If there’s one thing people want to know they can count on when they open a savings account, it’s that the money they keep there will be safe. (It’s kind of the whole point, right?)
That expectation isn’t likely to change based on whether the account is with the nearest brick-and-mortar bank or an online-only financial institution. And it doesn’t have to.
Online financial companies generally use the same precautions as traditional banks to safeguard their customers’ personal information and protect their money from cybercriminals and identity theft.
So if you’re drawn to the higher interest rates and lower fees they typically offer, but you’ve wondered if online savings accounts are safe, the short answer is yes.
Nothing is completely risk-free. But as long as the money is covered by the Federal Deposit Insurance Corporation (FDIC), it should be just as secure in an online savings account as it would be in a traditional savings account.
What Is an Online Savings Account?
You may already think of your traditional savings account as being “online”—especially if, like an increasing number of Americans, you prefer to use your computer or a mobile app to do most of your banking, instead of heading to the local branch.
Thanks to the popularity of direct deposits and ATMs, many savers seldom see their favorite bank teller anymore—unless they get a birthday check from Grandma or they have a problem with their account. But the banks—and their employees—are still there to do business.
True online-only financial institutions don’t offer in-person access. They don’t have physical branches, so customers manage all their transactions with a computer, a mobile app, or at an ATM.
Savers can still deposit checks, check their account balance, transfer money, and more. If they have a problem, they deal with that online as well, or make a phone call to customer service.
Because these Internet-based financial companies generally have lower overhead costs than companies with brick-and-mortar locations, they tend to pass their savings on to their customers, with low or no fees and interest rates that may be higher than a traditional savings account.
How Do Online Banks Keep Savings Secure?
The digital world can be a dangerous place, with hackers and identity thieves constantly looking for new ways to get their hands on others’ hard-earned savings, so both traditional and online-only financial institutions regularly update the methods they use to protect their customers’ accounts.
You may be able to find a list of those security measures on a bank’s website, or you can ask before you open an account. Precautions you might want to look for include:
Secret Socket Layer (SSL) Encryption
Encryption is an Internet safety protocol that creates a secure connection when you log in to a site on your computer or with an app.
Basically, your data is scrambled and can be read (or decrypted) only by the intended recipient. To be sure a site is using SSL encryption, you can look for a padlock and “https://” at the start of the web address.
Two-Factor or Multi-Factor Authentication
Two-factor (2FA) authentication adds an additional verification step to a normal log-in procedure. With single-factor authentication, you enter your username or email and a password, and then you’re done.
With 2FA, you must provide an additional verification credential before you can gain access to your account. For example, a financial site might text or email a one-time-only verification code to your smartphone (or another device you’ve pre-registered), and you must use that code within a limited amount of time to gain access to the account.
Like authentication, a firewall serves as a gatekeeper; it monitors the data coming in and out of a company’s computers and can block unauthorized access from certain websites or IP addresses.
Your financial institution probably has a policy against asking customers to provide personal information (Social Security numbers, usernames, passwords, PINs, etc.) through unsolicited emails.
This can help customers spot fraudulent requests and phishing scams that use personal information to gain access to financial accounts.
Alerts or Notifications
Some banks may offer different types of alerts that let customers know when there’s unusual activity on an account. (If there’s been a large ATM withdrawal, for example, or the balance drops below a certain amount.) You usually can set up text or email alerts through your account profile or account settings.
If you forget to logout of your online account when you finish your business, your financial institution will probably do it for you. Many sites automatically log out users after a period of inactivity. This can help keep prying eyes from viewing your private information.
Limited Login Attempts
If at first you don’t succeed in logging into your account, you may get a warning from the site that you’ll have a limited number of times to get it right before your account will be locked for a certain amount of time.
This security measure is designed to protect against “brute-force attacks,” when hackers try a variety of password combinations to break into a customer’s account. If this happens to you, the site will likely advise you to wait 24 hours before trying again.
Does the Government Protect Online Savings?
The government helps lower savings account risk in a couple of different ways.
The Electronic Funds Transfer Act
If your debit card is lost or stolen, the Electronic Funds Transfer Act (EFTA) limits your liability for any unauthorized activity in your account.
The limits are based on how quickly you notify your financial institution, so you’ll have no liability if you notify your bank before any fraudulent transactions are made.
You’ll be responsible for just $50 if you report it within two business days, and you’ll be responsible for $500 if you report the loss after two business days but within 60 business days.
But the EFTA isn’t just about fraudulent debit card use.
The law defines an electronic fund transfer as “a transfer of funds initiated through an electronic terminal, telephone, computer (including online banking) or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account.”
Which means if someone manages to hack directly into your savings account and takes your money, you generally won’t be liable as long as you report the unauthorized activity within 60 days.
After 60 days, everything changes. Whether the thief used your physical card or a computer to get to your money, if you didn’t report the unauthorized transactions within the 60-day timeline, you could be facing unlimited liability. So it’s important to monitor your account and move quickly if you see anything that troubles you.
The Federal Deposit Insurance Corporation (FDIC)
Although online banking has come a long way in recent years, some online-only financial institutions may not be household names just yet.
If you’ve done your due diligence and researched their reputations, but you’re still a little nervous about what might happen if an Internet-based bank fails, keep in mind that many major banks are insured by the FDIC for up to $250,000 per account, per bank. The FDIC is an independent agency of the U.S. government and was created to protect the money Americans deposit in banks and savings associations.
So your money is safe in a bank account with FDIC coverage, whether it’s online-only or down the street. To confirm the financial institution you are considering offers FDIC insured accounts, you can ask a representative, check their website, or visit the FDIC’s online tool BankFind to confirm.
How Can Account Holders Protect Themselves?
As an account holder, you can have a significant role in protecting your savings. Here are some preventive steps you could take:
Making Protection a Priority
While you’re shopping around for savings accounts with the best interest rates and lowest fees, keep in mind that safety is also key.
And when you sign up for an account, remember to take advantage of what’s offered by enabling security features like two-factor authentication and fraud detection notifications.
Not Getting Passive with Passwords
To keep your account secure, change your password often. Try to select a password that is as strong as possible, with a mix of numbers, symbols, and upper- and lowercase letters.
Make it long (as many characters as you can). Don’t share it with anyone or keep it taped to your computer.
And try not to use the same password for everything you do online. If your password is compromised in a breach, it can make every account for which you use it more vulnerable.
Keeping Anti-Virus Software Updated
If you don’t already have anti-virus and anti-malware programs installed on your computer, you may be able to find a free or trial version online. You also can purchase security software at a local electronics store or buy it and download it.
A full protection package can monitor your computer and other devices, and could include features such as a password manager, a virtual private network (VPN), and some type of identity theft protection.
If you already have protection on your device, be sure it’s turned on and update it regularly, so your computer recognizes every new threat that’s out there.
Avoid Using Public WiFi
Try not to use public WiFi when you’re logged in to financial accounts or sending personal information. If you’re using a shared computer at work or at the library, don’t give the browser permission to save your password, and be sure you log off when you’re finished. You also may want to consider changing the settings on your mobile devices so they don’t automatically connect to the nearest WiFi network.
If you must access online accounts through WiFi hotspots, consider using a VPN app, which can encrypt the traffic between your computer and the Internet even when you’re using an unsecured network. (Carefully research the app you choose to be sure it’s a trustworthy brand, and review the permissions the app requests before agreeing to the terms.)
It may seem unnecessary to monitor your savings on a regular basis—especially if you’re mostly depositing money into the account and almost never taking money out.
But by keeping an eye on your balance, you might spot a problem before the bank does. And that could save you some major headaches if an identity thief decides to drain your funds.
Don’t reply to calls, texts, or emails that request personal information, even if your financial institution’s logo is on the email. It may be a phishing scam. The thief is hoping their targets will fall for the bait and hand over details that could be used to access your account and take your money.
If you get a call, say you’ll call back, hang up, and call the phone number on your savings account statement or the financial institution’s website to report your concerns. If it’s an email or text, check online for alerts on your account or call to get more information.
What SoFi Money Can Offer
In uncertain times, it’s easy to become anxious about your finances. One way to prepare for whatever bumps or surprises may be down the road can be to set aside money in a savings account. And to maximize those savings, it may make sense to open an online account.
Savers who move their money to an online account can generally expect to find better interest rates, lower fees, and other benefits.
They also can count on safety.
But all accounts are not created equal, so it can pay to shop for the perks you want. For example, with a SoFi Money cash management account, account holders can save, spend, and earn interest all in one place.
There are no account fees (though that’s subject to change). And you’ll receive a debit card so cash can be easily accessed whenever it’s needed. You also can take advantage of SoFi membership benefits, including networking events and career coaching.
As for safety, your account will be secure with SSL encryption, two-factor authentication, fraud protection, and FDIC insurance. (SoFi isn’t a bank, but SoFi partners with FDIC-insured banks to keep your money safe.)
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Each business day, cash deposits in SoFi Money cash management accounts are swept to one or more sweep program banks where it earns a variable interest rate and is eligible for FDIC insurance. FDIC Insurance does not immediately apply. Coverage begins when funds arrive at a program bank, usually within two business days of deposit. There are currently six banks available to accept these deposits, making customers eligible for up to $1,500,000 of FDIC insurance (six banks, $250,000 per bank). If the number of available banks changes, or you elect not to use, and/or have existing assets at, one or more of the available banks, the actual amount could be lower. For more information on FDIC insurance coverage, please visit www.FDIC.gov . Customers are responsible for monitoring their total assets at each Program Banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. The deposits in SoFi Money or at Program Banks are not covered by SIPC.