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What is Online Banking?

By Deborah Ng
Updated May 16, 2024
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Online banking is the practice of making bank transactions or paying bills via the Internet. Thanks to technology, and the Internet in particular, people no longer have to leave the house to shop, communicate, or even do their banking. Banking online allows a customer to make deposits, withdrawals, and pay bills all with the click of a mouse.

For the online banking customer, the convenience factor rates high. No longer does a person have to wait for the bank statement to arrive in the mail to check account balances — he or she can check the balance every day just by logging onto the account. In addition to checking balances and transactions, customers can catch discrepancies in the account right away and deal with them swiftly. This can be done anywhere, as long as the person has Internet access.

Since bills are paid online, the need to writing checks, affix postage, and post the payment in the mail is eliminated. Once the amount is entered and the payee is checked off, the funds are automatically deducted from the payer's choice of account.

Since the cost to the bank is minimal, the cost to the consumer, in many cases, is also minimal. While there may be a fee for some online banking transactions, they are often extremely low. Those who use this type of banking often agree it's worth every penny, and not having to spend all Saturday morning standing in a crowded bank line is justification for most. It can even pay for itself since costs like postage and ATM fees are reduced.

Online banking also eliminates paper waste, which is a plus not only for those who have to handle all the paper work, but also for the environment.

Of course, there are also disadvantages. Security is always an issue with Internet transactions. Although information is encrypted, and the chances of an account being hacked are slim, it happens. Banks pay a lot of money to install high tech firewalls, however, and chances are good that a customer's money is in good hands.

People who do all of their banking via the Internet may also miss the personal service available at the bank. No smiling teller or representative hands the customer a receipt. Instead, except for what's recorded on the account, all the paperwork is the responsibility of the customer. Experts recommend that people always print copies of important transactions.

If someone needs to deposit cash or checks, he or she will probably still have to spend time at the ATM. Unless a payment is directly deposited, it often has to be handled manually. Still, for most customers, the benefits far outweigh the risks and minor inconveniences.

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Discussion Comments
By anon326041 — On Mar 19, 2013

What is the relationship between internet banking and international trade?

By OeKc05 — On Oct 27, 2012

I like the promotional deals offered through online banking. Every time I log in, I see several offers to get cash back at many different stores when I use my debit card.

All I have to do is click on the offer to activate it, and when I shop there, I use my debit card instead of cash. The offer is usually for something like 10% or 15% cash back, which will show up in my account at the beginning of the following month. Even though it may only be a few dollars, it is a perk that I'm grateful to have.

By kylee07drg — On Oct 27, 2012

It doesn't take long for most transactions to show up on my online statement. Usually, by the time I get home from the store and get online, the transaction has already been posted. It may not list the store's name yet, because it is a pending transaction, but the account balance will reflect the deduction.

By seag47 — On Oct 27, 2012

I only take advantage of free online banking, because I don't want to pay fees to get my bills paid automatically every month. I find that it's better to pay them individually and manually, though I can still do this online.

The fee is only charged when you get set up to have the bank remember to pay your bills for you. However, you can pay your own bills for free.

For example, every time I get my monthly electric bill, I go to the electric company's website and tell them to deduct the payment from my bank account. There is no charge for this, and I don't have to use a stamp or gas to pay the bill in person.

By Kristee — On Oct 26, 2012

@anon29112 – I don't know if you can open an online banking account without going to the branch. I contacted customer service at my bank online, and they told me I would have to go to the branch in person in order to open a savings account.

Of course, once you get set up with an account in person, you can register online to do your banking through the internet. You just have to go to the bank that one time to get things started.

By jonrss — On Oct 25, 2012

Do you think that eventually online banking services will be the only kind of banking services? I know that my bank has fewer physical locations than ever.

By summing — On Oct 25, 2012
I love online banking, but I'm also frequently frustrated by it. It lets you do a lot, but not everything that you would want to do. For instance, I would like to get lifetime records of my transaction history but my bank only makes the last few months transactions available online. They have limitless space in a digital environment, why not just give me access to all of it?
By Belted — On Oct 24, 2012

I still have some fears about signing up for online banking.

How can I be absolutely sure that the information is secure?

You hear so much these days about cyber attacks, how can I be sure that one won't happen to my bank?

By anon192641 — On Jul 02, 2011

thanks for what i have learned about online banking, but my question is how long does it take for the transaction to be effective? that is, how long does it take for maturity of the transaction?

By anon130034 — On Nov 26, 2010

What is the main difference between an online bank, and online banking?

By anon107850 — On Aug 31, 2010

how can we do audio conferences in online banking?

By anon101338 — On Aug 02, 2010

what is the difference between e-banking and online banking?

By anon98488 — On Jul 23, 2010

i get online banking..very useful

By anon91673 — On Jun 23, 2010

I use online banking. I found this information very resourceful.

By anon59543 — On Jan 09, 2010

what steps can banks take to mitigate the risks of online and mobile banking?

By anon44159 — On Sep 05, 2009

How do we open an account in online banking?

By anon40388 — On Aug 08, 2009

what is e banking? what are its advantages and disadvantages?

By anon31047 — On Apr 28, 2009

What is the difference between an Internet Bank and Internet Banking?

By anon29112 — On Mar 27, 2009

How do we open account in online banking?

By anon29111 — On Mar 27, 2009

How do we deposit money in accounts,in online banking? Do we have to go to bank branch?

By nazarch — On Aug 18, 2008

can we get personal loans online?

By nazarch — On Aug 18, 2008

Which are the services not available in Online banking?

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