Monday, February 8, 2010

Online Banking

Despite all the hoopla and negative press, Bank of America has excellent online service.

Online banking is very prevalent today and there is no reason not to use it. I was skeptical when online banking first became popular, and I was not an early adapter. But in this day and age, if you are still putting stamps on envelopes and writing checks to pay your bills, you are not only wasting money, but risking it as well.

Many people have vague, unfounded fears about online banking. They believe that somehow the computers will go "haywire" (a term favored by the elderly) and all their life's savings will disappear overnight. But if you think about it, this fear is unfounded - or at least it is not alleviated by using checks. When you write a check or go to the bank, the transaction is almost immediately converted to an electronic transaction (Check 21). If the computers are going to go "haywire", well, they're taking down your paper checks as well.

There are a number of disadvantages of using paper checks and mail for paying bills:

  1. Mail can get lost or delayed, resulting in late payment of bills. This can result in late fees, confusion, phone calls from creditors, damage to your credit history, and in the case of credit cards, jacking of your rate to 28% or more.
  2. "Identity Theft" is more likely to occur from someone stealing your mail, than your e-mail. Thieves love to snag outgoing mail with checks and then "wash" the checks and write new ones. Similarly, bank statements and other financial data, when sent by paper, is relatively easy to steal from a mailbox.
  3. You pay 42 cents to mail each check, which if you are paying 10 bills a month, comes to $4.20. Over a year, this comes to $50.40 -enough for dinner for two at a nice restaurant.
Online banking, on the other hand, is far easier to do, and faster and more efficient. And if you are careful, it is just as secure as paper banking, if not more so. It also allows you to keep better track of your finances and know exactly what your bank balance is, in real time, on a day-to-day basis.

I have been using Bank Of America for several years. There are other good banks out there, but BOA has an excellent online system. There have been some criticisms of BOA in recent years. Some criticize the actions of the Bank and its officers during the recent downturn. And the buyout of Countrywide Mortgage certainly is giving shareholder's ulcers. But these do not affect you, the customer, at all.

And I have read online, complaints from people (losers) who whine about overdraft fees, bounced check fees, and the like. All banks have these, and if you keep careful track of your balances, you'll never have such problems. And since everything is on the computer and accessible online, 24 hours at day (or by phone) there really is not reason you should ever bounce a check, unless you have a drug habit.

Paying bills electronically started back in the 1980's. I recall my Father appearing in a print ad for Syracuse Savings Bank's "Pay By Phone". The system used there (before the Internet) allowed you to call the bank, read your account number and password to the operator, and then designate which bills you wanted paid. The bank would then cut the checks and mail them out to the payees, all for a nominal fee. It was pretty crude, but it worked.

Today, we can do this online, and it is far easier. Many payees will automatically send bills to your bank account, and you are notified by mail. You can then log in and decide when to pay the bill, and for how much. You can also elect to receive the bills electronically or statements in e-mails or online.

If you spend a lot of time traveling, this is a Godsend, as you no longer have to worry about missing bills or missing payments. And many people are using this system today - much to the distress of the Postal Service. The volume of mail has dropped off significantly, and the loss of bill and statement revenue is one aspect of this problem.

I also enter all of my checks and credit card charges into Quickbooks (more on this later). You could also use Quicken, which is usually distributed free with new computers. And many online banking services allow you to "synchronize" their data with your Quicken data (I have yet to try this). Afraid to use Quickbooks or Quicken? Check our your local Community College or Adult Education Center - they may offer courses on the program.

One nice aspect of online banking is that you can setup automatic deductions from your account to go into savings. So, for example, you can pay $100 a month into your IRA, instead of waiting until April and trying to come up with the money.

And the fees for all this? Usually nothing, or free. BOA has a deal where if you set up your account to automatically put $25 a month into your savings account, they waive the monthly banking fee. You can even take the money back out, if you want to. It is weird, but they do it.

Now of course, you do have to take some precautions. If someone came up to you on the street and said "I work for your bank, can I borrow your checkbook for a minute?" you'd tell them to piss off. And yet online, many people hand over their account number and password to the first person who sends them an e-mail claiming to be from the bank.

It is not hard to spot these frauds, and if you are ever uncertain about an e-mail purporting to be from the bank, just log into your account in a separate window (NEVER follow a link from an e-mail!). Or call the bank, if you are in doubt.

ATM Machines have come a long way in recent years as well. Many people are paranoid about using ATM machines after seeing messages posted online about people stealing your identity by reading your PIN or whatever. Obviously, you do not use an ATM machine in a bad neighborhood, or with someone standing behind you. Use your common sense.

And unless it is an emergency, never use "foreign" ATM machines that charge fees. Most banks charge fees for using such machines, so if they charge $2.50, chances are, your bank will charge another $2 on top of that.

One advantage of BOA is that they are everywhere (at least on the East Coast) and it is not hard to find an ATM machine locally. You can call their 1-800 number, enter your zip code, and find one, or you can search online.

There really is no reason to go to the bank anymore and see a teller, or wait until "Business Hours". Modern ATM machines (at BOA anyway) take deposits by scanning in your check electronically (no deposit slips or deposit envelopes!). The machine then displays an image of the check and electronically reads the data off the check (or asks you to input the data if it can't read it). This is a real time-saver, as depositing checks by mail is slow and uncertain (and they can get lost).

Moreover, thanks to Check-21, checks deposited one day are usually credited the next. No more waiting "seven business days" to get access to your funds. Electronic banking represents a huge improvement over the past.

If you are one of the few people who has not gone online yet, the time to start is now. Waiting until the end of the month to know what your bank balance is, is simply not workable. Keeping track of your money is something you need to do in real-time, and thanks to electronic banking, you can.