How Does Online Banking Work?

Online banking provides many identical services that a traditional bank does with the biggest difference is in teller availability: Human tellers leave; electronic tellers—the websites—are available virtually all day, everyday—weekends and holidays, included.

Online Banking Structure

Online banking mirrors traditional banking procedures in many instances, and in some, actually improves security and reduces both banks’ and customer’s costs.

In electronic form, online banking still allows:
1. Deposits to the account, whether via payroll deposits or funds transfers
2. Bill payments via automatic payment schedules or individually ordered payments. Most bill pay users opt for the bank-generated checks, but payments can be ordered in a one off situation or scheduled regularly.
3. Statement formats can be electronic or paper; most who prefer online banking choose the electronic statements for convenience and reduced paper use.
4. Wire transfers to accounts within and without the bank’s structure, though some banks charge additional transaction fees for wire transfers.
5. Differing services depending on the individual financial institute.

Online Actions

All online banking transactions are initiated by creating an online account identity. Account login name and password creation is followed by choosing and answering security questions. It’s not recommended that security questions and answers be common or known by others; they should have unique answers, whether historically true or not.

For example, if a user chooses a security question, “What is the name your first elementary school,” choose an answer that is not the actual name or the actual elementary school. Use instead the name of another school or anything else that is easily remembered.

Provide an email address that is not tied to an Internet Service Provider. If the user changes ISPs, that email address will be lost. Instead, use a free email address that can last for as long as the user chooses.

Once the security aspects are in place and verified, look around the bank’s website and note important areas, such as:
1. Account activity
2. Statement delivery change areas
3. Customer Service options
4. Bill pay procedures, if any
5. And any other area provided on the website.

Online banking often reduces funds availability delays and hastens resolution to disputes and inquiries. While some complaints and problems do require human intervention, Customer Service Agents are available for longer during a calendar day than local branch personnel are.

Online banking differs from traditional banking when physical checks or cash is deposited; human interaction via a drive thru lane or at the counter is required. Cashier checks, traveler checks, and money orders cannot be purchased from the institution via online banking, but because all transactions allowed are electronic, tracking and accountability are easily provided.

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