Professor Elizabeth Baker Explains How to Use Online Only Banks Safely

10.30.2011 Faculty News, General, Multimedia

WFMY News 2 | by Philip Jones
Reposted from digtriad.com

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WFMY NEWS 2 — A number of banks are backing of their plans to charge fees for you to use your debit card. But you still might be considering breaking up with your bank.

If you want to take your money of out one of the big brick-and-mortar banks, is an online-only bank a good alternative? WFMY News 2 asked Wake Forest University Assistant Professor of Information Systems Elizabeth Baker what she thinks.

"ATMs are just computers that are specialized to do one thing," Baker said. "So now, you're turning your own home computer into an ATM with an online bank."

You can't get your computer to print out money, at least not legally. But what Baker is saying is that you can turn to a bank that only exists online and do pretty much everything you do at your brick and mortar bank, all while avoiding the fees that some are now starting to charge.

How?

"Their fee structure is a lot lower," Baker said of online banks. "Without having to pay for retail branches and tellers and just the physical buildings, you can perform your banking without that cost."

Baker says that's why you won't find as many fees and why you can take advantage of better interest rates.

So how do you get started? CNNMoney recently made a list of seven online banks it calls "awesome." But before you choose one of those — or any online bank — Baker says do some homework. Check to see if the bank is registered and federally insured. That'll help you know it's legit.

You can do that on the FDIC's website. But the bottom line is: research, research, research.

When you find an online bank that you like, make sure you see the little padlock symbol on your web browser — that means you have a secure connection. And getting an account up and going takes just a few minutes.

Baker says the online bank will send you a debit card you can use for free at certain ATMs within its network. Just match up the symbols on the back of your card to the ones on the ATM. Or you can always just get cash back at the grocery store.

And about what she said about how you can turn your computer into an ATM? New rules mean you can scan a check at your computer and deposit it electronically to the online bank.

So is your money safe? Baker says you can bank on it.

"It's as safe, really, as it is in a retail bank," she said. "Because if you're very accustomed to checking your online balance or if you're accustomed to going in and seeing how much you have left to take out of the ATM, then it's the same process."