What is internet banking, why should you use it and what you need to be wary of!

I was talking to some friends last week. They graduated a few years ago. They have common sense and are very logical. This is the case for most of their friends too, yet lots of them feel very confused and ignorant about how to manage their finances, how things like the fiscal year affects them, why they should save and so on.

This is something they were not taught in secondary/high school and unless you tell me otherwise, the syllabus has not changed. Thus many young adults go to Uni and have no idea how to manage their money, limit how much debt they accumulate & as a result, get very stressed. So I’m going to try and answer some questions in separate posts.

What is internet banking?

Definition 1 – Internet banking lets customers conduct their banking online.

Definition 2 – Where banking transactions such as payments, transfers and account balances are made via the internet.

Internet banking

There are lots of reasons to bank online – you can track your finances 24 hours a day and take decisions instantly.

Advantages
Most online services let you check balances, transfer funds, pay bills and buy financial products such as insurance. You can also set up direct debits and standing orders, amend overdrafts or apply for a loan. It’s also possible to see all your old statements.

Many online banks, being at the forefront of personal finance, offer offset or current account mortgages. These let you trade off the balance in your savings or current account against your borrowings, which can mean cutting the interest on your mortgage.

Because online services are cheaper to run, banks also tend to offer a higher rate of interest. Although this isn’t always the case. Some of the larger, traditional banks offer online accounts with poor rates of interst.

Also, be wary of online savings accounts that pay suspiciously high rates of interest. They may do this to attract new customers and then drop the rate. If you are vigilant and are willing to move your money around you can take advantage of some of these ‘loss-leading’ deals and then jump ship.

Online security
The safety of websites remains an issue. The industry spends milions of pounds each year in a bid to make systems secure. But the harder they try, the harder the hackers try.

On rare occasions, even customers have innocently discovered ways of looking at other people’s accounts. Either way, virtually banks guarantee to refund any money lost as a result of online fraud. That said, the experience can be traumatic and is nearly always inconvenient as it may take a bank weeks or months for the bank to refund your money.

So-called ‘phishing‘ has also caused concern. People receive an official-looking e-mail supposedly from your bank with a link to a bogus website. Customers who click on the link and log in, inadvertently give away their username and password.

Phishing e-mails (hackers slang for fishing for bank details) will not cost you a penny if you never hand out your password and details. Remember that your bank would never ask for these via email.

However, there is a grey area. Technically, banks could say you have breached their rules by giving out your password. In practice, they are unlikely to do this. If they have done, tell us about it by emailing editor@thisismoney.co.uk.

Read more about how to avoid being the victim of a phishing scam here