How to Be Sure an Online Bank is Legitimate

The growing popularity of the Internet has led to major changes in how we do almost everything, and banking is no exception. Most banks offer online banking so we can manage our funds from home. Some banks do all their business online, rather than relying on traditional neighborhood branch banks. This new technology makes everything much more convenient—but does it compromise the safety of our money?

As with any business transaction on the Internet, it’s important to know how to protect your personal information when you’re using online banking. One important first step is to be sure your online banking institution is legitimate.

If you’re using online banking through an established traditional bank, this isn’t really a concern. But if you’re one of the growing numbers of people taking advantage of banks that conduct business solely online, you’ll want to do a bit of research before trusting one of these banks with your money.

Video: Secure Online Banking

One important thing to look for on an online banking site is their general contact information. A bank should list its physical address, as well as phone numbers for customer service. A business history is a common addition, as well, and can tell you something about how long the bank has been in business. You can also follow up on this information to investigate the legitimacy of the bank. Call the phone number to see who answers. Ask questions, and see if the answers seem genuine to you.

The FDIC logo on a bank website is another indication of legitimacy. If other things about the site seem fishy, though, you can follow up by calling the FDIC directly or checking for the bank on the FDIC online directory.

Other things to look for include:

• A website that looks unprofessional
• A URL that is overly long (this could be a temporary URL)
• A URL with a name similar to a known bank, but not identical
• No “About Us” information listed

None of these by itself necessarily means the bank isn’t legitimate, but if you see any of these elements in the bank’s website, it would be a good idea to dig a little deeper. If you do find any problems with your online bank, it’s important to know your rights as a consumer, and how to report any issues you might have.

How to Protect Your Private Information

Regardless of what kind of institution you use for your online banking, you always want to be sure your private information is kept private. Truthfully, online banking is just as safe as traditional banking, if not safer, because of the layers of encryption, protection, and other precautions taken by legitimate banks. But there are still things you can do to further ensure the safety of your account information.

First, take advantage of the security offered by the bank itself. Use passwords, PIN numbers, and privacy questions to add levels of security to your account. When you choose a password or PIN number, be sure not to use something that could be easily guessed. Also, don’t write passwords and PINs down and leave them where they could be found.

Only enter account information through a secured interface. Most banks use encrypted pages for account information. You can tell a page is encrypted by a “lock” icon that appears on the border of your browser window, usually in the lower right-hand corner.

Keeping your personal computer’s firewalls and virus protection up-to-date is another way to keep your financial information secure. These precautions keep outsiders from lifting information out of your computer. Also, if you use a wireless connection, be sure it’s secured with a WEP code so it’s only accessible by people with the password. And if you’re out at a café or hotel with unsecured wireless, don’t do your banking there. Save that for the secured connections at home.

Video: A Strong Password

How a Bank Uses Your Personal Information

A bank does reserve the right to use your personal information under certain circumstances. While this might vary from bank to bank, typical uses include:

• Within the bank and its affiliates to ensure against unauthorized access of your accounts
• Within the bank and its affiliates to conduct everyday business, such as loan authorizations
• For legal purposes, such as tax reporting
• To market financial products within the bank and its affiliates

Your bank should have its privacy policy, which delineates all the possible ways it’s likely to use your information, available for your review on its website. Within this privacy policy there should also be an opt-out procedure. If you don’t want your information to be used for anything other than official bank business, you can opt-out, usually via a phone call or letter to the appropriate department. If you’re concerned about how your bank might be using your information, look for the privacy policy for clarification.

Examples of Bank Security Breaches

In spite of multiple precautions, security breaches do happen. Some recent examples:

• In January of 2009, Heartland Payment Systems, a credit card processing company, reported a security breach that affected over 500 different banks. Several thousand credit cards had to be replaced.
• In 2008, a tape with information about 4.5 million Bank of New York Mellon customers disappeared. The unencrypted tape held social security and bank account numbers.
• In November of 2008, over 500,000 online bank accounts were compromised by a single Trojan virus.
• In Birmingham, Alabama, a bank programmer stole a hard drive containing data on over a million accounts. The information was used for debit card fraud.

Sometimes, these security problems are out of our hands. But if you make sure you’re dealing with a legitimate bank, and are handling your personal information with as much care as possible, your chances of enduring a security breach or a case of identity theft are much lower.