Are On-line Banking Safe?

[Michael G.]

Interest rates are rising, and on-line banks seems to be a place to park
your cash, do you feel safe using them?

Cheers!

[retiredguy123]

Online banks are safe as long as they are FDIC insured, and you can actually verify that they are, and that you are actually doing business with the bank that they say they are.

I only use banks for my checking account, and never as a way to earn interest. I think you are better off buying shares in a short term bond index mutual fund. The Vanguard Short Term Bond Index fund is currently paying 2.85 percent, and is low risk and liquid.

[daniel200]

Yields are moving in a good way. Short term bond funds like The Vanguard Short Term Bond index (symbol BSV) … have also lost money in the last 3 months as interest rates have moved up. (The price has moved from 79.71 to 77.04 for a loss of $2.67 .. or a loss of 3.3%). Short term bond funds are not immune to rapidly rising rates …

I like short term US treasuries now.
Today you can buy:
6 month treasury with a yield of 1.51%
9 month treasury with a yield of 1.88%
12 month treasury with a yield of 2.18%

You are guaranteed not to lose money on these as long as you hold them until maturity.

I purchase online at Fidelity. But there are many other places to purchase these.

[retiredguy123]

Yields are moving in a good way. Short term bond funds like The Vanguard Short Term Bond index (symbol BSV) … have also lost money in the last 3 months as interest rates have moved up. (The price has moved from 79.71 to 77.04 for a loss of $2.67 .. or a loss of 3.3%). Short term bond funds are not immune to rapidly rising rates …

I like short term US treasuries now.
Today you can buy:
6 month treasury with a yield of 1.51%
9 month treasury with a yield of 1.88%
12 month treasury with a yield of 2.18%

You are guaranteed not to lose money on these as long as you hold them until maturity.

I purchase online at Fidelity. But there are many other places to purchase these.
If you buy a 12 month treasury at 2.18 percent and hold it for 12 months, technically you will not lose money. But, if the interest rate doubles 3 months after you buy it, you are losing the opportunity to replace the bond at a higher rate. It's semantics. I prefer to invest in bonds with mutual funds rather than buying individual bonds. I like the liquidity.

[DAVES]

Yields are moving in a good way. Short term bond funds like The Vanguard Short Term Bond index (symbol BSV) … have also lost money in the last 3 months as interest rates have moved up. (The price has moved from 79.71 to 77.04 for a loss of $2.67 .. or a loss of 3.3%). Short term bond funds are not immune to rapidly rising rates …

I like short term US treasuries now.
Today you can buy:
6 month treasury with a yield of 1.51%
9 month treasury with a yield of 1.88%
12 month treasury with a yield of 2.18%

You are guaranteed not to lose money on these as long as you hold them until maturity.

I purchase online at Fidelity. But there are many other places to purchase these.

We have to deal with what is, not what should be. History, the ten year treasury would pay the rate of inflation plus 2%. Retirees would build a bond ladder so as to have bonds mature on a regular basis and you would buy more bonds at the new rate. You would not make money but you would make enough to preserve your capital plus pay the taxes on the dividends. They are and still are subject to Federal tax but not state and local.

TODAY-The CPI is roughly 8%. The ten year treasury is paying roughly 3% and we pay federal tax on that. Used to be reality 8+2=10%

I've not bought treasuries in a very long time. Banks, brokerages as much as they LOVE US, they have to pay their rent and staff so they need to make money. It used to be that it was easy to open an account with the Treasury and get a higher effective yield as you are paying fees to a bank or brokerage. I expect that is still so.

[Babubhat]

Use 2 factor authentication and normal precautions. I don’t have a brick and mortar bank anymore. Don’t miss it. If you use a broker they should have online banking

[DAVES]

Yields are moving in a good way. Short term bond funds like The Vanguard Short Term Bond index (symbol BSV) … have also lost money in the last 3 months as interest rates have moved up. (The price has moved from 79.71 to 77.04 for a loss of $2.67 .. or a loss of 3.3%). Short term bond funds are not immune to rapidly rising rates …

I like short term US treasuries now.
Today you can buy:
6 month treasury with a yield of 1.51%
9 month treasury with a yield of 1.88%
12 month treasury with a yield of 2.18%

You are guaranteed not to lose money on these as long as you hold them until maturity.

I purchase online at Fidelity. But there are many other places to purchase these.

Bond funds verses buying bonds.
The hidden secret. Bonds are sold on a sliding scale commission. Not everyone pays the same price for a resale on a bond. If, you pay more, obviously your percentage yield is less on the same bond. If, you buy a bond and then sell it, you buy retail but sell wholesale.
A bond fund. The same as buying a bond. If, yields go up the value of bonds you hold go down so it same as a single bond can be worth less than you paid for your share.
The loss in a bond fund can be magnified because depending on the fund, they do not only buy investment grade bonds-more risk for higher returns. Also, they leverage bonds. Borrow money on bonds they hold to buy more bonds-more risk for higher returns.

[coralway]

yes, online banks are safe.

[rjm1cc]

Remember the bank can be hacked even if you do not have your individual account online. Thus the only additional risk I see is if you do not protect your login id and password or you do not use a strong password.
Of course you want the bank to be Insured by the Fed. I think they are safe.

[champion6]

Interest rates are rising, and on-line banks seems to be a place to park
your cash, do you feel safe using them?

Cheers!CDs, savings accounts, money markets -- let Bankrate search for you: Banking Information - Personal and Business Banking Tips | Bankrate.com (https://www.bankrate.com/banking/)

[retiredguy123]

yes, online banks are safe.
Maybe. Call me skeptical, but I still feel more comfortable doing business with a bank that has real humans working in a real building. And, I would always verify that any bank I use is FDIC insured. You can do this on the FDIC website. Just because they have an FDIC sign on the door, or on their website, doesn't make it true.

[retiredguy123]

Remember the bank can be hacked even if you do not have your individual account online. Thus the only additional risk I see is if you do not protect your login id and password or you do not use a strong password.
Of course you want the bank to be Insured by the Fed. I think they are safe.
What if the website is fake and posing as a real FDIC online bank? How do you know?

[Babubhat]

Fidelity, Schwab etc. you can go to LSL office if you have an issue. No need to make this complicated

[Michael G.]

Maybe. Call me skeptical, but I still feel more comfortable doing business with a bank that has real humans working in a real building. And, I would always verify that any bank I use is FDIC insured. You can do this on the FDIC website. Just because they have an FDIC sign on the door, or on their website, doesn't make it true.

That makes two of us skeptical, one reason I ask here.

Another question: Is there any on-line banks that do have a brick and mortar branch somewhere here in Florida?

[retiredguy123]

That makes two of us skeptical, one reason I ask here.

Another question: Is there any on-line banks that do have a brick and mortar branch somewhere here in Florida?
I don't understand your question. I think all banks are online. Typically, an online bank is one that does not have any brick and mortar buildings. I use Truist, but I do almost all transactions with them online.

[keepsake]

Do you include federal credit unions in your comfort zone ?

[retiredguy123]

Do you include federal credit unions in your comfort zone ?
I think credit unions are just as safe as banks if they have NCUA insurance. But, I would still use one with a local brick and mortar building, if possible. I could be wrong, but I don't know of any Federal credit unions that are online only, and don't have brick and mortar buildings somewhere.

[Two Bills]

In UK our local bank does not have facility to handle cash anymore.
Everything is automated. Paying in, and taking out.
No cashiers, just a couple of machine sorter outers for when you **** up!
Online/cell banking is as safe as any online business, as long as you have all safeguards in place to start off with.
Believe me, if I can do it, anyone can!

[daniel200]

If you buy a 12 month treasury at 2.18 percent and hold it for 12 months, technically you will not lose money. But, if the interest rate doubles 3 months after you buy it, you are losing the opportunity to replace the bond at a higher rate. It's semantics. I prefer to invest in bonds with mutual funds rather than buying individual bonds. I like the liquidity.

I am a big fan of bond funds in a falling rate environment. But we are now (I believe) in a rising rate environment. An investment in Vanguard’s short term fund has lost 3% in value in the last 3 months. Longer term bond funds have lost much more. I am no longer in bond funds … because I believe the Fed is on a path to consistently raise rates the next 12 months. So I am now nibling at bonds as rates rise.

I hold my cash in GM Rightnotes. Current rate is 1.25% compounded daily. Redeemable at any time upon request. Essentially it is like a money market account that pays 1.25%. Toyota and Daimler offer similar accounts. Certainly, the 1.25% is much less than inflation …. But it is better than 0.01% paid by most money market accounts … and you will never lose principle as rates rise (like bond funds).

I know there are many places to put your cash (preferred shares, trust shares, Reits etc) that offer 4 to 10% dividends or returns. I own many of these … but am at my personal risk “limit” of these. I see treasury bonds as ultrasafe for my cash … I am not rushing in to buy bonds but rather stepping in a few bonds at a time with maturities of 12 to 24 months. I plan to buy every 2 or 3 months and slowly build a ladder. I dont need the liquidity. If rates continue to rise I am happy! If rates fall, I am happy to have a few bonds at a higher rate.

I think the first choice with anyone with some cash that they do not need for 1 year is US treasury I-bonds. Current rate is 9.8%. But you are limited to $10,000 per year (+ $5,000 more if funded by a tax refund). They are easy purchase via the US treasury website

[Michael G.]

Do you include federal credit unions in your comfort zone ?

I do belong to a credit union in Ocala and thinking about joining the Camps USA.
Their building a new building along the service road just west of Stonecrest.

If you check on CD's at most Credit Unions, their rates are close to on-line banks.

[retiredguy123]

I do belong to a credit union in Ocala and thinking about joining the Camps USA.
Their building a new building along the service road just west of Stonecrest.

If you check on CD's at most Credit Unions, their rates are close to on-line banks.
The best CD rates are usually from the large Federal credit unions like Penfed and Navy Federal. I think Penfed currently has a 5 year CD for 2.5 percent. Anyone can join these credit unions. Personally, I would not buy a long term CD at this time because I think interest rates are going to increase.

[Nucky]

We have used Chase Bank for almost as long as they have had Online Banking. Never a blip. Chase does their updates during the early morning hours and warns you that they will be doing so. Chase has many departments, but not all
We did use Citizens First when we first moved here but several times they did updates during business hours and had no one on duty to help on weekends and after hours. We were accustomed to the service provided by Chase. I would highly recommend Chase for Online Banking. Good Luck.

Just so you know, Citizens is a fine bank in many other ways.

[New Englander]

I have been using this online bank for many years. (Online Savings Account ⋆ SFGI Direct, a division of Summit Community Bank (https://sfgidirect.com/)) It is FDIC insured. Very fast transfers to your local bank. It is currently paying 0.71% and that is much more than many bank. I have nothing but positive feelings about this bank.

[coralway]

been using Citi, Fidelity and TD for decades. As well as NFCU, and PEN FED.

Never had any problem at all with any of them.