Everyone groans when it’s time to “balance the check book.” What a tedious task with bank statement in one hand and check ledger in the other. Line by line, seeking out confused 7’s for 9’s, lost decimal points, and dodgy math. Most arguments among joint checking account owners start on check book balancing day. But what if you didn’t have to do this agonizing comparison every month? What if you weren’t charged outrageous fees anytime a mistake was made?

 

The boom in online banking services and checking accounts gives customers this opportunity. An online bank is never closed, except for perhaps one hour in the middle of the night for data processing. Transaction speeds of online banking grant real-time status of funds, a huge convenience and security protection. Immediately, mistakes and overspending can be spotted and adjustments can be made. 

 

Two Types of Online Banking

 

There are two types of online banking: banks and credit unions with physical buildings that offer online banking as an additional service, and banks and credit unions solely operated through the internet. Most bank customers only use the first type of online banking, and miss opportunities afforded by the second type. 

 

Banks and credit unions that are traditional, starting as so called brick-and-mortar banks, often offer more financial services than internet only banks. Car loans, mortgages, insurance, and investments are common services offered in addition to checking and savings accounts. However, most establishments have access to all services through online banking websites.

 

Nontraditional banks and credit unions, or internet only banks sometimes offer loans and other services, but mainly differ from traditional banks in cost to the consumer. Without the overhead costs of maintaining physical bank locations, return rates on savings and checking accounts are habitually higher while borrowing rates are frequently lower. Also, there are less likely to be minimum balance requirements and high fees associated with simple transactions.

 

Why Switch From Check Books to Online Checking?

 

The most important aspect of online checking accounts is convenience. Numerous services that once required a trip to the bank can be done from a home computer. Apply for a loan, change your mailing address, order new checks, or simply look at your balance. Many companies include financial service resources through their website, such as loan payment calculators or budgeting tools.

 

In addition to real-time account balances, online checking offers many bonus features an ordinary check book just can’t give. Suppose you only use online checking as a supplement to your hand written check. Did you know most banks allow you to view scanned copies of cleared checks? One of the biggest forms of check fraud involves number changing, or forged signatures. Now you can verify all checks are only signed by authorized users and cashed for the correct amounts. Any discrepancies can be reported immediately, meaning a shorter time your budget suffers any strain while the problem is addressed. 

 

Most online checking accounts also include check writing services, or online bill paying ability.  Scanning your check ledger, there are probably repeat payees.  Will your check book start to write those checks automatically?  Online checking accounts can!  This is not just a way to save on the ever increasing stamp. More importantly, this creates a handy record of all bill collectors’ addresses, phone numbers, and account information. Once a payee’s information is typed into the system, each additional online check only needs an amount and date to send the money.  Banks should offer this service free of charge if you write a small number of online checks each month. 

 

Online Banking Account Options

 

Online banks fall under all applicable regulations and laws as traditional financial institutions. They may not have tellers and branch managers. But customers can call customer service lines anytime and speak to a bank employee.  Online banks have offices, a mailing address, and fax numbers. This yields smaller operating costs than having hundreds of bank buildings to maintain and staff, a savings passed on to the customer. Online banking has become as varied as the designs for paper checks. Different online bank accounts are tailored to customers’ needs. There are high-yield checking accounts, free checking accounts, and traditional checking accounts tied to a savings account. 

 

A high-yield checking account is typically found through an internet only bank, but often requires a hefty minimum balance. It is essentially an extremely liquid certificate of deposit. Since it is a checking account, it is FDIC insured up to $100,000, and there are usually unlimited deposits and debits allowed. The interest rates are competitive with traditional banks, but no penalty for early withdrawal here. Why put your money where you lose the interest gained if you have to pull it for an emergency?  These accounts let you decide how long your money will be invested, not the bank you are allowing to hold your money.

 

Free online checking accounts are a great alternative to traditional checking accounts.  A good one won’t have a minimum balance. If that isn’t incentive enough, interest rates on free online checking accounts are often significantly higher than brick-and-mortar banks, but might be variable monthly. The downside is many services such as online bill paying or paper check ordering aren’t always available.  If not linked to a savings account, some do offer a line of credit with interest to cover overdrafts rather than charging an insufficient funds fee.

 

Traditional checking and savings accounts can also be found at exclusively online banks.  These accounts operate almost identical to a savings and checking account at a bank with a building, except with previously mentioned benefits.  Look for accounts with fewer fees, no minimum balance, and other offered services such as loans and investments. It only lacks a tiny parking lot without enough spaces and waiting in a long line for service.

 

Security and Online Banking

 

Hardly a month goes by that a news agency isn’t warning about identity theft and online banking.  But do the two really go together or are these isolated reports?  Not according to the 2003 Federal Trade Commission Identity Theft Survey Report. Only 12% of respondents described themselves as victims of identity theft. Even then, it usually didn’t involve a bank account. The most common way thieves stole victims’ personal information was by stealing a purse, wallet, or mail. In at least one-fourth of the cases, victims knew the person who stole their identity.

 

Online banking is secure for many reasons.  First, online banks and banks with online access have a profit interest in security.  A security breach equals bad press, and therefore bad for business.  Top of the line data encryption and secure online bank transactions are the priority.

 

Second, crime is always by convenience, and identity theft is the same.  It is easier to snatch a credit card from a distracted shopper than to hack someone’s computer and access online banking information.  Any withdrawal from the victim’s account will have the receiving account listed as part of the transaction.  It’s like someone stealing your credit card and writing his address and phone number on the credit card slip when he signed. 

 

Finally, in most cases of identity fraud the victim is not financially liable for stolen money.  This liability is further limited the sooner a victim alerts banking and credit card companies of any unauthorized transactions.  Online banking is the fastest way of noticing unauthorized activity.

 

Bottom-line for Online Banking

 

Despite all of this, some are still reluctant to join this century in their money management.  Online banking is a key to the best services and incentives financial institutions offer.  To not take advantage of a traditional bank’s online account access is like buying a car and never using the radio.  It’s there, it’s free, and so you might as well use it.  It’s the best way to protect your account integrity and reduce time spent managing your money.

 

Consumers can use free online checking accounts at internet only banks to cut down their banking costs. Reduce fees, increase your savings account returns, and be in control of your money every day.  It’s a means to divide your earnings into accounts suited for specific ends.  Try a high yield checking account for a vacation fund, or a free online checking account for a home business. 

 

Besides, paper checks now process as an electronic check.  Thanks to the federal Check Clearing for the 21^st Century Act, since 2004 checks no longer need physical presentation to a bank for cashing. Large retailers now have scanning machines that withdraw the funds from an account electronically, removing any possibility of a “floated” check. 

 

So, if a store can see if your bank account has enough money before any purchase, shouldn’t you? If companies are offering higher rates of return on savings, why not take the free money? Stop allowing your bank’s greed to capitalize on human fallibility by imposing outrageous fees and fines. Using online banking will save you in fees, stress, and improve your financial security. Enjoy the third millennium’s reinvented lollipop-- online banking is a sweet treat for all.