When data breaches are so common that they barely register in the news cycle, it makes sense to be skeptical about institutions like online banks. After all, a compromised savings or checking account can be the difference between a comfortable life and bankruptcy.
Whether you’re a diehard brick-and-mortar bank user, or you’ve been using online banks for years, it’s good to ask these kinds of questions. And when it comes to online banking, the answer isn’t always so simple.
There are a couple of factors that contribute to the relative safety of online banks. Here’s what you need to know.
Online banks can provide FDIC-insured accounts
Like traditional banks, many online bank accounts are FDIC insured. This provides up to $250,000 of insurance per depositor, per FDIC-insured bank, per account ownership category, which would apply if the bank were to fail. Accounts covered here include:
Our Picks for the Best High-Yield Savings Accounts of 2024
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Capital One 360 Performance Savings  APY 4.10% Rate info Min. to earn $0 Member FDIC. |
APY 4.10% Rate info |
Min. to earn $0 |
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American Express® High Yield Savings  APY 4.25% Rate info Min. to earn $0 Member FDIC. |
APY 4.25% Rate info |
Min. to earn $0 |
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Discover® Online Savings  Min. to earn $0 Member FDIC. |
Min. to earn $0 |
The accounts we recommend at The Ascent are all FDIC insured. This coverage also gives you access to supervision from federal and state regulators that protects you from certain bank practices, like overdraft fees.
However, while common, FDIC insurance isn’t necessarily a given. To make sure that an online bank is FDIC insured, you can use the FDIC’s BankFind tool, or give them a call at 877-275-3342.
Online banks offer the same digital security as traditional banks
Traditional banks and online banks both offer the option to access your bank account virtually. And they both offer the same digital security measures to protect your accounts. This can include multi-factor authentication to sign into accounts, data encryption, and fraud protection measures, such as monitoring accounts to look for suspicious transactions.
Regardless of whether you stick with traditional banks or use online banks instead, your banking details are always going to be sensitive data. So it’s vital that you protect that data against fraud. Here are a few ways that you can improve your online banking security practices:
- Use a unique, strong password (password generators can be helpful here).
- Never share your banking details with anyone.
- Install anti-spyware software on your computer.
- Avoid clicking links in emails, even if it looks like it’s coming from your bank.
- Sign out of your account when you’re ready to stop viewing your banking details.
In a similar vein, you may also want to consider freezing your credit, especially if your data is involved in a data breach. This would prevent criminals from opening new lines of credit in your name. You can do this by contacting each of the three major credit bureaus — Experian, Equifax, and Transunion — or visiting their websites.
As with any online activity, digital banking comes with risks. But if you’re diligent about protecting your data, and take time to research banks before entrusting them with your money, you’ll set yourself up for success.
