Are Online Savings Accounts FDIC Insured

Online banks are treated the same as traditional banks by the U.S. government. Online savings accounts are FDIC insured. If the bank were to fail, your money (up to $250,000) would be protected.

In this guide we will break down how Online Banks are FDIC Insure and more.

Are Online Banks a Good Idea?

Many Americans are worried about the safety of online banking. The good news is that online banks ARE safe—provided they have FDIC insurance. If a bank is FDIC insured, each account has coverage up to $250,000.

Banks charge fees to cover the cost of FDIC insurance, which then protects you. In reality, the primary difference between an online bank and brick-and-mortar bank is the presence or lack of a physical branch you can visit.

In fact, many people use online and traditional banks since the risks are the same. Before you do any banking online, though, check with the bank’s security measures.

Do they encrypt your data, use firewalls, and anti-virus software? What other security measures are in place? A few options include:

• Two-factor authentication
• Fraudulent activity alerts
• Automatic account freeze if suspicious activity is suspected
• Regular account monitoring
• Automatic time-out after a certain amount of idle time

You won’t find all these precautions at every bank. But knowing the steps a bank takes and the features they offer can be reassuring.

How To Protect  Your Online Banking Account

Keeping your money safe in a bank also depends on you. The bank can’t do much to protect you if you willingly give out your account information. Of course, your banking information can also be stolen unwillingly if you’re banking online over an unsafe network or even by someone looking over your shoulder. However, it is possible to protect yourself from online account hacking. Here are a few simple ways:

• Update Your Software: Always update your operating software and anti-virus software. Don’t ignore notifications when they pop up on your computer.
• Have the Latest Anti-Virus Software: Be sure to install a new anti-virus program every year—or renew your current one. You never want to be without anti-virus software.
• Update Your Apps: If you bank on a mobile app, make sure you do all of the latest operating system and app updates.
• Add Two-Factor Authentication: Most banks offer two-factor authentication. On your computer, you may add the option to email or text a code to yourself. On your mobile app, you can do the same thing or add face recognition as your second authentication factor.
• Avoid Banking in Public: Using an internet connection other than your own safe Wi-Fi network can put you at risk of fraud. If you have to conduct a banking transaction in public, ensure that the connection is secure before doing so.
• Don’t Click on Links: If you receive an email or text message that looks like it’s from your bank, confirm it first. Don’t click on the link without verifying, as you could be opening the door for hackers.

Pros and Cons of Online Banking

Pros:

• Higher interest rates. Higher yields are one of the main perks of online savings accounts. If you secure a higher yield on your savings, you can grow your funds more quickly. Online savings accounts offer APYs in the range of 1.6% to 1.8%; that’s 16x more than what many traditional banks offer.
• Lower bank fees. Online banks often feature no monthly maintenance fees, sometimes in return for maintaining a minimum balance.
• Online convenience. Conduct your banking on either the bank’s website or mobile app.
• Easy transfers. Many online banks make ACH transfers free and easy.

Cons:

• No physical branches. Customer service is one area where traditional banks may outshine online banks. With traditional banks, you can interact face to face with tellers to discuss your banking needs.
• Difficulty withdrawing money. Online banks usually do not offer ATM services and may charge for withdrawals.

Conclusion

Online banks are safe as long as you choose the right one. Do your research and ensure that a bank uses top-of-the-line security and is FDIC insured. There are several reasons to consider online banks: they offer an easy way to bank for free, they’re your best bet for finding high-interest rates, and they usually make life more convenient in other ways. You may never run into any of the problems mentioned above, and your overall experience will probably be great, but you should have a good idea of what to expect.