional banks. If they detect any unauthorized transactions, you won’t be held liable for them.
While online banking is generally safe, there are some downsides to consider. One drawback is the lack of face-to-face customer service. With fewer employees, online banks have limited customer service options. However, with the increasing trend of remote servicing even in traditional banks, face-to-face interactions have decreased in general. Another downside is the possibility of the bank’s website temporarily going offline. Although most problems are fixed quickly, it’s a good idea to keep some emergency money in hand just in case.
There is also the risk of hackers stealing money and identity theft. It’s important to choose a bank with tight controls and security measures in place. However, if your money is stolen and you report it within 60 days, the bank will make it right. To protect against identity theft, it’s crucial to guard your password and change it periodically.
In conclusion, online banks are a safe place to keep your money. They offer higher interest rates compared to traditional banks and employ various security measures to protect your funds and personal information. With the FDIC insuring all legitimate banks, your money is protected up to $250,000. While there are some downsides to online banking, such as limited customer service and the risk of temporary website outages, the benefits outweigh the risks for many people. In this digital age, online banking has become the predominant way people manage their finances, and with proper precautions, it can be a secure and convenient option for keeping your money safe.
