How to Protect Banking Information on Your Computer

Think for a minute about the kinds of banking information you store on your personal computer. Then think of the exposure you would face if the wrong person got their grubby hands on that information. Not fun.

Even when your computer is not logged into the Internet, you could still be vulnerable. Laptops can be stolen, and computers can be accessed by anyone who happens to be in the room. That doesn't mean there's any reason to make things easy for them.

One simple way to prevent casual exposure of information is to keep your computer locked when you're not using it. Most operating systems have this feature. On shared computers, make sure you always log off and that your files are accessible to you alone.

That will prevent theft by people with easy access to your computer. But if your laptop gets stolen, the thief could very well find his or her way past that lock password. What then? For a major step up in security, you can encrypt your sensitive documents. Even if someone steals your computer, they'll have a hard time unlocking encrypted files.

More robust operating systems, like Vista Ultimate, include BitLocker, which can lock down your data. It takes some work on your part to set up, but it can protect your entire hard drive [source: Trapani]. Mac OSX users have FileVault, which can protect individual folders. Other third-party systems are also available for both Mac and Windows systems. Note that BitLocker requires a physical device that you need to plug into a USB port on your computer to even gain access to your hard drive. Pretty secure, but if you're the type that's always fumbling for your keys, it's probably not the solution for you.

If you have an operating system like Vista Ultimate, you should also be able to individually encrypt folders by going into Windows Explorer, right-clicking the folder to encrypt and select the option for "Properties." Under "Advanced" in the "General" tab, select the checkbox for "Encrypt Contents to Secure Data" [source: Cook].

For most people, 128-bit encryption should be good enough, but if you're the paranoid type, you might be comforted to know that 256-bit encryption is enough to make the United States government comfortable with its Top Secret data [source: NSA]. Later on, we'll look at some third-party tools to protect your sensitive financial documents.

Remember that old warning about never sending an e-mail that you wouldn't want the world (or your mother) to read? Information too easily goes astray or ends up where you didn't intend. It's bad enough when you hit the reply-all button by accident, but when criminals are laying digital traps for you online, the risks are far worse.

Fortunately, you can minimize the risks you take when you bank online, and these days most banks don't hold you liable for any of the losses if you've taken a reasonable degree of caution with your account. Let's go over some of the things you can do to make sure that you're a low risk customer.

Be creative with your passwords. Using "MyThreeKids" as your password may show that you love your children, but your kids may not love you as much when you don't have any money left in your account come Christmas. Make your password memorable to you, but difficult (ideally impossible) for others to guess [source: Durgahee].

Avoid phishing scams by looking for signs of a secure Web site. Before plunking down your credit or debit card information, check to see if the checkout process of the Web site has a URL that starts with "https." Some browsers also include a lock or key icon to show that a Web site is secure. Always check the address to see if it matches what it should be, especially if you clicked on something in an e-mail or other unusual place to get to that page.

Lastly, you might think of firewalls as something only a company would want, but a relatively inexpensive personal firewall can add needed protection for your computer.

Next, let's take a look at some trends in online protection coming down the pipe.

Are you one of the growing group of people who love the convenience of online transactions? Or are you among those who still aren't convinced it's a safe thing to do? Security of your banking information online is one of the most pervasive reasons people prefer cash, but it's getting more and more difficult to conduct business outside of your own neighborhood without giving in to the pressure to go digital.

In the constant battle with cybercriminals, there are some new weapons in the consumer's arsenal you might want to take a look at.

Besides using up-to-date browsers, which offer better encryption of secure transactions, a new push for something called federated identity is taking shape. Spearheaded by the National Institute for Standards and Technology, this plan would have you sign on once securely, and then use those credentials to move from one account to another without the need to log in a multitude of times. Because this approach requires participating entities to use standardized practices to function properly, the technology and protocols are not quite mature. Watch for it to gain momentum in the next year or two.

Another technique is to use single-use passwords, which change automatically every time you use them. Sounds like a pain, doesn't it? It's not quite as bad as it sounds, but like all new things, it takes a little getting used to. It requires that users have a random password generator similar to the ones that have been used for corporate security for years.

Not quite as confusing as an ever-changing password is something called out-of-band verification, which is a fancy way of saying you'll be getting a phone call or text message to confirm a transaction. That makes it a lot more complicated for any criminal to get away with your money undetected.

And don't forget about password managers. Using a single high-quality password is digital suicide and could open you up to identity theft. Find a password manager that fits your lifestyle. Stand-alone versions install on your personal computer and can even fill in forms for you. Others, like LastPass (freeware) and RoboForm, offer cloud-based and mobile password management services.

Expect to shell out $20-30 for a decent password manager. That's a small price to pay, considering what you're securing, but this security could haunt you if you forget your single password for the password manager itself.

Your banking information is precious. Taking the time and effort to protect it will save you a world of trouble and potentially serious financial losses in the future.