What You Should Know About Internet Banking

Banking Consumers' Options

• You can go to a traditional "brick and mortar" institution that has a building and personal service representatives, but doesn't offer Internet banking services.
• Or you can bank at a "brick and click" financial institution that has a physical structure, and also offers Internet banking services.
• Or you can choose a "virtual" bank or financial institution that has no public building and exists only online.

Internet banking, and other types of online banking, offer advantages such as speed and convenience. But since the Internet is a public network, it presents some privacy and security issues. Knowing the "Do's and Don'ts" of Internet banking can help make your online banking experience more productive, safe and enjoyable.

Two Different Types of Online Banking

Internet banking is usually conducted through a personal computer (PC) that connects to a banking Web site via the Internet. For example, a consumer at home accesses a financial institution's Web site via a modem and phone line or other telecommunications connection, and an Internet service provider such as America Online, Microsoft's MSN Network, Earthlink, Juno or AT&T WorldNet.

Internet banking also can be conducted via wireless technology through both Personal Digital Assistants (PDAs) or cellular phones.

Electronic banking is conducted by using Automatic Teller Machines (ATMs), telephones (not via the Internet) or debit cards. Debit cards look like a credit card. But unlike a credit card, using a debit card removes funds from your bank account immediately.

What Internet Banking Offers — Services and Advantages

As a consumer, you can use Internet banking to:

• Access account information, review bills, pay bills, transfer funds, apply for credit or trade securities.
• You can find out if a check has cleared or when a bill is due.
• You can apply for mortgages, shop for the best loan rates and compare insurance policies and prices.
• And you can do all of these things anytime you want to — day or night.

Some people like to tie banking functions into personal financial software such as Intuit's Quicken or Microsoft's Money. This can make record-keeping and tax preparation quicker and easier. Many consumers also like the idea of not waiting in line to do their banking, and paying their bills without shuffling papers and buying stamps.

Protecting Your Privacy

You need to be concerned about privacy and security. Consider this: When you bank via the Internet, your personal and financial information may be shared with others without your knowledge.

A financial institution may want to share information about you to help market products specific to your needs and interests. For example, it might share information about your average checking account balance with an affiliate selling life insurance or securities.

Financial institutions have policies about what information they collect, how they use this information and with whom they will share it. Financial institutions are required to provide customers with a copy of their privacy policy. Reviewing this policy can tell you what information your financial institution keeps about you, and what information, if any, it shares with its affiliates or others.

You have the right to tell your financial institution not to share your personal information with others without your consent. You should be given a choice to "opt out," allowing you to limit sharing of your personal information.

• Do check for an "opt out" option.

How "Cookies" Could Affect Your Privacy

Internet technology allows financial institutions and other websites to track your browsing habits while at their site. This may be done using a small file stored on your PC called a "cookie." Tracking your browsing gives financial institutions information about your apparent interests and preferences. It helps them to potentially market goods and services to you based on these interests and preferences.

• Do check your financial institution's Web site privacy statement. Determine if the website uses cookies or otherwise tracks your browsing habits. If this tracking practice concerns you, your PC's Web browser may offer useful options.

A Web browser is a program on your PC that enables you to browse Web sites over the Internet (Internet Explorer and Netscape are two examples of browsers). Check the Preferences or Tools areas of your browser to look for cookies. Your browser may offer the option to notify you before a cookie is created, identifying who is attempting to place the cookie and giving you the option to accept or reject it. Your browser also may offer you the option to reject all cookies, or to accept all cookies.

Just be aware that some Web sites are designed to function properly only when their cookies are accepted. Blocking cookies may prevent normal access to certain Web sites or to some of their online options. If this happens, you can easily begin accepting cookies again.

• Do check your browser's options for accepting or rejecting cookies.

Security Tips — How to Protect Your Personal Information

Since the Internet is a public network, it's important to safeguard your banking information, credit card numbers, Social Security number and other personal information.

Some consumers have had credit card numbers and Social Security numbers stolen and used fraudulently. Of course, this can happen even if you don't bank online. By taking reasonable steps to protect your personal information, you can reduce the chances that it may be stolen.

• Do ask your financial institution about its security practices. How does it safeguard your information during transmission and on their Web site?

Web sites use Uniform Resource Locators (URL) as a kind of Internet street address. You can tell your browser which Web site you want to go to with the URL. When a URL begins with http plus an "s", it identifies the site as "secure," meaning that it encrypts or scrambles transmitted information. This prevents others from seeing your information when it travels over the Internet.

Also, most browsers and Web pages display a small icon of a locked padlock or a key to show that the site is encrypting your information during transmission. Your browser may also notify you when you are entering a "secure" Web site.

• Do make sure your transmissions are encrypted before doing any online transactions or sending personal information.

Is E-mail Safe?

E-mail is usually not secure. It's not a good idea to send personal information such as your Social Security number, personal identification number (PIN) or account numbers via e-mail, unless you know it is encrypted.

• Don't send personal information by ordinary e-mail.
• Do change any passwords or PINs you receive via e-mail that are not encrypted.

Other Security Tips

Dos

• Do make sure you are on the right Web site. Imposters have created Web sites with similar names to trick unsuspecting consumers into revealing personal information.
• Do make sure that the financial institution is properly insured. It should be insured by the Federal Deposit Insurance Corporation (FDIC). FDIC coverage only applies to deposit products such as savings accounts, checking accounts and Certificates of Deposit (CDs). The coverage does not apply to transactions involving mutual funds, stocks, bonds and annuities.
• Do be "password smart." When possible, use a mix of letters and numbers for added safety. Change your password regularly. Keep your password or PIN to yourself. Avoid easy-to-guess passwords like first names, birthdays, anniversaries or Social Security numbers.
• Do check bank, debit and credit card statements thoroughly every month. Keep good records. Save information about banking transactions. Check this information for agreement with account statements, debit card bills, and credit card bills. Look for any errors or discrepancies.
• Do report errors, problems or complaints promptly.
• Do keep virus protection software up-to-date. Back-up key files regularly.
• Do exit the banking site immediately after completing your banking.

Don'ts

• Don't have other browser windows open at the same time you are banking online.
• Don't disclose personal information such as credit card and Social Security numbers unless you know whom you are dealing with, why they want this information and how they plan to use it.
• Don't download files sent by strangers or click on hyperlinks from people or sites you don't know. Sometimes doing this can infect your computer with viruses that can damage hardware or software.

Consumer Regulations that Protect You

There are federal regulations that protect consumers against unauthorized transactions, including Internet bank transactions as well as those conducted via an Automated Teller Machine (ATM) or using a debit card.

The Electronic Funds Transfer Act, or Regulation E, says a consumer's liability for an unauthorized transaction is determined by how soon the financial institution is notified. A consumer could be liable for the entire amount unless the unauthorized transaction is reported within 60 days of receipt of the financial institution's statement detailing the unauthorized transaction. The sooner the unauthorized transaction is reported, the less the level of liability; therefore, it's important to report unauthorized transactions immediately to limit loss. It's also important to remember that it might take time while the unauthorized transaction is being investigated for money deducted from your account to be credited back to it.

The Truth-in-Lending Act, or Regulation Z, governs illegal credit card use. While bank transactions conducted over the Internet are governed by Regulation E, credit card purchases over the Internet are governed by Regulation Z. When making purchases via the Internet, it's smart to use a credit card. That's because if a credit card is stolen or used by an unauthorized party, liability should be no more than $50 if proper notice is given to the credit card vendor. The vendor can be telephoned, but it's best to follow up the call with a letter stating that the transaction was made by an unauthorized user, and detailing the account number and the dollar amount of the unauthorized transaction. Consumers do not have to pay the disputed amount during investigation.

All financial institutions are also subject to Regulation P covering privacy and the Interagency Guidelines for Safeguarding Consumer Information.

All federally-insured financial institutions are subject to federal regulations concerning the distribution of personal information. These institutions must comply with established guidelines for safeguarding this information. They are also subject to onsite examinations to ensure compliance with consumer laws and regulations.

How to File a Complaint

It's best to contact a customer service representative or senior manager at your financial institution and discuss the problem first. The problem may simply be a misunderstanding.

But if you are still not satisfied, you can file a written complaint containing the following information:

• Your name, address, and daytime telephone number, and the name and address of the financial institution involved in your complaint or inquiry.
• Your account number, type of account, the names of the people you talked to and a description of the problem.
• Describe exactly what happened and the dates involved. Include copies of any letters or other documents that may help to investigate the complaint; however, don't send originals. Sign and date your letter.

You may write directly to the financial institution with which you experienced the problem, or to the authority that regulates that institution. If you don't know the right regulatory authority, call the institution and ask.