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How Online Checking Accounts Work

Depositing and Transferring Money with Online Checking

To get money into your online account, you've got a few options. Most people are already familiar with direct deposit: Instead of receiving a check from your employer or payee, you give them routing information, so they can deposit your money directly into your bank account. You can also deposit checks by taking a photo of them with your smartphone [source: Block]. If you're depositing cash, you can either buy a money order and mail it in or deposit the cash into a traditional bank account and transfer the money.

Got more than one online account? One area where online banking is very convenient is transfers. With an online account, you can do it with just a few clicks on the bank's Web site(s). If you're trying to move the money from one bank account to another you can transfer between accounts at the same bank for free. If you're transferring money to another bank, you may have to pay a transaction fee [source: HSBC].

Even if you do most of your transactions online, from time to time you're going to need checks. Online only banks do offer paper checks. Some will send you a checkbook, while with others you fill out your check online, and they mail the paper check to the payee for you.

Whether you're depositing, withdrawing, or moving your money around, you want to be sure that your online checking account is safe and secure. As with anything online, security is a concern, and there are hackers out there who try to get into online bank accounts. Banks use heavy 128-bit encryption to protect customers from getting hacked, and while banks do sometimes have their databases compromised, it's a relatively small number compared to how many customers bank online. Even then hackers don't always get all of the information they need to steal your identity [source: Nicholson].

You actually have a lot of the control over your account's security. Here are a few ways to make sure your online banking stays safe:

  • Choose a secure password. Many banks require that passwords contain one or two numbers. Don't choose an obvious password, and change your password periodically.
  • Watch out for "phishing" scams. Phishing is a type of Internet fraud involving spam or pop-up messages designed to gather personal information and help hackers get into your accounts. Never give out personal information via email. Instead, go to the bank's Web site directly (not by clicking any links in the suspicious email), and contact its customer service department using the email address or phone number on the site, to make sure you're really dealing with your bank [source: APWG].
  • Make sure your deposits are FDIC-insured. You can use the Bank Find database to check if your bank has insurance to protect you in case they go under [source: FDIC].
  • If your online account comes with a debit card, you'll also have a PIN number. Change your PIN number periodically, and don't share it with any third parties.