MONEY MANAGEMENT

ONLINE BANKING: SHOULD YOU OR SHOULDN’T YOU?

(November 30, 2004) — Does being able to check the balance in your checking account at 2 a.m. have a certain appeal? How about having your mortgage payment made while you’re vacationing in Europe? Online banking and bill payment comes with many conveniences, but it’s not for everyone, reports the Virginia Society of CPAs.

If you’re computer savvy, transfer money between bank accounts at the same bank and pay more than a few bills a month, you may be a good candidate for electronic banking and bill payment. Here are some questions that can help determine if you should take your banking online.

What Are the Key Advantages of Online Banking?

Online banking allows you to access your bank accounts and pay bills at home, at work, on business trips or on vacation. All you need is access to a personal computer and an Internet connection. Some online banking systems allow you to download banking transaction information to personal software applications, such as Quicken and MS Money, making it easier to manage your finances.

What Types of Transactions Can You Do Online?

With online banking, you can check your account balances and view account activity. This makes it easy to verify ATM cash withdrawals, debit card purchases and other transactions you may forget to enter into your checkbook register. You can also transfer money between your accounts, view statements online, and, in some cases, even see the front and back of paid checks.

Are There Transactions That Cannot Be Completed Online?

When it comes time to make a deposit to your account, you’ll need to stop by your local branch, although you can arrange for direct deposit of your payroll, government or dividend checks. For cash, it’s off to an ATM or bank teller.

How Does Online Bill Payment Work?

To set up your online bill payment account, you will need to provide your bank with the account number and the correct remittance name and address for each company you plan to pay electronically. To pay bills, you enter your payment requests online. The bank debits your bank account for the appropriate amount and pays the payee either electronically or by check. You can schedule payments in advance or arrange to have regular, fixed-amount bills, like your mortgage or loan payment, paid automatically each month.

How Quickly Do My Transactions and Bill Payments Post?

While electronic bill paying may be easier, it’s generally not faster. Most banks suggest that you allow anywhere from five to 10 days for your payment to reach the payee. To help you monitor your payments, most online bank sites provide a payment activity page that shows the status — scheduled, pending or processed — for all your payments.

What Fees Should I Expect to Pay?

Most banks don’t charge for online banking, but fees for electronic bill payment vary. Banks typically charge a monthly fee for a specific number of bill payments, with an additional per item charge when you exceed the limit. Some offer free or discounted electronic bill paying for the first two or three months or when you maintain a specified balance in your accounts.

What if I Have a Dispute About a Ttransaction or a Bill Payment?

Your bank is required to provide you with its error resolution procedures. Be sure to follow the rules closely, and pay particular attention to the deadlines for reporting errors.

How Secure Is Online Banking?

Most banks use 128-bit encryption technology, which is the most secure way to send information over the Internet. In addition, online banking services require some combination of user name, password and personal identification number (PIN) to access your account.

CPAs say that while this should give you confidence regarding the security of your transactions, be sure to read your bank’s privacy notice on its Web site to learn specifically how your data is protected.

The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at www.vscpa.com.