Understanding online banking terminology can help if you are new to managing your money on the Web. Terms used in online banking aren't all that different from those used in bricks-and-mortar banking, but online banking offers you many more options that you don't want to overlook.
Online Bill Pay
Online bill pay is perhaps the most important out of all online banking terms. Through this process, you can electronically pay creditors. Instead of writing a check and having to send the payment to your creditor, you can automatically authorize the transfer of your money to pay your bills. This service may be free at your bank, or you may have to have a certain minimum balance or meet other standards in order to qualify for the service.
You are normally able to set up recurring payments so that the money comes out of your account automatically each month without you having to authorize the payment. The only downside is that it may seem too easy, and you need to know how much is in your account at all times so you don't withdraw too much money.
Direct Deposits
Direct deposits circumvent the need to deposit a paper check into your account each time you get paid. Normally, direct deposits are set up by a person's employer. They are also common for tax refunds. When you set up a direct deposit account, you'll give your employer or the government your bank account information. This information can be found on the bottom of your check. Once payroll or the government has this information they can automatically deposit funds into your checking account. Direct deposit is much faster than waiting for a check to arrive, and you can check your online account whenever you like to find out when the money is available.
Overdraft Protection
This feature is offered on many checking accounts in order to help customers pay the checks that they write. When an account has overdraft protection, your checks will be paid even if you don't have enough money in the account at the time of the withdrawal. This is not meant to be a blank check in order for people to spend money that they don't have. It's meant to help customers cover a check they wrote if they miscalculated a bit.
For example, if a customer writes a check for $50 and she has only $40 in her account, the bank will pay the $50 and charge the standard insufficient funds fee (NSF) to the account. The customer will have to make a deposit in order to cover the amount spent, but the check won't be returned. Some banks waive the NSF fee and instead charge a low monthly fee for overdraft protection.
However, it is best if you balance your checkbook and know exactly what you have in your account. You will save money if you are good at managing your money and can avoid paying for overdraft protection. If you have online bill pay, watching out for overdrafts is important since the process is so automated that you might forget how much money you have to pay your bills.
 | As long as you know how online banking works and how you plan to use it, you can find the banking account that best meets your financial needs, but it's still a good idea to choose a bank with both online and physical banking or open separate accounts, one with an online bank and another at a bricks-and-mortar institution. |
 | Learn the advantages and disadvantages to banking online. |
 | Because online bill pay is a relatively unfamiliar concept for many people, you may wonder how to best pay bills online. |
When you first start banking online, you may be offered free online bill pay. Online bill pay is a brilliant invention that saves you time and simplifies your budget, but only if you use it the right way. These tips can help you avoid surprise late fees and overdraft charges. |
If you rely on internet banking, you need to be aware of several tips to keep your personal information and your bank account safe. |
