4 Ways to Protect Your Money in an Online Bank

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Financial technology is getting better and better. We no longer have to go to the bank in person to move money – you can access your cash on your smartphone and even deposit checks by taking a photo of it (that blew me away the first time I saw someone do it).

If you’re looking to move your banking into the future, you may be thinking about joining an online-only bank (or perhaps you’ve already done so). Online banks have fewer overhead costs than traditional banks. You are therefore more likely to pay a high APR on your savings account and allow you to maintain a high-quality checking account without annoying management fees.

Read on for some great tips on how to protect your money in cyberspace.

1. Check for FDIC insurance

This is absolutely crucial because without FDIC insurance, your money is not safe from a bank failure. This rarely happens, but it is certainly possible – in the spring of 2023, three major banks in the USA went bankrupt within a few days. You can check your bank’s website to see if it is a member of the FDIC or use the agency’s BankFind Suite tool.

Fortunately, reputable online banks are covered by the same FDIC insurance as your local bank or the large bank that has a branch in your city. The Federal Deposit Insurance Corporation covers $250,000 per depositor, per insured bank, and per property category. If for some reason you have more money in a particular bank, consider splitting your money across multiple banks to keep everything safe.

2. Log in regularly

It’s a good idea to check your online bank accounts regularly. Log in a few times a week and make sure that any bills you paid have been debited from the account and that you have received any expected direct deposits.

Look for suspicious transactions that you did not make and notify your bank of possible fraud. Make sure your balance is where it needs to be based on how much money you have in the account.

Speaking of balances, if you have a linked checking and savings account at an online bank, make sure your checking account doesn’t remain overvalued. Even if it earns interest, that APY will likely pale in comparison to the APY in your online savings account. Why would you give up the passive income that a savings account can provide?

I earned over $2,000 in interest on my savings account this year – what about you? Check out our list of the best high-yield savings accounts and watch your money grow.

I choose to keep a fairly low cushion of just $500 in my main account at all times because I want to earn as much interest on my money as possible. This may be less money to spend on the review than you would like, but I strongly advise you to decide on a goal and make sure your money is working for you as best as possible – it is a tool after all.

3. Enable multi-factor authentication

You may be able to enable multi-factor authentication to log in to your online bank and I recommend you take advantage of it too. Multi-factor authentication requires you to provide your online account name and password, and then may also enter a numeric code sent to you via SMS or email.

This helps protect your money and data – it provides an extra layer of protection to ensure you, and not some shady scammer, have access to your information.

4. Sign up for notifications of all kinds

Online banks are embracing technology heavily, and you’ll likely have the option to set up alerts for various issues, such as: Such as a low balance, receiving a direct deposit, or suspicious transactions (such as those made outside your usual geographic area).

Definitely go for it (you can probably find it on the bank’s website and mobile app). If something goes wrong with your money or your paycheck is early in a particular week (hooray!), do you not want to know about it when it happens?

Online banks are pretty great – my online high interest savings account is by far the best bank account I’ve ever used. If you haven’t jumped on the online banking bandwagon yet, now is the perfect time. Just follow these tips to keep your cash safe.

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