using electronic banking

Posted : February 13, 2018
Last Updated : February 13, 2018

using electronic banking

Electronic banking uses computers to move money to and from your bank account instead of checks and other paper transactions. Examples of electronic banking include:
  • Automated Teller Machine (ATM) transactions with use of an ATM or debit card.
  • Automatic bill pay.
  • Online bill pay.
  • Mobile banking.

Debit Cards

A debit card is similar to an ATM card but it has more functions. The difference is that you can use a debit card to make purchases at retail locations (e.g., department stores and gas stations). If someone uses your card without your permission, federal law protects you. But the protection differs depending on whether you used your debit or credit card.

With a debit card, the disputed transaction will have already been withdrawn from your account. If you report the problem promptly, the financial institution will put the money back into your account (less $50) if it is unable to resolve the matter within 10 business days. You must report errors within two business days of discovering them to be fully protected under federal law. Some banks may voluntarily waive all liability for unauthorized transactions if you took reasonable care to avoid fraud or theft.

With a credit card, you don’t have to pay the disputed transaction while the company that issued the credit card is investigating the matter. If someone uses your credit card without your permission after it’s lost or stolen, federal law limits your losses to a maximum of $50, although industry practices may further limit your losses.

Temporary Holds

When you swipe a debit card for a purchase where the exact amount isn’t known (e.g., at a hotel or when reserving a rental car), a temporary hold is sometimes placed on funds in your account until the actual transaction posts to the account. The hold will likely be for an amount greater than you actually spend. This temporary hold could prevent you from buying other things, even if you do have the money available.

For example, imagine you have $200 in your checking account and you use your debit card to reserve a hotel room that costs $100. If the hotel places a temporary hold on the funds in your account for the amount of $200, you’ll have no money available to use until the hotel posts the charges to your account or releases the hold.

Many car rental companies and hotels allow you to use debit cards to reserve a car or a room. The temporary hold amount is generally more than the cost of the car or room and can last several days. When making travel reservations, be sure to ask about the debit card hold policy.

Here are some differences between a debit card and a credit card:

  Debit Cards Credit Cards
  • Buy now, pay now.
  • Buy now, pay later.
Interest Charges
  • No charges apply as funds are automatically debited from your checking account.
  • Charges will apply if you carry a balance or your card offers no grace period (time to repay without incurring interest charges).
  • Fees on certain transactions (e.g., an ATM fee charged for withdrawing funds from an ATM not operated by the financial institution that issued your card).
  • Potentially costly fees if you try to spend more money than you have available in your account.
  • Fees and penalties can be imposed if payments aren’t timely.
  • Some cards also have annual fees.
  • Not all cards offer grace periods (time to repay without incurring interest charges).
Potential Benefits
  • Easier and faster than writing a check.
  • No risk of losing cash that you can’t replace.
  • Some cards may offer freebies or rebates.
  • As long as you don’t overdraw your account, debit cards are a good way to pay for purchases without borrowing money and paying interest.
  • Freebies are sometimes offered (e.g., cash rebates, bonus points, or travel deals).
  • You can withhold payment on charges in dispute.
  • Purchase protections offered by some cards for faulty goods.
  • If you’re careful about how you manage your credit card, especially by paying your bill on time, your credit score may go up and you may qualify for lower interest rates on loans.
Potential Concerns
  • Usually there are no protections against faulty goods and services.
  • You need another way to pay for unexpected emergencies (e.g., a car repair) if you don’t have enough money in your bank accounts.
  • Over-spending can occur, since the credit limit may be higher than you can afford.
  • If you don’t pay your card balance in full each month, or your card does not have an interest-free grace period, you’ll pay interest. This can be costly, especially if you only pay at or near the minimum amount due each month.

Automatic Bill Payment

Automatic bill payment automatically takes money from your account to pay your bills. If you use automatic bill pay, make sure you have enough money in your account to cover your bills when they’re due, and keep track of your account balance. Check your bills regularly to ensure the bill is accurate and the payment is made. You may be responsible for late payments if the bill isn’t paid automatically as anticipated.

Online Bill Payment

Online bill payment is different from automatic bill payment in that you can designate when bills are paid from your account each month. You may be able to pay bills from your online banking account, through a budgeting software program, and/or by creating an online account with your service provider (electric, water, or cable/satellite companies, etc.).

Mobile Banking

Depending on the services offered by your financial institution and your cell phone service provider, you may be able to conduct the following banking transactions from your cell phone:
  • Receive text message alerts when your account balance reaches a certain level, or when a certain transaction occurs.
  • Access your online bank account to check balances, pay bills, and transfer funds between accounts.
  • Locate your bank’s closest ATMs.
  • Pay for purchases.

Safe Electronic Banking

The Internet offers convenient new ways to shop for financial services and conduct banking transactions any day, any time. However, safe electronic banking involves making wise choices that will help you avoid costly surprises, scams, or identity theft. Some precautions you can take include:
  • Using a secure and encrypted connection to the Internet.
  • Disregarding fraudulent emails asking you to send your account number, password, or any personal information via email; legitimate financial institutions don’t ask for this information via email.
  • Confirming that an online bank is legitimate by contacting the Federal Deposit Insurance Corporation (FDIC).
  • Monitoring your bank account activity closely.
  • Keeping your information private.
  • Contacting your bank to find out more about precautions you can take with the online and mobile banking services they offer.
  • Using anti-virus software, keeping it updated to detect and block spyware and other malicious attacks, and using a “firewall” to stop hackers from accessing your computer.

Protection against Identity Theft

The Internet offers the potential for safe, convenient new ways to shop for financial services and conduct banking business any day, any time. However, safe electronic banking involves making good choices and making decisions that will help you avoid costly surprises or even scams.

The evolution of identity theft includes the spread of fraudulent “phishing” emails. These are unsolicited emails allegedly from a legitimate source – perhaps your bank, utility company, well-known merchants, your Internet service provider, or even a trusted government agency (e.g., the FDIC) – attempting to trick you into divulging personal information.

Whether you bank online or in person, there are many ways to keep your identity from being “hijacked,” and to assist you if you have become a victim of identity theft:
  • Protect your Social Security Number (SSN), credit card and debit card numbers, Personal Identification Numbers (PINs), passwords, and other personal information. Never provide this information in response to an unsolicited phone call, fax, letter, or email – no matter how friendly or official the circumstances may appear.
  • Protect your incoming and outgoing mail to prevent thieves from obtaining valuable financial and personal information.
  • Keep your financial trash “clean” by limiting the use of your Social Security number and other valuable information. Also, destroy documents containing SSNs, bank account information, and other details a dishonest person can use to commit fraud.
  • Keep a close watch on your bank account statements and credit card bills. Monitor these statements each month and contact your financial institution immediately if there is a discrepancy in your records, or if you notice something suspicious (e.g., a missing payment or an unauthorized withdrawal).
  • Avoid identity theft on the Internet:
  • Confirm that an online bank is legitimate and that your deposits are insured.
  • Keep your personal information private and secure.
  • Understand your rights as a consumer.
  • Learn where to go for more assistance from banking regulators.
  • Make sure your bank requires a password or PIN to use a cell phone for banking, in case your cell phone is lost or stolen. If your cell phone is lost or stolen, you should also contact your cell phone provider immediately. Your provider may be able to deactivate the phone or have sensitive information erased.
  • Contact your bank to find out about any additional precautions it may be able to take, or what you can do to protect yourself.
  • Exercise your right to receive one free credit report each year at Review your credit record and report fraudulent activity.


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