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About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.


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  2. Understanding the Banks Behind the Internet Banks

Understanding the Banks Behind the Internet Banks

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Many people continue to be uncomfortable with internet banks. It is understandable that people have concerns when there are so many news reports of scams. If you’re new to online banking, how can you be sure that a website is really a bank that’s a FDIC member? There are steps you can take to independently confirm a bank’s website, but some banks don’t make it easy due to the internet banks operating under aliases. This BauerFinancial article has a good overview of this issue:

The issue of banks operating under aliases (or more than one name) has always been a problem, but since the advent of the internet, it has become much bigger.
[...]
While most URLs (web addresses) bear some resemblance to the real name of the bank, some are completely off the wall

The article gave some examples of banks and their internet banks’ URLs. Long-time DA readers should recognize all of these:

  • Flushing Bank, NY=igobanking.com
  • Northeast Bank, ME=ablebanking.com
  • River Valley Bk, WI=incrediblebank.com
  • Bank of the Wichitas, OK=redneckbank.com

Here are a few others that I have reviewed over the last several years:

  • New York Community Bank, NY=mybankingdirect.com=amtrustdirect.com
  • Bofi Federal Bank, CA=bankofinternet.com=ufbdirect.com=bankx.com
  • Chesapeake Bank, VA=clearskyaccounts.com
  • All America Bank, OK=americanetbank.com
  • Southwest State Bank, OK=evantagebank.com

Verifying the Internet Bank Is an FDIC Member

The internet banks will typically mention the parent bank on its website. If you want to independently verify that the website is part of the parent bank, it can be difficult. CIT Bank is an example of a bank that makes it easy to confirm the legitimacy of its website. First, you can verify CIT Bank by searching for “CIT Bank” at the FDIC Bank Find tool. This will take you to a FDIC page for CIT Bank that will list the FDIC certificate number (35575) and its website address (bankoncit.com). This website address takes you to the internet bank. This gives confidence that bankoncit.com is legitimate and is a FDIC member. If you try to do this with the banks in the above list, you’ll find it’s much harder to verify. That doesn’t mean they’re not legitimate. It’s just harder to verify.

We try to help you verify an internet bank at DepositAccounts.com. Our hub page for a bank will include a financial summary. This is the health tab in the hub page. In that financial summary, we include the FDIC certificate number. Clicking on this number will take you to the FDIC webpage for that bank. One bank may have several DA hub pages if it has internet divisions. For example, we have two hub pages for both igobanking.com and Flushing Bank. The health tabs are the same. Each shows the FDIC and financial information for Flushing Bank.

Avoiding Uninsured Deposits

Once you’re confident that the internet bank is part of an FDIC-insured bank, there is another important issue to consider. Deposits held at the internet bank are not separate from deposits held at the parent bank from a FDIC insurance point-of-view. If you have $150K of deposits at Flushing Bank and $150K at igobanking.com, you may have $50K that is not FDIC insured. This is also an issue with brokered deposits. You have to total your deposits at all the different variations of a bank. This includes all the various internet banks and brokered deposits.

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7 Comments.
Brad
  |     |   Comment #1
With respect to the isue of FDIC insurance, would, for example, GE Capital Bank and GE Retail Bank be considered siblings of the same parent "bank" or comapny, General Electric?
Reply
6
KenBDG
  |     |   Comment #2
GE Capital Bank and GE Capital Retail Bank are two separate banks with different FDIC certificate numbers. So deposits are insured separately as if they were two totally different banks. I have more details about these two banks in my GE Capital Bank review.
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11
Robert
  |     |   Comment #3
I'd be curious to see a summary (maybe there is one somewhere on this website) of "who owns the banks?"  I vaguely remember hearing a lecture that Chase was x % owned by some other bank, and this bank was partially owned by that bank, etc.  The gist was that to a large extent, the banks own each other.  Furthermore, how and what percentage of some of the big banks (thinking Ally) are owned by the US Government?
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9
Anonymous
  |     |   Comment #4
A big name: Capital One NA = capitalone360.com

Re:#3. I dont think another bank owns Chase. Or, another bank owns Bank of America. But JPMorgan Chase, as we know it today, has a huge history and has owned (fully) several large banks by mergers or acquisitions, like Chase Manhattan Bank, JPMorgan & Co., Bank One, Bear Sternas, Washington Mutual, Chemical Bank, and First Chicago.
Reply
4
Anonymous
  |     |   Comment #5
I remember when people were afraid of internet banks way back when. Could even understand it 10 years ago.

 

But NOW ?  REALLY ?
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2
Fred
  |     |   Comment #6
Re: #5: I was involved in the start-up of the Internet banking charters. Participated in the Internet Banking Round-table that established regulatory guidance and industry best practices. There are a lot of data security issues with Internet banks and Internet access to bank accounts. Only now are banks beginning to establish second-tier verification like a call-back or text-back or emailed code to verify the account user for online access -- primarily because they have been badly burned. Many of the transmission security and user ID controls that were required for ATMs were completely ignored in the start-up of Internet banking. And now, the imaged check deposit and withdrawal over cell phones opens up a whole new can of worms. And there is a thriving area of bank fraud where hackers get malware onto customers' personal computers, and steal their access codes and passwords. As for banks claiming to have "no risk" Internet accounts -- I know of a number of instances where banks promising this feature have later reneged when a customer's account was looted online. They have refused to refund the losses, and force the customers to sue them. In court they contend that the illegal access was the fault of the customer who failed to adequately safeguard his computer (whether he did or didn't).
Reply
2
dollarsncents
  |     |   Comment #7
"In court they contend that the illegal access was the fault of the customer who failed to adequately safeguard his computer (whether he did or didn't."

I can see where that would be an inherent problem and continue to be a risk even today, as is any business conducted over the internet.
Reply
1

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