A few months ago, I had some decisions to make. After a number of years of living in the U.S., I was moving back to Britain. However, I had a financial life in America, including credit card bills that would need to be paid monthly (I know; ideally, I could have paid them off in full, but that?s another story).
It would have been possible to have the statements sent to my U.K. address, but given the vagaries of both postal systems, that didn?t seem viable. That was what led me to investigate online banking and bill payment. And it?s proved to be an interesting world.
We tend to think of banks as concrete edifices, places we can go into (or drive through, depending on where you live) and transact our business, deposit pay checks, and so on. But we pay our bills by writing checks and dropping them in the mail, assuming everything will be fine; which, when you pause to consider it, is actually quite haphazard. Mail is misplaced or mishandled; envelopes can take weeks to arrive on occasion. And we trust this?!
Something else to think about: If you?re reading this, chances are you make purchases online, whether it?s from some of the many retailers who sell through e-commerce, or on eBay. You might have been a little hesitant at first, but by now it?s probably second nature to you. With some precautions?a good firewall, anti-virus and a spy detection program?and a dose of common sense about phishing and fake e-mails, you?ve probably had completely secure transactions.
Online banking is simply the next step from that.
For my needs, it?s ideal. I can access my account, pay bills (actually, I pay my credit card bills directly to the institution, since everyone seems to offer that option), and move money from checking to savings and back again. About the only thing I can?t do is transfer money from my British account to the American account, but that?s the way the law is set up (to prevent money laundering), so I have to wire transfer money when necessary (or arrange a transfer between my Paypal accounts, since I?m hardly dealing in many thousands). With a little imagination, many things can be worked out.
Banking online has become a fairly simple process. The logging-in process is virtually as straightforward as any other site, with a couple of extra precautions. Banks and financial institutions take a great many precautions, as they have to. And yet, people don?t seem to be convinced. A recent survey showed that, of computer users, only 39% regularly bank online, citing security as a concern.
That?s natural; after all, people should be concerned about their money, especially these days, when reports of identity theft proliferate. There are cases where it does happen; however, few have come from proper online transactions. And the industry-standard 128-bit encryption is about as safe as you can get; it?s the same as you find when purchasing online through secure sites (and if you purchase from non-secure sites and give credit card details? Sorry, but you get what you deserve).
Online banking makes sense for me; I do most of my banking in the U.K. online, too, other than putting checks in the bank. But does it for you?
The answer is yes. Whether it?s with your current institution or one of the growing number of Internet-only banks, it?s something you should be doing. You?ll have more immediate control of your money, able to check balances in all your accounts, and look at your transactions for several months (in some instances, years) without having to request a statement?and most banks would charge for such a paper service.
Many, if not all, banks offer online bill payment, allowing you to take care of that at home, without physically writing checks or having to buy stamps or run to the mailbox. Bank of America, for example, has a long merchant list to choose from, or you can add others. You should probably still allow a few days for the check to progress through the system so you don?t end up with a late fee; if you do forget, some institutions, like Chase, will let you make a same-day payment to your card for an extra fee (currently $14.95). There also are a number of online bill paying services, such as Yahoo! and My Check Free, that allow you to simply do that?pay bills online with your existing bank account. It remains a bit of as mystery, however, why you?d use them when (if you?re going to do this online) you can do everything through your bank.
Banking online allows you to check your balances and move money between your accounts at the click of a mouse. It helps eliminate the danger of being overdrawn, while still letting you keep money in a higher-interest savings or other account until it has to be moved. This gives you the flexibility to let your money really work for you, the way banks always claim it should in their ads.
Internet-only banks, which are more prevalent in Britain than the U.S., tend to offer a higher rate of interest both on checking and savings accounts. Of course, they don?t have the expense of maintaining branches or paying large numbers of staff, which gives them that ability. One U.S. Internet bank, for example, offers a 2.96% rate on most checking accounts. Another offer is a 3.40% annual yield on savings accounts. But if you do decide to change, make sure they?re with the FDIC, so your money can?t just vanish. And, of course, you can dip a toe in the water by opening a savings account for that high interest without abandoning for regular bank.
There are minuses to dealing with an Internet-only bank, though. The biggest, of course, is making deposits. Often you need to mail them to the company?s address, which seems to negate the convenience of the online idea?and, of course, means they could go astray, and you have a delay while they?re en route. Some U.K. Internet banks have agreements with other institutions, allowing you to deposit through them (for example, Smile, the online arm of the Co-Operative Bank, lets you make deposits at the post office). And for using ATMs?which we all need to do?you run the risk of an extra charge every time you withdraw cash (much better to get cash back when you pay by debit card at the supermarket).
Something you?re probably used to is paying a monthly charge (unless you have a certain minimum balance) as well as paying for checks. A lot of online banks eliminate that fee; after all, you?re not writing checks, and with fewer overheads, they don?t need to make those charges?all of which helps put them in a more desirable position for consumers.
And they?re offering a wider range of services, moving beyond the basics to become full-service, with mortgages (and in the U.K., insurance and other services) and credit cards as part of their goods. Like any bank, the more of your custom they can take, the better it is, since you?re less likely to leave.
That doesn?t necessarily mean they?ll want you to stay, however. With online banking, you?re relying on yourself far more than in a bricks-and-mortar place, where there?s always someone to help. Online help costs money, and sometimes people who can?t take the learning curve are actually asked to leave: ING Direct, for example, closes three to four percent of its customer accounts each month because they require too much personal service. If that seems like an unusual idea, just consider the cost savings?and the people who are ?released? probably shouldn?t be banking online, anyway.
Perhaps the greatest advantage online banking offers is convenience. You can access your account, make transfers and pay bills any time, anywhere. No more waiting in line or stuck in the drive-through as someone takes forever and you begin to fume. If you?re on the road abroad and need to pay a bill you?d forgotten, all it takes is a few mouse clicks and you?ve escaped a late charge.
Think of it as the natural evolution of banking, although it?s probably going to be a long time before a majority of people are really willing to divorce themselves from physical buildings to the cyber world. And that?s understandable, especially among older generations, who?ve both been conditioned to think of banks as secure physical edifices and who also are less comfortable with computers (if they even own one) and more wary of transacting business online. Yet for the disabled, or those recovering from an illness that might have great difficulty getting to the bank, it?s ideal.
For me, online banking has proved to be a godsend, the perfect answer to my problems. I tested it for a few months before moving continents, making sure I was familiar with the ins and outs (and it will probably take you a little while to master the full intricacies and possibilities of the system). But for bill paying, at least, it?s worked with a wonderful smoothness.
It might be taking a while to really catch on?certainly compared to e-commerce?but make no mistake; online banking will be the wave of the future. There?s simply no reason to be tied to the past any more. Don?t go to your bank; let it come to you.