Are Online Banks Trust worthy

Online banks are financial firms that provide banking services mainly or totally through the Internet. Their services range from account opening to bill payments and CD investments. 

Online banks operate 24/7 and offer lower fees, fewer time limits, higher savings and CD rates, and cashback rewards.

The main drawback of Online banks is their exclusive virtual operation: Customers will be unable to deposit or withdraw cash due to this. Some online banks offer ATM services, like Capital One 360, blending physical and virtual operations, widely recognised as online. However, these developments still do not entirely remove the doubt many still have about online banks. 

In this blog post, you will get a very definite understanding of how online banks handle security and if you can trust an online bank to keep your earnings.

FDIC’s role in bank security

In 1933, Congress inaugurated the Federal Deposit Insurance Corporation (FDIC) to keep the country’s banking system stable and the public’s trust in it. This was an urgent and highly needed move because, in the 1920s, spanning into the early 30s, a national bank failure resulted in a severe loss of many American savings. 

The FDIC has been saddled with the responsibility of Insuring financial institutions, bringing accountability, and increasing customer protection. Part of the duties is to make significant economic issues easily resolvable. Since its inception, the FDIC has proven its capacity over the years by changing the US banking security trajectory. 

Aside from federal government funding, the FDIC collects premiums from its members to cover expenses and compensate depositors at failing banks. The bank deposits the money into a Deposit Insurance Fund (DIF), with banks paying based on insured deposit balances and risk levels.

Related blog post: What are online banks? Features, Drawbacks & Reputable Banks.

Relevant Security Measures for Online Banks’ Security

It’s good to know that most online banks offer the same security measures, and you can expect that any bank you choose to sign up with employs one or more of the security measures listed below. 

With the FDIC, up to 250,000 dollars per depositor per ownership category in a bank insurance scheme, you can be confident that your funds are in safe hands. All you have to do is check for the bank of your choice and verify that the FDIC insures it. 

FDIC- Online Bank Security

Image Source: FDIC’s official website

 As security concerns rise, traditional brick-and-mortar and online banks are furthering all possible means to boost their security. This security measure is much more realistic with online banks because of the streamlined cost of running the financial institution. They do not need to spend so much on buildings, power and maintenance. Hence, they can channel their funds into security. 

NOTE: Ensure your preferred bank offers two-factor authentication and activate it before any major transactions. 2-FA enhances account security against fraud.

Security keys to take note of when opening an account with an Online bank:

The security measures your Online bank employs can guarantee your peace of mind. However, this does not remove the responsibility you need to imbibe to safely protect your account and money.

Below are a few security measures to take note of;

  • When signing up for an account with an online bank, do so with a secured internet connection.
  • Create a password combination that is difficult to guess.
  • Do not use a link sent through a message or mail when accessing your account. Ensure that you type your bank’s web address on your browser.
  • Set text message alerts and email notifications to ensure that you can see a transaction’s report as soon as it occurs.
  • Consider using a VPN to secure your internet connection and protect your bank accounts on various devices.
  • Refrain from sharing confidential account details with anyone calling or sending you a message through your social media accounts claiming to be a bank representative.
  • Constantly keep your banking software or app up to date to make sure that you are transacting using all the latest security features your bank can provide

Online and Customer reviews

The safest bank to transact with might be the one with the most safety testimony, which it must have had over a long period of time. The Consumer Financial Protection Bureau (CFPB) provides a database that anyone can use to inquire about any financial product or service. 

You can also check for comments and ratings of the bank online before signing up with them. It would not be wise to ignore all the obvious negative comments that customers using bank apps have made. Only some of the reviews online are beneficial. 

A review of the logo’s colour might not be a sufficient reason not to sign up with a bank. However, evaluating the general banking experience will be critical to making the right decision. 

Final Remarks 

The banking experience online is similar to the traditional banking experience. However, the trust we develop with physical banking experience is much faster because you can talk with bank officials and walk up directly to your account officer in any nearby branch. Taking advantage of the information provided in this blog post will spur you to make the right decision and secure your account from any fraudulent activities.