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As consumers shift more and more of their daily activities to the Internet, online banking is emerging as a popular and efficient way to conduct and manage financial transactions.
Online banking helps consumers save time and money by reducing or nearly eliminating the number of paper checks people need to write, or the number of times they may need to visit a bank's branch.
Online banking consumers cite a number of benefits, including the convenience of checking their balances instantly and the ability to pay bills or to make account transfers online. By entering a password and making a few clicks, people can take care of basic banking transactions around the clock.
According to a 2009 survey by the American Bankers Association, online banking has overtaken in-person banking as consumers' favorite way to conduct routine financial transactions.
Online bill payment has emerged as the most popular online banking activity. Consumers have the option of registering the accounts they'll pay most often, such as utility or credit card bills, and they then log on to their bank's site to initiate payments.
Most large credit card issuers or utilities accept electronic payments that can be credited to your account the next day. For accounts that don't accept electronic payments, your bank will mail a paper check. (You should understand which method is used for your accounts and allow enough time, generally five days, to make sure a paper check arrives before your bill's due date.)
Online bill payment saves consumers time and postage associated with writing and mailing paper checks. You can log on and pay several bills on one screen, generally in a couple of minutes or less.
Similarly, because electronic payments are dramatically less expensive to process, most banks offer online banking services without charge to encourage their use.
Many service providers and banks allow you to set up automatic payments or transfers to save you the time of initiating routine payments or reduce the risk of forgetting to schedule a payment.
In addition, many customer service requests can be initiated or completed online, saving you the need to spend time navigating a customer service phone menu or waiting on hold.
Online banking can also be more immediate and interactive than in-person banking, with many banks offering e-mail or text alerts if your account balances are low or if suspicious activity takes place within your account. By registering for the types of alerts you'd like to see on your handset, you can be kept informed about what's going on with your account without the need to log on.
To help protect the security and privacy of online transactions, banks generally offer state-of-the-art data encryption and require at least two layers of authentication as users log on. For example, most banks require users to create strong passwords that don't use easily guessed combinations such as "password," "123456," or other common words. Security researchers suggest combining upper and lowercase letters and numbers to create uncommon words that can defeat casual guessing attempts.
In addition, most banks display customer-selected images or phrases to reassure users they are logging on to the bank's legitimate Web site, and a not a careful duplication created by hackers or criminals.