Traditional brick and mortar banks give the appearance of security and stability – and for most people, that’s the only place to leave their money. But a new kind of branchless banking is challenging those assumptions, as online only banking slowly but steadily draws customers away from their local branches and raises concerns about the safety of their accounts.

The trend began when traditional banks began to offer online banking options that allowed users to conduct most if not all transactions with the click of a mouse and a few passwords for security. Now, new banks are dispensing with the expense and logistics of maintaining physical bank buildings by keeping all banking services on the Internet.

The process works much like the old online banking services do. Create an account, get passwords, conduct transactions. Some online banks allow users free access to any ATM in the country for cash, while others issue their own debit cards and offer other services in full competition with traditional banks, allowing users to access their money and conduct transactions at any time, any place.

Online banking can save money, too. With almost no operating expenses, these banks can pass savings on to customers in the forms of more favorable interest rates and a variety of loan and savings packages. And they may eliminate many of the service fees and account minimums required by traditional banks.

But are online banks safe? Internet security experts say that legitimate online-only banking institutions are generally as safe as the online services of traditional banks. The key Is “legitimate, ” and as Jason Hartman advises, do your homework. It’s essential for potential users to thoroughly investigate the bank before giving it their savings. Be sure that the bank is FDIC insured and has a history of safe transitions.

As with any online transactions, identity theft is a risk in online banking. But accounts can be password protected on multiple levels and the usual rules for making safe online transactions apply — make sure that you can distinguish legitimate email correspondence from the bank from look alikes crafted by scammers and identity thief phishers. And pay close attention to statements and account documents to track down potential identity theft.

Online only banking isn’t for everyone. Some people like the experience of walking into a bank and talking to tellers. Others feel more secure that way. But Internet security experts point out that conducting banking business with solid legitimate online institutions is really no riskier than their brick and mortar counterparts – and you don’t have to worry about getting caught in a bank robbery, either.  (Top image: Flickr/erobson)

Hicken, Melanie. “Can You Trust Online-Only Banks?” CNN Money. 30 Aug 2013.

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