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Plan Well, Retire Well

Saving and investing your money

Online Banking - Is it a good fit for you?

Today we welcome two guest bloggers, Paige Luster and Jessica Sturdy, to share their insights on online banking. Jessica and Paige are Peer Educators through the University of Illinois Extension's Financial Wellness Program.

Online banking, commonly referred to as Internet banking, is defined as the opportunity for customers to conduct financial transactions via the Internet. Almost all large financial institutions offer online banking. The features offered include funds transfer (account to account transfer or wire transfer), bill payment, loan application, and statement reconciliation.

The benefits associated with online banking include convenience, efficiency, and effectiveness. Online banking is only a few mouse clicks away, 24 hours a day, 7 days a week, free of charge. This unlimited accessibility allows customers to conveniently and instantaneously transfer money or pay bills without a trip to the ATM (including fees) and the Post Office. Online banking is incredibly efficient in the sense that one has constant visibility of their current financial position. On one page you can access and manage checking, savings, CDs, securities, and investment accounts. In relation, online banking assists in effectively managing your money by offering tools such as stock quotes, portfolio management programs, and bill payment reminders to help in tracking various accounts.

Online banking can be tough to get used to, especially when you are starting out. The transition to online banking is one that needs to be evaluated to get an idea if banking on your computer is the right choice for you!

The biggest convenience of online banking is being able to check your account balances any day of the week, at any time of the day, but this can lead to errors. If you are not keeping track of transactions you make, and are solely relying on the numbers shown on the screen, it is very easy to spend money you do not have. Some transactions, depending on the vendor and your financial institution, take longer to post online. For example, you may see that you have $100, but you forgot you wrote a check to the utility company last week for $60. This check has not posted to your account yet, so you really only have $40 of spendable money in your account. Even though it says you have $100, if you spend more than $40, it can lead to an overdraft, fees, and a big headache while sorting it out.

The most common concern associated with online banking is safety. Phishing (email prompting user to enter personal information on a fraudulent website) and Pharming (hacker whom redirects website information to a fraudulent website) are two well-known attacks on computer security. However, the best way to avoid falling victim to a scam is to use your best judgment. Be aware that no legitimate financial institution will ask for personal information (i.e. Social Security number) via phone or email. Speak to your financial institution about their specific safety policies and other online banking service concerns prior to enrollment.

Always make sure a website is "secure" before entering in any personal information! You can easily do this by checking the URL. A secure website will show https:// rather than the usual http://. The "s" stands for secure.

Some banks or credit unions enroll your account(s) in online banking right from the start, but others may require a form to be physically filled out at a local branch. In this case, there may be an initial period where you will not be able to access your accounts online.

Websites vary widely from one bank to the next. Some sites are extremely difficult to navigate and will take time to learn. If your bank, or credit union, has a site that isn't easy to utilize, take some time to read the tutorials and familiarize yourself with the layout and procedures, or consider switching financial institutions.

Overall, free and secure online banking can be used as a resource for money management. Successful management including prompt bill payment and reduction in ATM fees leads to saving money, and who doesn't like that? Online banking is offered as a convenience to you; if you run into any setbacks, make sure to contact your local branch!

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