When online banking first became available in 1995, the inventors of the process predicted it would eventually replace the traditional banking which had previously been the only available option. While the prediction has yet to come to fruition, online banking has indeed changed the way people manage their money. With millions of people currently using online banking either for full time banking needs or for savings or bill paying, it has indeed proven itself as a useful tool in money management. There is no immediate threat that traditional banks will become obsolete however, as many people are still leery about trusting their finances with virtual banks or the technology that makes online banking possible. The following are reasons that have prevented many people from making the switch to online banking.

• Security- Despite advances in technology and improved security methods, one of the major reasons people are afraid to bank online is the fear of identity theft, credit card fraud or security breaches which would make their banking information vulnerable to hackers. Virtual banks or other financial institutions which provide online banking services go to great lengths to ensure personal and financial information is secure at all times and are also required to comply with federal regulations in respect to privacy and security. Unfortunately just as experts continue to develop technology to make online transactions secure, there is always the chance a technologically savvy hacker could find a way to penetrate these protective measures. That being said, the biggest danger of banking online generally is found on the end of the account holder versus the bank. Before banking online or performing any financial transaction for that matter, make sure you understand what precautions to take to ensure your information is protected.

• Availability of funds- While online banking offers many conveniences not found with traditional banking, one of the biggest complaints many people have with virtual banks is the availability of funds. Depositing, transferring or withdrawing money from some online banks takes longer than going to your local branch and making a withdrawal. This means that if you use on online bank for your day-to-day banking, you may find a delay of up to 5 business days for deposits to post to your account. Certain online banks do offer a credit or debit card that you can use for purchases or the ability to pay bills directly from your online account. Even so many people find the inability to “instantly” access their money a deterrent to banking online.

• Technical difficulties- Power outages, problems with your Internet or down websites can turn the convenience of online banking into a headache. While these occurrences are the exception, not the rule- if you are in a hurry and have to make a transaction, view an account or perform other actions, technical difficulties can be inconvenient. A bigger worry is of course that transactions may be posted incorrectly which could cause real financial problems that could take days to resolve. Of course these issues could arise at your local bank, however when you bank online, you do not have the option of simply dropping by the local branch to correct the problem. With virtual banks you will have to call the bank for all issues which could become frustrating if you get involved in a game of phone tag or have a bank with less that exceptional customer service.

As you can see there are some downfalls to online banking, however there are downfalls to traditional banks as well. If you have not yet jumped on board the online banking wagon, you should take the time to compare the pros and cons before making a decision. There are after all millions of people currently banking online, so the chances are you will find the benefits outweigh the potential downfalls.

Tags: online banking, online bill pay, traditional banking, virtual banks

This entry was posted on Sunday, July 26th, 2009 at 11:18 am and is filed under commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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