Understanding the Banks Behind the Internet Banks

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.
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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.