Is Online Banking Safe?

Online banking is generally safe. Still, you can take steps to better secure your online accounts. You can also make sure the banks you are using or considering are reputable.

After addressing safety concerns and choosing between online and traditional banking, you can shift your focus from asking, “Is online banking safe?” to “Which online bank is the best fit for me?” Note that some banks are fully online, while others have brick-and-mortar locations along with online and mobile functionality.

How safe is online banking?

To make your online banking experience as safe as possible, you’ll first want to make sure you’re banking with a legitimate financial institution.

To verify a bank’s legitimacy, you can confirm that its deposits are insured by the Federal Deposit Insurance Corp. (FDIC) on FDIC’s BankFind website. The FDIC recommends looking for slight misspellings of the names of real banks, which can appear in the web addresses of fake banks.

You can also review complaints about the financial institution in the Consumer Financial Protection Bureau’s consumer complaint database. Sites such as Trustpilot are good places to check for reviews. A good rating from the Better Business Bureau is also a positive sign.

Some bad reviews don’t necessarily mean that an online bank is unsafe, but if you spot a lot of complaints related to security issues, that could be a red flag. Data breaches can affect financial institutions, although compromised systems don’t always indicate compromised customer financial information.

How do financial institutions make online banking safe?

Your financial privacy is protected under the law, whether you bank online or in person. Banks secure customer data using a variety of tactics, including multifactor authentication, encryption and anomaly detection, according to the American Bankers Association.

Here’s how these online banking security measures can protect you:

• Multifactor authentication: Requiring more than one method to verify your identity can be accomplished in obvious ways, such as pairing your card with a password or PIN. But banks also work behind the scenes to authenticate your activity.
• Encryption: When a financial institution encrypts your information, it transforms it into text that can only be deciphered by parties with a specific decryption key.
• Anomaly detection: Anomaly detection technologies can track patterns in account activity. This information can help banks automatically flag fraud.

Steps to boost your online banking security

If you’re eager to boost your online banking security, be sure to take steps that are actually helpful. For instance, public Wi-Fi networks were once unsafe for sensitive data, but increased encryption online means that they are now generally safer for accessing your banking information.

The following steps can make a difference in your online banking security:

1. Select strong passwords. Your password should be unique, meaning you don’t use it anywhere else. A strong password generally includes letters, numbers and special characters. You could also change your password regularly, such as every couple of years.
2. Use two-factor authentication. A solid password is a starting point, but you’ll want more than that to ensure your account security. With two-factor authentication, you’ll have to provide something additional to access your account, such as a response to a push notification on your cellphone. Doing so creates an extra layer of protection to keep hackers out even if they have your password.
3. Know the signs of scams. Phishing scams and other forms of bank fraud can compromise your account. Look out for suspicious text messages and email links, especially those that try to persuade you to act quickly. Be sure to verify downloads, too, including mobile apps.
4. See if your bank offers supplemental features. You could set up alerts for certain types of transactions, allowing you to be quickly notified about anything unusual. Your bank also might allow you to log in using biometric data, such as your fingerprint.
5. Monitor your accounts regularly. This could mean taking a close look at your monthly account statements or monitoring transactions as they happen through account alerts.

Is a traditional bank safer than an online bank?

Traditional banks offer similar levels of safety to online banks, as long as they are federally insured.

Even if you use a traditional bank, you’ll likely have the option to set up an online account. The advantage of a traditional bank is that it provides physical locations and some services that digital platforms may not accommodate, such as cash deposits and in-person advisors.

Online banks, on the other hand, allow you to bank at your own convenience and may provide more competitive product offerings.

Is an online bank right for you?

Whether an online bank is right for you will depend on your priorities.

Online-only banks can offer higher rates and lower fees because they have lower overhead costs than traditional banks. If you’re looking for a high-yield savings account, for instance, you’ll likely find that online-only banks offer some of the most competitive rates.

At the same time, their customer service experience may be inferior to what you’d get with a local bank or even a large national bank. Checking a bank’s reviews before opening an account can help you get a sense of the customer service experiences of current and former customers.

In either case, make sure the bank you choose offers features that are important to you. If you want or need to deposit checks in person or make other regular ATM transactions, for example, you’ll likely want a bank with a convenient ATM network. That can be either a traditional or online bank.

How to choose a secure online bank

Although banks generally take steps to protect your information — and you can take steps to protect yourself — you can also screen a bank before opening an account.

Data breaches are possible, and user error can leave your information exposed.

Factors to consider include:

• FDIC protection: Check the FDIC BankFind tool to make sure your bank has federal protection. With FDIC insurance, each of your accounts is insured for up to $250,000.
• Reputation: If you notice a lot of reviews that cite poor security or issues with online accounts, this could be a red flag. Checking a bank’s ratings with organizations such as the Better Business Bureau can help you confirm its legitimacy.
• Security approach: Learn about the bank’s security protocols, such as their data encryption, fraud detection and two-factor authentication methods, for insights into how they protect your financial information.

How to safely open an online account

To open a bank account online, you can navigate to the page on the bank’s website with the product you’re interested in. You’ll likely see an “open an account” button or something similar.

Click through and check that your browser connection is secure. Look for “https” at the start of the URL or for a lock icon, which indicates the site connection is encrypted.

You’ll need to provide sensitive personal information for the bank to verify your identity, such as your Social Security number. Once you’re approved for an account, make sure to create a secure password.

Is using a banking app safer than online banking?

Mobile banking apps are likely to be encrypted, just like bank websites. You may be able to set up biometric authentication for your banking app, using your face or fingerprint to sign in.

As with other downloads, make sure your banking app is legitimate. Some malicious apps can install malware on your device, according to the FDIC.

If you’re not confident in answering the question “Is online banking safe?” with a yes, then you likely won’t feel comfortable with mobile banking, either. On the flip side, if you’re comfortable with online banking, then you’ll likely feel good about mobile banking.