Concerns About Opening a Bank Account Online

Last week the Kasasa blog published a post on opening a checking account online. I thought this topic of opening an account online would be a useful one to discuss. Kasasa is a brand name from BancVue which markets Kasasa products to community banks and credit unions around the nation. One of the Kasasa products is a high-yield reward checking account. These accounts pay a high interest rate for up to a certain balance if the customer meets certain monthly requirements.

One nice feature that BancVue has designed into Kasasa accounts is online account opening. According to that Kasasa blog post "all of the community banks and credit unions that offer Kasasa accounts can be opened online." It should be noted that even though a Kasasa account can be opened online, it doesn’t mean that people in all states are eligible to open the account. Credit unions have field of membership limitations and community banks often limit new accounts to residents of their local market areas. The Kasasa account application should inform users if they’re eligible to apply.

Even if you’re eligible to open an account online, you may be hesitant due to safety concerns. This was addressed by the Kasasa blog post. According to the post "Every bank and credit union that offers Kasasa is insured by either the FDIC, NCUA, or ASI." Note, FDIC and NCUA offers federal insurance. ASI is private insurance. I reviewed ASI in this blog post.

Another safety concern is protecting your accounts from criminals. According to the Kasasa blog, "complex security software and encrypting measures" that banks and credit unions use help ensure your accounts are kept safe.

The above issues of federal deposit insurance and online account protection are relevant to opening any type of bank account. Before you open a bank account online, it’s a good idea to verify that the bank or credit union website is legitimate. I described the steps to do this in my blog post "Verifying Your Internet Bank Deposits are FDIC Insured."

Once you’re confident that a website is legitimate, you may still be hesitant to open an account online due to risks of application complications and poor customer service. Problems in the application process could delay account opening, and if you specify funding with an ACH transfer, it’s possible that your money that you’re using to fund the account will be unavailable for many days. This is one reason to fund a checking account or other liquid account with the minimum initial deposit. Once the account is opened and you can log in and get access to the initial deposit, you can transfer in more money.

Ensuring your online account is properly being protected is not easy. As we have seen with the Target data breach, all institution are at risk. There are federal regulations that require banks and credit unions to maintain certain standards. There are also regulations that protect consumers against fraud if they report the fraud in time to their institutions. So one way to reduce the chance that you’ll lose anything from fraud is to regularly monitor your bank accounts. If you quickly report any fraudulent debits, the bank or credit union should reverse them. Setting up automatic account alerts on your accounts can help you quickly identify unauthorized debits.

Do you prefer opening accounts online or at a brick-and-mortar branch?

In 2011 I asked the question in a poll that if the rates and terms are the same, would you open a CD at a local bank office or at an internet bank? Out of the 85 readers who took the poll, 58% said they would prefer a local bank office (within 10 miles) over an internet bank. I thought it would be interesting to see if preferences have changed in the last three years. In this new poll, I’ll ask a very similar question as before, but it’ll apply to any bank account: For the same bank account, would you prefer to open the account at a local bank office or by using the bank’s online application?