SEPTEMBER 2005 :: CONSUMER ED

Warning: The Future Is Here
What You Need to Know for Safe Electronic Banking

By Karen Blumenthal
Staff Reporter of The Wall Street Journal

Futurists have talked for years about a checkless society, one where the basic tools of banking-paper checks, deposit slips, receipts and statements-become obsolete. Today's teenagers may be the first to actually live it.

And why not? Most banks now offer bill-paying and up-to-the minute account statements online all the time. Meanwhile, debit cards, which deduct funds directly from your checking account, have proliferated, allowing users not only to withdraw cash at any hour of the day, but also to buy just about anything with either a signature or a personal identification number.

In a survey earlier this year, the American Bankers Association and Dove Consulting found that in 2003-04, purchases made with credit and debit cards for the first time surpassed purchases made with cash and checks. Buyers used debit cards for 31% of their purchases last year, up from 22% in 1999.

Your parents may cling to their checkbooks, smudged check registers and account statements that arrive in the mail. If you shun all that, here are few things you should know:

Keep your PIN and password to yourself. You may share your locker combination or your deepest secrets with your best friends or your romantic interest, but keep your banking information private. If you must write it down, keep it in a safe place at home, not in your wallet.

Indiscretion can cost you. If you lose your debit card or your password and someone rips you off, you are responsible for up to $50 of losses-but only if you report the lost card or password to your bank within two days of discovering it. If you wait more than two days, you could have to eat up to $500 in losses. You aren't responsible for fraudulent transactions that happen after you've reported the loss.

Banks--and computers--aren't perfect. Even if you don't get a monthly account statement in the mail, you are responsible for making sure that all the deposits and withdrawals in your account are accurate.

Ashlee Stokes, a spokeswoman for ING Direct, which offers online savings accounts, says she collects her receipts and matches them to her online statement once or twice a week. "I wouldn't rely on the bank," she says-even though she works for one.

At the least, check your statement once a month to be sure it's correct. If you don't want to print out a paper copy, consider saving a copy on your computer for future reference.
If you spot unauthorized transactions or mistakes, let the bank know right away. The bank isn't responsible for any errors that aren't reported within 60 days of the monthly bank statement.

What you see isn't always what's there. Your debit-card purchase from lunch may show up in your online account before school is out. But some purchases may not show up for a few days. You still need to keep track of what you've spent to avoid taking out more money than you have, a situation known as an overdraft, which can result in fees of up to $35.

Likewise, be suspicious of the account balances you get on the phone or from an ATM. They might not be up to date. They also might not be accurate. A few banks have added their "overdraft protection" to the ATM balance, telling you, for instance, that you have $100 more in the account than you actually have, says Linda Sherry, a spokeswoman for Consumer Action, a consumer education and advocacy group. If you spend that "extra" money, you'll have to pay it back, along with overdraft fees and possibly interest charges.

Public computers are, well, public. Avoid looking up your banking information on a school or library computer where someone after you could go back and see all your information. Don't let the computer save your password. Or at least be sure to sign out of any password-protected sites and close the browser window before you leave the desk.

Online bill paying isn't always online. If you use online bill paying, take note when the screen tells you that the payment may take five days. That's a sign that the bank may be actually printing out a check and mailing it, not zapping the funds electronically.

In reality, it may take as long as 10 days to get that payment to your creditor, says Ms. Sherry. She recommends that you pay the bill seven to 10 days before it is due to be sure it gets there on time.

Phishes bite. Phishing, or sending realistic-looking e-mails that ask for your personal information, like PINs and passwords, has become a common scam. Some of those missives may link to Web sites that look a lot like the real thing. But they are actually a ruse by criminals who hope to snag your information-and your money.

Your bank should never ask for your password or PIN via e-mail or in an unsolicited phone call. If you are unsure, call or e-mail the bank directly before divulging any private information.

Your bank will call you, however, if it sees suspicious activity in your account. That's why it's a good idea to make sure you notify the bank when your address and phone numbers change.

For more information about electronic
banking, visit http://wsjclassrom.com/consumered.