Online Banking Dos and Don’ts

I, like a lot of you out there, use online banking. If I remember correctly I first started using it in 2003 or 2004. The NetTeller system was what my bank at the time was using. Was it free? Ha! No. I had to pay a fee just to apply for it back then. The bank I was using weaseled $15 out of me even though I was doing them a favor just by using it. Thankfully all modern online banking is free these days.

NetTeller was clunky, very un-user friendly and looked like it had been programmed in 1998, but it did do its job.

To note, only smaller banks usually use NetTeller. It’s billed as a "turnkey cost-effective solution", which translates to "Run a bank? Are you cheap and can’t afford to program your own online banking system? Use us!" Smaller banks will also usually charge fees just to use this type of system for the wad of cash they shelled out just to get it. But I digress.

There are a few things I’ve learned over the years when it comes to banking online. Some I’ve learned the hard way. This will be presented in question and answer style.

Q: Is it better to have the online system mail a standard payment check or for you mail it yourself?

A: Let the bank do it.

First of all, you save the cost of a stamp. Secondly, if the bank mails a check and it doesn’t get there, you can blame the bank and be 100% in the right because they were the ones that were supposed to get it there on time.

To date, I have never had a mailed check from the online banking system not arrive when the system said it was going to.

If you live in an area where the mail system is just outright crappy (which unfortunately happens in some parts in the world), that is even more of a reason to have the bank do the mail-outs for you.

Q: Is it better to have the online system mail out a high-priority payment check or you mail it yourself?

A: This one is the exact opposite, you mail it.

High priority payments should be done by overnight check mail-outs so they can be tracked.

For example, if you were going to send an overnight payment to a credit card company, you call them up, ask for the "priority" or "emergency" physical payment address (because you can’t overnight a check to a PO Box), then do your overnight mail-out that way.

You may ask, "Couldn’t I have just done an electronic payment? That’s supposed to be processed in 24 hours, right?"

Yes, it’s supposed to be. But some companies have become shifty and will delay electronic payment processing by up to seven days, thereby making your payments late. One wonders if this is done on purpose.

When you mail and track it, you have physical proof it got there on time, regardless of when whom you sent the payment to processes it.

With electronic, the receiving system may subject you to delayed payment processing. I would not trust the "processed in 24 hours" claim for a hot minute.

Q: Should you trust electronic drafting?

A: Only if you watch your bank account like a hawk.

Some people have some or all their bills set to have the payment be automatically drafted when the payment is due.

As to what you should trust with electronic drafting, this is dependent on whether or not the monthly amount due is consistent or not.

With credit cards there is little to no consistency due to the ever-changing rates. I strongly advise against having a credit card company auto-draft payments.

With wireless phone plans, these are also inconsistent unless you always stay within your allowed minutes and data allowance per month.

For car payments, yes you could auto-draft because the payment is always the same. There is consistency here.

For mortgages, if it’s fixed-rate, yes you could auto-draft because once again you’ve got consistency from payment to payment.

But as I said in the beginning, auto-drafting serves you best if you watch your bank account like a hawk. You have to confirm that any money taken out was the proper amount for each payment. To me it is worth the slight inconvenience to manually send out payments so I know exactly what’s going out.

Q: Is it safe to go "paperless"?

A: This depends on whether you value physical copies of bank records or not.

All banks encourage their customers to use paperless statements, as in the kind that’s delivered to your email address and nowhere else.

Person A would say, "Yes, that would be more convenient. I get enough postal mail as it is and less mail is better."

Person B would say, "To conduct business with a bank and not have physical paper records of your transactions is foolish."

Person B is correct. You should keep paper records of statements.

Going paperless is safe, but not necessarily smart. Database records can change dynamically. Physical printed paper records cannot.

Final notes

Online banking is something that is best practiced in moderation. I would never tell anybody to conduct 100% of their transactions and other banking activities online because it’s too easy to lose track of where you money is coming and going. There are times when you need to physically mail stuff out and have paper copies of transactions for record keeping. There’s simply no way around that.

Do you trust your bank’s online system?

Has it worked for you? Did it work well or was it awful? What would you tell people to watch out for with online banking? Let us know in the comments.

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Ronald Deming
I use online banking exclusively! I find it very convenient.I can and do monitor my bank account everyday. I use auto drafting for my mortgage and never have had a problem. Using Microsoft Money I and can download my transactions every day!Just make sure you use a very good password!and change it from time to time. Online banking is a great tool to help keep track of your finances and pay bills!It is not a set it and forget it thing! Does require a little work on your part!
Doctor Gonzo
I use Quicken to manage my finances and I download transactions from all of my banking and credit card accounts on a daily basis, so I do watch my accounts like a hawk. This has allowed me to go entirely paperless without problem. If I notice a discrepancy on my daily download, I take care of it immediately.
Tom
I am curious if you can supply a reference on the point that some places will delay electronic payments by seven days? Granted, the sites I deal with may charge you extra to do this, but I have not seen a case where it does not meet their published time table.

http://www.menga.net Rich Menga
DiscoverCard openly states it takes 5 to 7 business days for any transactions to be processed.

Bill
I’ve been doing online banking for four years (as of last week) & I love it. With the exception of my mortgage payment (which is auto-draft each month), I log on every Sunday evening & pay all bills due the following week. Altho’ going paperless sounds attractive… I’m not ready for it (doubt I’ll ever be). I like having paper records. I tend to avoid payments that are not electronic (if someone’s going to lick the stamp, I’d just as soon do it myself). For the past 3 years, all my payees accept electronic payments. One problem I can see? The fewer checks I write, the harder it is to write them. Major irritant? Four days to clear electronic payments with fee schedule to shorten delay. That… really bites me.
Charles Laughlin
I have been doing online banking for some 5 years and have never had a problem. I never use automatic drafting as I want the control over when a payment is to be made. I also print out all statements and payment records as I have enrolled in paperless statements for all companies that offer this option. Briefly, I LOVE IT!!!!!
P.S. I work for the U.S. Postal Service so I am cutting off my nose to spite my face, but do I care??……..Nah!!, not on your life!!
Myles
I am an elderly gentleman and was the first kid on my block to get an ATM card, and my bank an ATM machine! LOL!
I use on-line banking & billpay for everything. I have a “paper” budget that shows who & how much I pay each month and at the end of the month I write into my check register all payments and then show them on my “paper” budget. It shows the amount due, balance due, and then subtracks my income to show how much is left at the end of the month for my “slush” fund.
By knowing what day a payment is due and how much it is, allows you to better budget your money and also allows you to utilize your interest-bearing account to its mazimum advantage, because some payments are made electronically while others are actually made by a check (CheckFree) sent from your bank.
You can also have your on-line banking center or creditor send you an electronic notice of a payment paid/due, so not to miss a bill or notation for your register. You do need to micromanage your money a bit, but if you also use transfers from your savings to checking (I do not have both linked to my ATM card, should I lose the card, I don’t want to get wiped out, completely! Also, for my safety, I use my savings account as my overdraft account for both my checking and credit card, all from the same bank) whenever you need to make an odd not normal check to someone, you just log-on and have it sent out from the bank. I never write a check to anybody these days and haven’t, in years. Most banks keep paper records for several years and there really isn’t any reason, either, why you would want to have paper-cluter around, anyway. If you are anal about needing copies of anything, scan it and put it all on a flash-drive in folders, with a DVD copy! I do, very seldomly, need to get a check out in a hurry, so I have over-nighted it to some people. Because this is now the 21st century, I have a 2nd checking account that i use for my slush fund (and not for paying bills, as from my “primary” account), and have some people that I allow to make deposits into (for personal debts owed and rental payments to me), but not out of. If you have children, as an example, you can also transfer money into their accounts, even if they are on vacation outside the country, and it will show up at 12:01am, into their accounts (all done at home, in your underware, while sitting in front of your PC, instead of having to run around to a “bank” to do it)!
As far as my experiences with late payments, here is a scenario: Be aware of when your payments are due, and change their payment dates if need be.
Example: If a payment is due on a Friday, and it is a hoiliday weekend, you can bet your buns the office receiving your check will close at noon, or the people doing the processing will stop working at noon. So, your check sits unprocessed until TUESDAY, when everybody comes back from their long weekend. Problem is, that they will probably NOT get to your payment until later in the day on Tuesday, and it still might not show up on your account until Wednesday. So, kick back the payment arrival date a day or two for those holiday weekends!
And, yes, I do firmly believe that some businesses do this on purpose. For obvious reasons, I won’t mention their names. YOU need to be aware of when your payments are due to arrive and need the initiative to make sure they arrive on time. Only send money to people with Friday due dates, that you trust!
I had a credit card account that I had paid off and closed, because they were always screwing up my payments that were received by them and due on Fridays. They even refused to change my due date. They came out with a new plan to take the payment from my account when due and I let them have at it, instead of me sending it to them, when it was due. The first time they posted it late, I gave them the tongue lashing of a lifetime, over the phone, for posting it late. “Afterall, it was YOU who was responsible for taking it out of my account and making the payment” and “NOT ME!” HaHa! They had nothing to say about it, fixed the problem, and was lucky I didn’t sue them back to the 18th century!
Yes, banks sometimes are liars and cheats. Something we’ve all learned recently, and of which, is my opinion (little disclaimer here).
Kids, watch your money. You worked too hard for it to let someone steal it from you! Don’t wait until you get a bunch of $50 late fees before you start paying attention to it.
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