From bricks to bits: 10 questions
to ask before diving into online banking
By Michelle Samaad • Bankrate.com

If you believe all the hoopla about banking on the Internet, you're probably wondering if you're missing out.

Not to worry, says one industry watcher.

Approximately one-third of U.S. online-bank customers discontinued their accounts during the past 12 months, according to a recent study by Cybercitizen Finance, a division of online market researcher Cyber Dialogue, based in New York.

Replacing departing customers
But as fast as people departed online banking, others took their place. From July 1998 to July 1999, while 3.1 million people stopped using their online bank accounts, 3.2 million people opened electronic accounts, according to the report.

Why the coming and going?

Fifty percent of the people who stopped using online banking said they found the sites to be too complicated or the customer service dissatisfying, according to Michael Weiksner, manager of finance strategies for Cyber Dialogue.

And if you polled a non-Internet banking customer, "The fear of someone breaking into their account would probably be the greatest concern," says Linda Sherry, editorial director at Consumer Action, a privacy rights group based in San Francisco.

Benefits of online banking
So, what's the good news about doing online banking? For the converted, the convenience of instant account access and online bill payments are the main lures.

The real question is whether you really need to do your banking electronically:

• How many accounts do you have with your bank?
• Do you frequently transfer balances among them?
• How many bills do you pay each month?
• Is the paperwork a monthly nightmare?

If your accounts are spread across several institutions, or you write just a few checks a month, it may not pay to do your banking online. If you frequently use the automated teller machine to withdraw cash or transfer balances among your accounts, you should probably use a local bank. Otherwise, you'll be forced to pay heavy fees if you use another bank's ATM. But if you have multiple accounts at one bank, a torrent of monthly bills and little free time, online banking may be an option.

The right questions to ask
To help make your decision, we've come up with a list of questions you can drill your bank or credit union on before making the cyber move to online banking.

1. What fees do I need to be aware of before signing up?
   It depends. Sometimes account access is free over the Internet but not free with bank or money management software. Sometimes access is free for a specified number of sessions per month, after which you're charged for each session. Electronic billpaying is almost always a separate charge; usually, there is a monthly fee a specified number of payments per month, after which you pay a small fee for each payment. Fees typically range from $3.95 to $6.50 a month for basic electronic banking services. Some banks charge an additional fee for electronic bill payment, ranging from $4.50 to $6. But many fees can be eliminated if you keep enough money in your account. Find out if your bank considers deposits in all your accounts in assessing fees. Some banks will lure you in with free Internet banking for a certain time period, and then hit you with monthly fees. The key is to shop around and read the fine print.
2. How do I sign up for online banking?
   You'll typically need a checking account established with the financial institution first. Most banks and credit unions have a link on their Web site that allows you to apply for online banking and submit the application. Once the online application is sent to the bank, within 5 business days (or in some instances the same day) your financial institution will send you a startup package that will contain a user identification number, password and instructions on how to begin online banking. Keep in mind that with online banking you can open bank accounts in other states with ease. However, states differ in their banking regulations, and not every fee or service will apply in every state. Find out your bank's policy.
3. Will I need to use software to set up my accounts?
   Probably, if you want to do more than just access your account. Besides bill paying, you may want to manipulate the raw data to generate management or tax reports. For that, you'll need financial software, such as Quicken or Microsoft Money. Most banks allow you to download your account into these programs. The bank's proprietary software is usually provided without charge.
4. What kind of services can I expect with online banking?
   In most cases, you can check balances and view account activity on all your accounts: checking, savings, credit card, mortgage loan, auto loan, line of credit, CD-based IRA and so forth. You can transfer money between accounts and handle housekeeping chores such as a change of address or ordering checks.
5. What if I have a dispute about a transaction or bill payment?
   Contact your bank or credit union immediately! With bill payments, by law, consumers have up to 60 days from the account statement date to notify banks in person, by telephone or in writing, of an unauthorized payment or an incorrect payment amount. With transactions, resolving a matter can take up to 10 business days. To be safe, customers should keep a paper trail of all transaction and bill payments.
6. How quickly do my online transactions post?
   Account information is updated daily to reflect all account activity. Real-time access means you can access your account, pay your bills online, conduct an online wire transfer 24 hours a day, seven days a week. Some banks allow you to see the front and back of your canceled checks as well as view your bank statements online.
7. What about security: Should I be concerned about someone breaking into my online accounts?
   The likelihood of someone hacking into your checking account is very remote, say online banking experts. All banks use secure socket layer encryption, which is the industry standard, in the interactive sections of their sites and require secure browsers such as Netscape Navigator 3.0 or higher, Microsoft Internet Explorer 3.0 or higher, or AOL 3.0 or higher. For even tighter security, many banks require that browsers be capable of 128-bit encryption, which limits your browser choices to Navigator 4.0 or Internet Explorer 4.0 or higher. Another safety measure is the user ID and password (which you choose yourself) that you'll use to log into your account. What this all means is that there are layers and layers of protective firewalls a hacker would have to break through to get your cash. Even then, he would need your password. To be safe, back up your files on a diskette each time you complete a transaction.
8. If I need to talk to a real person, what do I do?
   Any bank or credit union worth its salt will have a handy and free customer service phone number should you have questions. Unfortunately, some banks will charge you per phone call if you have a question about a payment gone awry or if you simply have a question. If a customer service number is not listed prominently on the Web site, beware. It could be indicative of the bank's attitude.
9. What transactions can't I do through online banking?
   You'll still need your ATM card for cash withdrawals. While some banks will provide postage-paid envelopes for deposits, many hope that you will apply for direct deposit.
10. How do I discontinue the service if I'm not satisfied with it?
    Notify your bank or credit union and tell them to deactivate your online service. It typically takes up to 10 business days to stop the service. If you've signed up for bill payment service, make sure all your bills have cleared before stopping that service.

-- Posted: Sept. 14, 1999