Overview of Online Banking and Related Issues
When was the last time you walked into a branch office of your bank? The low interest and high fees on your account are partially due to the bank's need to pay rent on that building and keep tellers behind those windows. If you're not using those services, why are you paying for them? You should consider opening an account online. Online banking is growing in popularity, as it offers another level of convenience for managing your finances.

There are three ways to access an online banking account (in order of increasing popularity): through a personal finance software package like Intuit's Quicken or Microsoft Money, through the bank's proprietary software, or through the bank's internet web site.
If you already use Quicken or Microsoft Money, you'll probably want to bank through this software, but if not, you'll probably be better off using a bank's web site.

Online banks can be divided into two types: traditional banks which also offer online banking, and online-only banks. Below, we consider the pros and cons of each.

Here are some of the advantages of online banking through traditional banks:For online-only banks, all of the advantages above still apply, and in addition...Here are some of the disadvantages of online banking through traditional banks:For online-only banks, all of the disadvantages above still apply, and in addition...But is online banking safe? In a word, yes. Although no online system is completely safe, banks have a vested interest in making their customers feel comfortable about online banking, and employ firewalls, high-end data encryption, and other measures to maintain a high level of security. In fact, the least secure step in the process is usually the account holders' password and PIN number, if they don't take the necessary steps to keep them secret. Any bank you're considering should have detailed information on its site explaining the steps they take to keep your account secure. Regardless, the government's Regulation E states that if you notify your bank within 2 business days after discovering any fraudulent activity on your account, your liability is limited to $50.

So who is online banking appropriate for? Those who are already online, who pay more than 10 bills per month to pay, and/or who already use a personal finance software program like Intuit's Quicken or Microsoft Money will benefit the most from online banking.

If you've decided to go the online banking route and you're ready to choose an online bank, be sure to perform the same type of evaluation that we recommend in our choosing a bank section .

Online Bill Paying

Although we discussed online bill paying briefly above, the topic is important enough to warrant some additional discussion. There are numerous benefits to paying bills online:There are three levels of service: online bill paying, online bill presentment, and full-service online bill presentment.

Account Aggregation

Most people have complex financial situations. They bank, pay bills, borrow, buy insurance, save, and invest. Each account has its own ID number, login password or PIN. It can be difficult to manage all these activities in a cohesive way. A new generation of online services are trying to offer solutions to handle this complexity. Such services are called "account aggregators", and they make it easier to manage a large number of financial accounts from a central location. Web portals offer such services, as well as smaller providers such as Yodlee and Corillian. While some individuals are concerned about security and privacy issues, these providers understand the importance of this and work hard to make their systems as safe as possible.
This article was brought to you by the InvestorGuide Staff Writers and Editors.

Copyrighted 2015. Content published with author's permission.

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