What is online banking?

The absolute easiest answer is the internet version of managing money through your financial institution. Super obvious, right?

The more complex answer is online banking is a digital experience that offers account holders access to every aspect of their money throughout their lifetime. It's your entire financial history: every deposit, debit card swipe, bill payment, paycheck, check, statement, investment, expenditure, and transaction from the time you open your first account until your executor closes your last account. That's a lot of information about you and your money.

If you were born after 2001, online banking has always been a part of your financial history. If you've always used your bank or credit union's online banking service or its mobile banking app, you might think everyone uses it. Not quite.

Online banking has absolutely transformed the financial industry (really, what industry hasn't been transformed by the internet?), but more importantly, online banking places your money more than ever in your hands. Online banking puts control of your money with you, so let's cover — and uncover — all the ways you can control your money and make the most of online banking.

What exactly is online banking?

While the first online banking debuted at the beginning of the 21st century, the idea of "home banking" began well before anyone had computers in their homes. Initially, and ironically, in the 1980s, people could gain information about their accounts by using their phones to call their banks and receive automated account information. How low- tech!

Today, online banking can include computer access, but also the use of mobile banking. Many financial institutions still use dial-in banking services, but the usage rates of online versus mobile are often considered independent of each other. Many consumers use mobile-exclusive banking services from neobanks, so even at-home banking isn't limited to your home. Likewise, mobile apps may not include every feature of their online counterparts, so your preference may depend on what you need as much as what device you're using.

It's no surprise that the pandemic did as much to push users towards online banking as much as all the technological improvements over the last several decades. Across the banking industry, 71% of consumers have used online banking and 43% used mobile banking prior to the pandemic. Online transactions at some financial institutions jumped by more than 200%, which may be the biggest jump in online banking's short history.

Hop back just a few years to a 2019 survey: 34% of account holders preferred to use their mobile phones as the primary access point for their accounts and less than 25% of Americans used online banking as their primary means of account management. When you consider all the benefits of banking from home, it might even be a little surprising that those numbers aren't higher.

If you use your online account access daily, you may be using lots of features and rarely visit an actual bank branch. You might just check your balance and log back off. But if you really want to find out what online banking is — and what it can do for you — explore these features.

Standard online banking features

When you log into your online account or mobile app, you might take for granted some of the standard features. Many have become so ubiquitous that it doesn't even occur to us how transformative they are.

Security

Simple user names and passwords have advanced to multi-factor authentication (MFA) for your account access, which we also use for dozens of sites and apps. Security was a major concern with the first online banking service. Today, banking security often sets the standard for how to access your most personal information.

Also, once you log in to your account, you have the ability to update your address, mobile number (super important for that MFA), and even rename your accounts if you happen to like that option.

Check your account balance

As soon as you log in, there it is right on the landing page: your account balance. It's nearly impossible to imagine a time when this information was unknown to you. You had to visit a bank — and later use an ATM — to know how much money was in your checking account or savings account.

It's easy to stay on top of how much money you have in each of your accounts by checking your balance online, and if you open a new account, it shows up there, too.

Account history

From your account balance, you are one click away from your account activity. Every transaction from your account, whether it’s from an ATM the swipe of your debit card or your employee payroll. You can find out which checks have cleared and research specific payments. You can see if an unexpected fee has been incurred and you can see when cash is deposited.

It may sound obvious to say every single transaction, but without online banking, or an actual visit to your financial institution, you would only know what has been incoming or outgoing once a month. Reviewing past payments and deposits can be made easier by sorting and categorizing them.

You can access monthly statements via your online banking service (and most mobile banking apps), as well as review your charges and deposits by date and amount when logged into your account. If you only have an online savings account, your statements may be available quarterly rather than monthly.

Not every transaction will be visible in your account history, but when you download your e-statements, you will collect a day-by-day history of your spending for your entire lifetime — right there in your online banking.

Transfer funds between accounts

The simplest transfers are when you move your own money, for example from your checking account to your savings account. These transactions happen in real-time because they stay within the same bank or credit union. Transfers can be one-time, recurring, or even automated.

This can apply both to transferring money between different types of accounts, like checking and savings, and transferring money to other people's accounts within the same bank. Many internal loan payments can be completed through this same process.

Once money moves out of your bank or credit union to another financial institution, known as an external transfer, the timing and process may be different depending on both your bank or credit union and the financial institution that receives the money.

Bill pay

We all have to pay bills, but online bill pay makes the entire process much less painful. You will need the name, address, and account number for the company you want to pay, but once you enter the information, it is saved. National or regional companies, such as cell phone or utility companies prefer these electronic payments and set up electronic fund transfers (EFTs) to move the money even faster.

You can even pay individuals or small businesses, such as your lawn guy or your nephew, and your bank or credit union will send a paper check, many of which can even be tracked to the local post office where it is sent. Also, any check from your account, whether sent by your bank as a bill payment or one your write yourself , can be viewed — both front and back — in your account history. Some check images may be small, but they're a great way to double-check that your payments were received.

Depending on the financial system your bank or credit union uses, you may have to apply online to activate online bill pay service, but it is free and much more convenient than writing checks or returning payment coupons. You can also schedule payments for in the future and arrange for recurring payments to simplify the process.

Also, check your mobile app. You may be able to take photos of your bills and have the information automatically added to your bill payee list.

Deposit checks

When flip phones first combined cameras and phones, banking really took the leap with mobile deposit. Not having to go to the bank or even an ATM to deposit a check made it so much easier to get money into your account. Yes, there are limits and holds in place, but when you are sitting at the beach depositing your graduation check, that's a modern convenience that really is convenient.

Message your bank

Often overlooked, but important, your bank or credit union allows you to send messages within your online banking. This level of customer service allows you to share specific information, such as account numbers and transaction information securely. This avoids the risk of sharing information via email, but also allows you the flexibility to contact your financial institution with account-related requests after hours.

Policies and guidelines

This may be just a nice-to-have until you need to have it, but your bank or credit union's online banking terms are also available within online banking. They are required to provide them to all account holders, so having them available with your accounts is mandatory.

Online banking extras

Keep in mind, what you might consider standard, someone else might consider extra, such as mobile deposit. But many features are developed and added to online banking sites as they are developed and improved, or even requested by account holders.

If you think a specific feature would be beneficial, ask your bank or credit union. Sometimes those features may already be in the works and it confirms they are giving you the level of customer service you and others want.

Account opening

Do you need a new savings account for your granddaughter, a personal loan for your upcoming wedding, or a new credit card for your small business? More and more options are available to start and complete the process online. You may need to upload documents through a secure website, so keep in mind that you might start the process on one device and follow up with another.

P2P

Often called person-to-person, or peer-to-peer, P2P services allow you to send money to someone who doesn't bank where you bank.

P2P payments [LINK: new blog post] are simply another form of external transfers, but they may be set up differently from one financial institution to another. Some use SMS messages or email to alert the recipient of the incoming payment, but it is designed to move money between accounts rather than pay money to a payee, such as a company.

Alerts and notifications

Notifications are designed to inform you of your account balance, such as sending you a message once a day , or a monthly notification of how much money is in your emergency fund. These are especially helpful if you've set up automatic transfers and you want to keep that effort out of sight, but not entirely out of mind.

Account alerts are the smartest way to track your money movement and stay on top of changes to your account. An alert can let you know when your direct deposit is in your account, or when a withdrawal or debit occurs. More importantly, you can be alerted if your password or address is updated, so you can keep track of your personal information.

With alerts and notifications, you can find out when your account balance drops below a certain level so you can transfer money to avoid overdraft fees. In short, it's your online banking reaching out to you to let you know what's happening in your account.

External transfers

Any time you move money out of your bank or credit union to an account with a different financial institution, those transactions are considered an external transfer. The timeline for delivering them, and for deducting them from your account, will vary depending on the policies of both the sending and receiving institution.

External transfers allow you to move money into an IRA account, put money into your Google Pay digital wallet, or send your daughter money to her bank or credit union where she lives.

Many online banking platforms include features that allow you to set up these transfers within their online services after confirming small (less than $1) transfers to the receiving account. These services may only allow funds to be sent out, but not received.

Searching, sorting, filtering, and reporting

As part of your account history, you have the ability to look for specific transactions by amount or date, ranges of dollar amounts, only deposits or only withdrawals, only checks, or even sort by keywords such as "point-of-sale" or by its abbreviation "POS."

You can also download data from your account history by running reports. You don't have to wait until your e-statements are available if you want to get a jump on your personal accounting, but you can also use these features to create a printout if you ever need to review payments made to a company or individual over a specific period of time.

The possibilities are varied depending on your needs, but many of these tips and tricks are often overlooked, and amazingly helpful when you need them.

Card services

If you have a debit card, many online banking platforms allow you to set up card controls through your computer or mobile app. This may include turning your card on and off (like when you accidentally leave it at your favorite restaurant), using it within specific geographical regions, or blocking purchasing categories, such as gaming stores on online shopping, or even international transactions.

If you also have a credit card with your bank or credit union, these features may extend to your credit card, too. You can even place travel alerts or advise your financial institution of your upcoming travel so that transactions that might otherwise appear as possibly fraudulent do not interfere with your out-of-town purchases.

Many business accounts offer these same controls so you can manage what purchases may be made by which cardholders in your organization.

Credit scores

Many financial institutions recognize their account holders want to have up-to-date information about their creditworthiness at hand and are partnering with the major credit bureaus to provide accurate credit score information within their online banking platform. If you're planning for a future car or home purchase, monitoring your credit score is a good way to know if you are on track for your future plans.

Online versus mobile

For the most part, what you can do online versus on a mobile app are fairly similar, but the devices themselves may lend themselves to being more useful through the internet or your bank's mobile app.

When it comes to security, touch ID and facial ID services are common in mobile apps. Also, using your phone's camera makes mobile deposits and photo bill payments much easier.

Online banking links are always front and center in your bank or credit union's website, so if you purchase a new computer, you don't have to hunt for your old bookmarks. When you want to use their mobile app, you will need to download it from the app store like any other app on your phone.

While many banks and credit unions offer versions of their apps for small businesses to utilize business services, many of the advanced features may be only accessible, and often easier to use, through the online version.

The future of online banking

You might discover from this list that many of the features you may use in the future are already available today. Financial institutions are careful to make sure that online banking is safe and you'll usually find it's pretty intuitive as well.

Your bank or credit union may provide tutorials, tips and tricks, and previews of what's coming on their website. They may also showcase underused features on their social media, so follow along and get insight on what is available to you. If you want to know more about what is available or what is coming, ask. They want to make sure you know what's already available and use those services to put you in greater control of your money.

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