Online banking is wonderful. It’s difficult to believe that even as recently as ten or fifteen years ago, online banking was a rarity. It seems ubiquitous now (especially with so many online banks offering high yield savings accounts ). My first account was at our local credit union and they were ahead of the curve in offering banking online services. You could check your balance online, transfer between credit union accounts online, and do all sorts of cool online stuff! (Unfortunately, they haven’t upgraded non-security related features in fifteen years, but they are a credit union after all)
Since then, the number of features offered by banks and their online banking services has blossomed. There are banks that operate entirely online, from opening an account to depositing funds, with interest rates that beat the long-term CD rates of conventional banks. It might seem like old hat to many readers, but it wasn’t that long ago that the idea of a 100% online bank sounded like a scam.
It used to be that to transfer funds between accounts you had to rely on a paper check as the cheap option or go with a wire transfer as the more expensive option. Those transfers took a long time as checks first had to be mailed and then you waited for it to clear. Now? Everyone knows about the 9-digit ABA (American Bankers Association) routing transit numbers on their checks because you use it to link up accounts to make ACH (Automated Clearing House) transfers. Now a transfer takes less than a week if it’s between institutions and that’s mostly so banks can still play the float.
I’m a huge fan of ACH because I’m not a fan of checks. With all the bells and whistles online banking security features now have, you’d think fraud runs rampant online. The fact remains, a fact repeatedly numerous times in Frank Abagnale’s The Art of the Steal: How to Protect Yourself and Your Business from Fraud, America’s #1 Crime , checks are the biggest security hole in the financial world. A check has your name, your address, your bank’s transit number, your account number, and probably your signature depending on when it’s lifted. When you mail a check, it spends a lot of time off the radar as it sits in your mailbox, sits at the post office, sits in the mail truck’s bin, and then sits in the other mailbox. ACH transfers fly through the wires and, hopefully, is always traceable.
While phishing is a big online threat, you can protect yourself against phishing  fairly easily (never click a link, never provide information unless you called them).
I used Bill Pay for the first time this month. Shocking right? Considering the Bill Pay option has been available for many years (my friend, having discovered the service a few years ago, once sent me a penny), I’m pretty far behind.
Why the delay? I just don’t have many bills that don’t auto-debit. Despite the risks of auto-debit, I find it superior to bill pay because everything is electronic. With bill pay, a check is still being sent and that represents a risk. The bill I paid was my annual homeowner’s association dues. It’s the only regular bill that I paid by check, so it was the only bill I could pay with this feature. I was apprehensive at first because it was my first time but, as expected, it went through without incident. The only concern I had was that I couldn’t include the coupon slip (and I had no “account number” to link it to, but they can match addresses) but that probably won’t be a problem.
So Much Information
Back in the day, if you wanted to see the latest and greatest rates, you’d have to drive over to the bank and read it off the wall (or call I suppose but I never called, I just read it off the wall when I went to deposit checks). Remember those puffy gray, black, or tan signs with the Comic Sans font-type letters? The bank might have had a website listing potential rates on CDs or money market accounts, but those were never updated regularly.
Now? You can ladder CDs on a single page at ING Direct . Back then, you had to do the math yourself! All the rates you could ever want is available online, along with the ability to open accounts to your hearts content.
This goes hand in hand with the beauty of ACH transfers but I felt it deserved extra mention. The main idea in David Bach’s Automatic Millionaire book is that you need to make things automated. Don’t trust yourself to remember to contribute to your retirement, make it automatic through monthly deductions from your paycheck to your 401(k). You can’t forget, you can’t change your mind, it just happens. Your paycheck is a little smaller but you adjust and then, when you’re ready to retire, that nice fat 401(k) is ready for you.
Now you can automate transfers to for save for anything. Planning a vacation in six months? Start saving now with monthly transfers into a high yield savings account rather than putting it on a credit card or “hoping” you have enough. You can’t forget, or cheat, if it’s automatic.
It’s easy to forget how good we have things now. I can’t imagine having to call up my bank, struggle through those voice menus (entering my account number thirty different times) just to hear my balance. Isn’t technology grand?