OnLine Finance and You
SHA Newsletter: Vol 1. No. 12
Online Finance and You
If you’re like I am, you’ve heard many offers for online financial
services: investing, banking, and bill payment. You may have been offered
the opportunity to declutter your mailbox by receiving statements online
instead of on paper. Perhaps you’re wondering whether online financial
access is a good idea. As with so many computer topics, I think the answer
can go either way.
What’s In It For Me?
Online banking tools give you convenient access to your money. Whether
it’s transferring money from savings to checking, or paying bills
at 2AM, you can do more online than ever before. If you use personal-finance
software, it can often integrate with your financial institutions seamlessly,
saving you plenty of paperwork through the year and at tax time. And online
tools frequently mean that you can do simple account maintenance yourself,
such as changing your address, without having to make a phone call or
write a letter.
One of my colleagues absolutely loves the idea of online banking. He travels throughout the year, and it would be nearly impossible for him to pay his bills any other way.
What’s In It For the Bank?
Plenty! As more and more financial institutions move customers to online
channels, they stand to save a fortune in costs. Banks save because they
can attract more customers without building new branch offices and hiring
staff. They save a lot on the costs to maintain accounts: printing and
mailing statements, processing checks and deposits, performing research
and recordkeeping. They also gain on float, the value of your money while
your check is in the mail.
On top of this, the bank transfers costs from the bank to the customers. Have you ever known a bank that gives away a PC when you sign up for online banking? When you use online services, you pay for the computer, Internet access, and the costs to protect your information. Sometimes, the bank will charge fees for online services on top of everything else.
Would You Like Risk With That?
More than this, you are accepting risk when you accept an online banking
arrangement. A few examples will illustrate the point.
1. Online funds transfer. If you can move money using your computer, then anyone who can use your computer might be able to do the same. Viruses, keystroke loggers, and similar malicious programs are at the ready to steal your account data through such channels. In many cases, if a transfer is made from your computer, or using your (stolen) identification, the bank will honor it.
2. Online bill payment. This is where you visit a Web site and enter information to send money to a third party in payment of a bill. If the payment is not processed correctly, or on time, you might face penalties or damage to your credit rating. If the problem is due to an issue with your equipment and ISP, you might be stuck.
3. Online bill presentment. This is the industry term for paperless billing. Often this involves email notifications to visit a Web site for billing information. If you miss the email, or you aren’t able to visit the billing Web site, you are still liable for paying the bill. If your computer is broken, or afflicted with a virus – or if your power is out when the bill is due – you are still on the hook.
4. Electronic delivery of statements. This is what you get with the “declutter your mailbox” offers. Your bank or investment house will stop sending you paper statements, and let you receive them via email or by visiting a Web site. You become responsible for viewing the electronic statements when they are posted to look for errors. You need to print copies of statements for your records. And you will often end up with another ID and password that you must manage.
5. Automatic transfers to and from your accounts. These will happen even if your computer is down. But you need to track these to assure that the money is available on time, or you will face penalties.
6. Electronic signatures. This involves proving your identity by providing personal information for an online transaction. You can pay taxes, apply for some loans, and set up investment accounts using such methods. Even the IRS allows many taxpayers to file and pay taxes without sending any paper forms. The weakness here is that it’s not too difficult for someone familiar with you to forge your electronic signature (depending on the specific scheme used. Electronic signatures depend on knowing information such as your name, address, Social Security number, and mother’s maiden name. These are all items which, while personal to you, are probably known by your ex-spouse, your best friend, your boss, or the kid who found some papers in your recycling bin.
7. Data security. How secure are the computers and networks used to handle your personal data? They are almost always more secure that one’s own PC. However, since they handle data for many customers, they are an attractive target for attackers. Why go after a single person’s computer, when you can crack the bank’s machine and steal from all the users at once?
But My Bank Offers a Fraud Guarantee!
Many banks advertise that they will absorb losses for you. One nationwide
bank who advertises in my neck of the woods promises to put stolen money
back the next day. But keep a few points in mind when considering the
value of such a guarantee.
1. The guarantee might only cover certain kinds of activities. For example, you might be protected when using your ATM card online, but not when using online bill payment or automatic transfers. There might be other requirements, such as prompt notification of losses. Make sure you know the details.
2. The guarantee might not cover much more than is already required by law in your state. So Big National Bank might not offer more than Friendly Local Bank in the final analysis.
3. Returning your money is only part of your worries. If you are the victim of theft or fraud, you might be without the use of your credit or ATM cards for several weeks. You might discover the problem only when you go to buy something and find you cannot. You might need to open completely new accounts and take other actions before you are completely back to normal.
OK! But Offline Banking Isn’t Perfect, Either!
Unfortunately, no. Thieves can rob you at the ATM kiosk, steal your mail,
and rifle through your garbage. If all else fails, a thief can walk into
a bank and steal money from the teller, too. But police are experts at
solving street crimes, mail thieves must deal with Postal Inspectors knowledgeable
about mail crime, and you can shred documents to protect your trash. So
you will either know you’ve been victimized or have well-established
ways of protecting yourself.
Making a Smart Decision
If you want to try serious online banking, there are some things
you can do to get the most benefit and lower your risks.
Buy a dedicated PC for online banking and finance. Keep antivirus protection and a good firewall on at all times. Don’t use the computer for games or general Web surfing. You don’t need an expensive computer – or even a brand new one – for mort kinds of transactions.
Take the time to prepare a backup and recovery plan for this computer. Plan to back it up regularly and store backups offsite. Stoney Hill Associates can help you sort out the issues.
Consider creating a special email account specifically for banking uses. You can control who gets that email address to limit your exposure to spam and email scams.
Make time to periodically check your online accounts for errors and problems. Put reminders on your calendar so you won’t forget.
Would you like more information about this topic? Contact us at request@stoneyhillassociates.com
Please note: Any trademarks and trade names of others mentioned in this message are the property of their owners, and not Stoney Hill Associates, LLC. We respect the intellectual property of others. The information provided is believed to be reliable, but we cannot guarantee that the procedures and information given here will work correctly for your specific situation.
If you would like help with a computer or software problem you face, contact us. Send an email to request@stoneyhillassociates.com.
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