Banking online: How to protect yourself from fraud and hacking

By Stella Brown

The Internet has simplified our lives. We use it to connect with friends and family, pay our bills, stay up to date on current news, shop and find general information.

Most of us are also using it to keep track of our finances. In fact, a 2011 survey conducted by Nationwide Building Society found that 77 percent of people bank online.

Online banking is much easier than the traditional method of physically going to the bank. Through your bank’s website, you can see a list of your transactions, see how much money is in your savings and checking accounts, transfer money, pay bills and even get a financial report on how your money is being spent. And now, thanks to the popularity of smartphones, you can even deposit checks without having to physically go to the bank.

But being able to access such a private facet of your life through the Internet does make some people nervous about being hacked and having their money stolen by an online predator. Luckily, there are a few things that you can do to ensure that your online banking information and financial security are kept safe and sound.

Create a unique username.

Online banking institutions require you to have a username and password in order to access your account. Most of us make the mistake in becoming comfortable with one or two usernames, and we choose this to be our username on our bank accounts.

Make sure that the username you use for your online banking is different than usernames you use for social media accounts, emails and even other online accounts you have. You should also try and get as creative as possible, but ensure that it’s something you can remember. For example, most people use their first initial and their last name, or their last name and a few numbers. Instead, use an alias that makes sense to only you.

Use a strong password.

Just like our addiction to using easy usernames, we also suffer from the plague of using vague passwords. If your password is weak, you’re making it very easy for hackers to guess. Make sure that your password combines numbers and letters, and use a capital letter and a symbol when possible. The stronger your password, the more difficult it is for someone else to hack.

It’s also a good idea to use a unique password for you online banking than any other account you have, but you need to make sure that it’s something you remember. Whatever you do, do not write your password down and keep it near your computer.

Create strong security questions.

Most online banking institutions require you to have security questions set up so that they can verify your identity. If your bank allows you to choose your own questions, make sure you’re choosing those that only you know. For example, stick to the most recent events as possible that are private to you. The Internet allows everyone to find information on anyone, and choosing a question that can easily be answered by Googling your name will not protect you.

Use fake security answers.

Some financial institutions do not let you choose your own questions, and they have a standard set of questions for you to answer that seem to revolve around an old pet’s name, a grandparent’s name or a city that you lived in—all of which can easily be located by anyone else.

Instead of answering these questions honestly, use fake answers that don’t make sense. If the question asks the model of your first car, say bologna. Hackers will not be able to get these answers from any online profile or public information about you. The only problem is that you’ll need to remember your answers.

Don’t give personal information through email.

Some hackers are creating fake emails that look like they’re coming from your financial institution saying there is an error with your account and they need you to verify it. These emails then ask you to provide a wealth of personal information, such as name, account number, and even your username and password. Your financial institution will never ask you to share this information via email, so make sure that you disregard any emails that look like they come from your bank. If you want to check the validity, you can always visit your bank yourself or even call your nearest branch.

Online banking can make life much easier, but you should always keep yourself protected from hackers by using these four tips.

Prepared by Stella Brown from Authentify, experts in biometric authentication.

Reasons to Use Online Banking

Online banking saves time, money and space by automating transactions, reducing billing times, check writing and billing expenses. Online banking can even reduce filing cabinet space that may always seem too full. Online banking may also makes use of secure websites; if you see https in a website address, this means information you provide in online banking transactions can only be read by you and the bank. Encryption of financial data is another reason why online banking is safe.

• Automated transactions

Automated transactions allow banking clients to perform a transaction without even being there for the transaction. These transactions can occur on a one time, or repeated basis. For example, Automated Clearing House (ACH) deposits, pay check deposits, and pre-scheduled bill payment can all be automated using some online banks' electronic banking.

• Bill payer services

Another reason to use online banking is electronic bill payment or e-bill payment. These can be set up through a banks online banking software and once the recipient data is entered, the information is already there for future transactions saving even more time. E-bill payments are set up using account numbers and company information.

• Secure website services

Many people have concerns about the safety of online banking, however online banking may be even safer than in person banking. This is because computers are not subject to human error reducing the probability of this type of error by up to 50 percent.  Also, as time has progressed, so has the experience and technology used to prevent identity theft. Additionally, savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC) regardless of whether transactions are performed online or not.

• Data encryption

Data encryption is a technique used to protect information transferred over the internet. Encrypted data makes use of ciphers that allow only senders and recipients to scramble and unscramble banking information for the purpose of protecting it. These ciphers are incorporated into online bank programming and are secured by time sensitive online banking.

• Multiple banking privileges

If the above reasons aren't enough to consider online banking perhaps knowing the amount of transactions that can be performed online will. A number of services can be performed using online banking including fund transfers, deposits, withdrawals, bill paying, personal information updates and more.  These transactions can all take time, money and space when done the traditional way.

In summary, there a multiple reasons why online banking is a good idea. There are even online money orders through sites like Payko that lower the need to drive to the nearest post office or money order dealer. Online banking doesn't necessarily eliminate the need for in person banking, but can definitely reduce the number of times one has to go to a bank or post office to perform financial transactions or pay bills.

Guide to Buyer-Protection Credit Cards

Buyer protection credit terms were recently adjusted by the Credit Card Act of 2009. This act affords consumers additional protection from credit card companies. Specifically these changes pertain to credit card interest rate and fee limitations, disclosure requirements, and age restrictions on credit marketing among other terms. This article will serve as a guide to buyer protection credit terms in regard to legal premises, buyer protection terms, and consumer advocacy.

Image source: Petr Kratochvil

The legal foundation of buyer protection terms

Buyer protection credit terms are legal agreements offered by creditors before and during the providing of credit to consumers. By agreeing to the terms of credit and credit protection, both the buyer and the creditor are acknowledging rules are in place regarding the handling of credit and circumstances surrounding that credit. There are many types of credit terms as credit varies. For example, there are credit cards, mortgages, car loans, leases, lines of credit, home equity loans etc. Since each of these loan products are different, credit terms must be tailored to comply with the nature of each specific loan.

Ultimately buyer protection credit terms are determined by Federal and State regulation and not exclusively by the terms of agreement that come with the credit application. In some cases, terms of agreement may be invalid due to non-compliance with statutory law. Title 15, Chapter 14 of the U.S code outline the Federal requirements regarding credit protection. This covers issues such as 1) disputing debt, 2) debt collection practices, 3) liability of creditors and debtors and more.

The U.S. code is occasionally updated to incorporate Federal laws such as the Fair Credit Billing Act, Consumer Credit Protection Act, Fair Debt Collections Practices Act, Credit Repair Organizations Act and more. According to Title 15 of the U.S. Code, U.S. States must have consumer protections in place that are not inconsistent with Federal regulations, or go above and beyond them in regard to protecting the consumer.

Buyer protection: The credit agreement and rights

Before accepting credit consider consulting The Federal Reserve Board's 'Consumer Handbook to Credit Protection Laws.' This handbook outlines some of the key aspects of credit that should be disclosed by the creditor to the buyer such as how and what interest rates and fees are charged, conditions of the leases, manner of credit terms disclosure, obligations of both debtor and creditor etc. The providing of specific information to consumers from creditors is required to help protect the consumer from misunderstandings that can lead to financial damage. For example a credit card agreement may have the following aspects as required by law.

• Liability protection for unauthorized use of credit
• Payment of credit
• Interest and fees
• Identity theft procedures
• Limitations on credit use
• Enforcement of financial penalty
• Disclosure of creditor lending terms

Larger credit loans such as mortgages may be far more complex as the number of laws governing the credit increases due to the nature of the loan. For example, a mortgage involves multiple parties such as Title company, Realtor(s), Bank, municipal record keepers, insurers, inspectors etc. all of whom have their own terms of lending, contracting, charging and rules they must follow to be legally compliant.

Mortgage agreements can be multiple pages long, written in legalese and difficult to read during a home closing meeting. Due to this, the assistance of an attorney may be helpful when reviewing or contesting the credit terms. Additional credit regulations pertain to credit records for which further protections are afforded to the consumer.

• Credit repair organization requirements
• Consumer credit information provisions
• Dispute procedures and rights
• Credit reporting regulations

Buyer credit terms protection advocacy

Government and private organizations exist to assist consumers in having their buyer protection credit terms properly honored. Additionally, changes to credit laws take place to modernize credit protection. For example, annual free credit reports were not always a consumer privilege.

Buyers may now report and dispute errors found on credit reports and take steps to have errors removed. Consumer advocacy organizations can be contacted in cases where credit fraud, credit repair fraud, credit identity theft, unresolved dispute claims and other credit problems occur. Three of these organizations are listed below.

• State Departments of Consumer Affairs
• Federal Trade Commission: Bureau of Consumer Protection
• The Identity Theft Assistance Center
• American Alliance on Consumer Interests
• Consumer Federation of America

Buyer protection credit terms are often small print agreements written in financial or legal language and at times may be difficult to comprehend. These terms often include information on the cost of lending, liability protections, buyer and lender rights, use of credit, billing procedure etc.

Legislative regulation exists to protect the consumer from credit fraud, abuse, impropriety and other aspects of borrowing and lending. These protections are consist of a number of Federal and State Acts which credit lenders such as banks are required to follow if applicable. Violations of these terms may occur at times, in which case consumer awareness and enforcement of protection laws may be necessary.

How to keep your good credit score

After working to get a credit score to its best numerical value i.e. between 735-850, keeping it there may also require some maintenance. Keeping a credit score high shouldn't be a challenge so long as one continues the techniques and methods one used to get the credit score high in the first place. There are also a few ways to prevent a credit score from lowering that are not related to strong management of personal finances.

Image source: Phillip Newton

Maintain less than 40 percent usage of credit

Individual debt management decisions also affect credit score. Moreover, the lower the percentage of debt one uses, the more debt management credibility one may achieve in the form of a high and maintained credit score. If one has a high credit score then uses the maximum debt for all one's credit the affect could be lower credit score. Paying as much of one's monthly credit card bill as possible not only helps maintain ideal credit levels, but also indicates a willingness to pay down debt to creditors.

Stay with financial institutions and creditors

How often a debtor switches and closes financial institutions indicates a potential strike against credit worthiness. Sticking with financial institutions and lenders demonstrates debtor may be less likely to engage in risky financial behavior based on statistical correlations and data. So if one must close an account, finding a new financial institution one can feel comfortable banking with over the long term can be a healthy choice for one's credit score.

Avoid frequent credit checks

A credit check from a lender once in a while shouldn't hurt a credit rating however frequent credit checks can indicate a sudden need and application for credit which could adversely affect a credit rating and/or credibility. By spacing out car loan, credit card, mortgage refinance, and individual business loan applications, the chances multiple credit checks will lower a credit score go down. Additionally, avoiding too many comparison related inquiries can also be helpful. For example, if shopping for a credit card one may require pre-approval, too many credit card inquiries could have a negative affect even if one just wants one credit card.

Keep good financial habits

The same financial habits that enabled a debtor to achieve a high credit score must be continued in order to keep the credit score high. The typical practices that contribute to strong credit scores are listed below:

• Budgeting
• Debt Management
• Pay bills on time
• Reasonable Debt to Income ratios
• Credit History

The above methods require ongoing fiscal discipline, know how, financial record keeping and organization skills. Maintaining a cost of living and standard of living in proportion to one's income level is also a good idea in avoiding an over accumulation of debt. Making extra mortgage payments and paying taxes on time can also have an influence on financial credibility.

Protect financial information and identity

Lowering the risk of identity theft can also assure a credit score is less likely to be compromised. Shredding old and unneeded financial documents, obtaining credit freezes during periods of loan inactivity, reviewing credit reports once or twice a year, and removing one from marketing, and credit card distribution lists can all be helpful ways to protect identity. Other techniques include using license numbers instead of tax payer identification numbers at doctor's offices and other places where TIN's are not necessary, changing computer passwords often and using data encryption, firewalls and spyware protection on computers.

Avoid overdraft and bounced checks

Another way a credit score may be affected may be from writing checks that bounce or make use of overdraft protection. Bad checks are reported to credit agencies and although overdraft protection is technically a line of credit, it can incur financial penalties and may also be reported to credit agencies depending on the financial institutions practices.

Keeping a credit score high has several potential benefits including qualification for lower interest rates, higher loan qualification amounts and beneficial background screening for job applications that require good financial credibility and credit scores. Additionally, the satisfaction of knowing one has make a solid and consistent effort in maintaining a deserved credit score can be of personal benefit.

A high credit score can also be useful in unexpected times of low cash flow and when additional credit is required for large expenditures and/or investments. Whether it be personal or business related, be able to qualify for low interest credit and or loans an assist one in realizing one's dreams so long as they are well managed.