Online Banking: The Convenient Way
to Manage Your Personal Finances

Using the Internet to perform day-to-day financial transactions has become the attractive alternative to branch visits in recent years for a growing number of American bank customers. You can pay bills, view account balances and transaction histories, set up automatic bil payments, transfer money between accounts, and even apply for credit cards, mortgages, and other types of loans—from the comfort of home or on the road. With an Internet connection, 24/7 online banking is easily accessible on your laptop, smartphone, or PDA from any location.

According to the most recent survey by the American Bankers Association (ABA) of more than 1,000 consumers in 2010, 36% of respondents said they prefer online banking over branch visits or ATMs, which is an 11% increase from the previous survey's results. The steady rise in online banking's popularity is due to several important factors, such as convenience, efficiency, safety, 24/7 availability, and mobile device access.

The research indicated that the appeal of online banking is not just limited to a younger age group, but is the preferred banking method of customers between the ages of 35 and 54 who have an annual income of over $75,000, and reside in the Western part of the country. However, the report also showed that 33% of customers over age 55 still prefer branch visits for conducting their personal transactions compared to only 20% in this age group who engage in online banking. When asked about their second choice of banking method, 25% of respondents cite branch visits, 15% use ATMs, and 3% (18 to 34 year olds) use smartphones, PDAs, etc.

The convenience of an online account can save time that would otherwise be spent possibly waiting in line, as well as traveling to and from your branch. In addition, online banking may also offer a more cost-effective way to perform your financial transactions. Depending on your bank's online policy and fee structure, you may be able to reduce or eliminate monthly bank fees altogether, as well as get higher interest rates on certain types of accounts. Further, you will not only save on stamps with online bill-paying, but by viewing your monthly statements online instead of receiving paper versions in the mail, you may also be helping to save the environment.

How It Works

To open an online account with your bank, you will first need a user name and password in order to perform transactions. Setting up an online bill-paying system involves registering the bills you pay regularly and specifying which account you will use to automatically pay these bills. If you have monthly bills owing the same amount, you can schedule a recurring payment. Or, if monthly amounts vary, you can arrange to pay those bills on an individual basis. Should a creditor notify you that a payment has not been received that you are certain you made, you will have proof of your attempted payment with an electronic record of the transaction. Bank websites also frequently allow customers to view images of canceled checks or place stop payments on checks.

Safety Precautions

Online banking is generally as secure as other methods, and customers can be confident that bank websites have invested in security systems, such as data encryption, which makes accessing account information practically impossible. A majority of banks also use Multifactor Authentication to guard against phishing, dictionary attacks, and keystroke logging viruses. As an added safety measure, bank websites require customers to answer a series of security questions when the account is opened, and lock out users after a brief period of inactivity.

Customers can perform their own safety checks for tracking account activity by signing up for e-mail alerts when specific transactions occur, checking up-to-the-minute balances, and viewing full transaction histories. In this regard, the easy accessibility of online banking provides a way to closely monitor your account for any potential fraudulent activity or attempts to steal your identity. However, it is your responsibility to protect your password, and install a secure firewall and up-to-date anti-virus protection on your computer or mobile device to ensure a safe online banking experience.

Banking on the Future

Nessa Feddis, ABA vice president, predicts that the future of banking is online, especially as Gen Yers come of banking age, but acknowledges the need for banks to continue to offer consumers a few options. "Online banking may be the most preferred method of banking but banks remain committed to providing multiple choices to serve all bank customers," she says.

Based on your individual needs, online banking may be the optimum choice for managing your personal finances, providing safe, convenient access from anywhere at any time, and potentially lower monthly fees and higher interest rates. For more information about online banking, contact your branch for assistance.

Life Insurance: Changing Times, Changing Needs

When Judy purchased her life insurance policy 10 years ago, she thought her insurance planning was complete. She assumed that if she paid her premiums on time, she could sit back and not think about life insurance anymore. Judy's life insurance may help to protect her loved ones from future uncertainties, but her policy should not be left to run on autopilot. Life insurance is just like any other piece of your financial puzzle. As your circumstances and needs change, periodic monitoring is needed to help ensure that your life insurance will achieve your desired objectives. Here are some questions that Judy, like all policyholders, can ask as part of an annual review.

Is My Coverage Up-to-Date?

To start, Judy may want to consider whether her original reasons for purchasing her policy are still applicable. She may also evaluate any additional needs. For instance, when Judy initially purchased her policy, she was newly married and owned a modest home. Now Judy and her husband, Jim, have four children and a much larger home. Is Judy's existing policy appropriate for her new circumstances? She may need additional life insurance to help cover a larger mortgage, pay college expenses for four children, and contribute to her family's financial future in the event of her death.

If Judy's existing policy is term insurance, she may want to consider converting it to a permanent contract. Permanent insurance contains a cash value component that offers the potential for tax-deferred accumulation, as well as the same death benefit features of term insurance. In the future, the cash value could be accessed to help supplement retirement income needs. Keep in mind that withdrawals and loans taken against a policy's cash value could reduce the death benefit, increase the chance that the policy will lapse, and may have tax consequences.

Have My Beneficiaries Changed?

Currently, the primary beneficiary of Judy's life insurance policy is her husband, Jim. If Jim were to predecease Judy, the policy currently names Judy's nephew as a contingent beneficiary. However, now that Judy has her own family, she may choose to update her policy's beneficiary arrangement to name her children as contingent beneficiaries instead of her nephew. In addition, if Judy and Jim eventually set up a living trust, a legal professional may suggest naming their trust as the policy's beneficiary.

Has My Estate Grown?

Regardless of the type of life insurance Judy owns and the beneficiary she chooses, the death benefit proceeds from the policy will be included in Judy's estate. As their asset base increases, the family may want to periodically monitor and update their estate planning strategies to help minimize the effects of estate taxation.

Life insurance may play a significant role in solidifying the family finances of couples like Judy and Jim. But as with all financial matters, life insurance policies need to be reviewed on a regular basis. Be sure to consult a qualified insurance professional to help you evaluate your present situation and determine an appropriate course of action.