When Vanessa and Cyril Bright married last year, they merged their banking styles. For the newlyweds, it was a matter of old meeting new. Vanessa is a self-described online banking whiz. Her hubby prefers to pay his bills in person and in cash.
For Vanessa, the convenience of managing money and paying bills using the Internet makes it all worth it. It means not having to lick envelopes and buy stamps because everything is done online. Cyril doesn’t trust electronic banking with his hard-earned money and often drives to the store where he bought an item to pay the bill in person and walk out with a receipt.
Vanessa, 38, says she is savvy enough to recognize fake e-mails from scammers trying to trick her into divulging personal and financial information. Cyril, 41, had his identity stolen years ago and thinks putting his account information on a computer is a risky move.
The Brights, who live outside of Washington, D.C. in suburban Maryland illustrate the divide that exists in the black community when it comes to banking via the Internet. Larry Irving is an expert on the digital divide. He’s president of Irving Information Group in Washington, D.C., and former senior adviser to President Clinton on telecommunications and Internet initiatives. He says African Americans like Vanessa make up a small percentage of the 53 million Americans who bank online.
African Americans who are fearful of mixing their finances with the World Wide Web are being left behind by those who have embraced the technology and convenience of online banking. Those enjoying the opportunity to check their account balances 24 hours a day, view their account activity and history no matter where they are, transfer money instantly, reorder checks electronically, and perform other banking functions from home without picking up the telephone, say there’s no reason to continue sitting on the fence.
On a typical day, 13 million Americans are banking online, an increase of 58% from 2002, according to a study released this year by the Pew Internet & American Life Project. Irving suspects that only a small segment of that number are African Americans. “We, historically, have been less trusting, particularly with our finances as it relates to electronics. Generally speaking, people of color have wanted to see their money and hold their money. And they’ve been less trusting that they won’t get ripped off,” says Irving. “A lot of times, we don’t want people to have that much information about us. We don’t want to be caught in the databases of institutions that we, historically, haven’t trusted and that have not always done right by us.”
It’s not surprising that African Americans are more wary of banking electronically than other consumers. We are the group least likely to buy online, according to a study by Cambridge, Massachusetts-based Forrester Research. In addition, according to research conducted by Pew Internet & American Life Project, people with higher incomes who have been using the Internet for six years or more and who have broadband Internet connections are more likely to bank online.
“We are later getting broadband, and we are less likely to use the Net for e-commerce. And we are
underbanked as it compares to non-minorities,” says Irving. “Major factors are race and class. Increasingly, [online banking and e-commerce] are occurring during working hours and in the office where many people have daytime access to the Net. We are still disproportionately in jobs where, during the day, we may not have access to the Internet.”Irving acknowledges that not all African Americans are behind the curve when it comes to reaping the benefits of online banking. “A lot of black folks are whizzing through this, particularly those who are college educated and have medium to high incomes.”
Vanessa has been using computers since college and is not intimidated by new technology. She loves having the power to check her account balance at her fingertips and having the ability to identify and report fraudulent charges to her financial institution before her monthly bank statement arrives in the mail. Online banking can also cut down on late fees because you can pay bills almost instantly.
Ultimately, Vanessa won in the money management disagreement with her husband: they’ve agreed to let her take over the bill paying. Cyril says he trusts Vanessa, though online banking isn’t his forte: “I’ll never feel comfortable online. Maybe I’m just old fashioned. She says she knows what she’s doing.”
Vanessa checks their online bank account regularly. Every two weeks, she spends about 15 minutes paying the bills. Doing it the old way—with pen, checkbook, envelopes, and stamps—often took 45 minutes or more. Now she pays all their monthly bills through an account she set up with Baltimore-based M&T Bank. She even pays one-time bills, such as a medical invoice, online. “It’s fast and efficient,” Vanessa says. “I don’t have the fear some people have.”
For most people, that fear is of identity theft. According to a study released last year by Forrester Research, 71% of online shoppers who don’t bank online cite security and privacy concerns as the reason for their resistance. Other fears, habits, and misconceptions cited in the study include the following:
- Many said they were content driving to a bank branch or using phones and ATMs and see no reason to add online banking to their repertoire.
- Others said they didn’t think their financial institution offered electronic banking services. (Actually, of the country’s 9,000 banks, about 6,800 have Websites. And 80% of those Websites offer online banking services to their customers.)
- Some said they just haven’t gotten around to banking online or that it seems too complicated.
Banks and credit unions are working hard to entice their customers to bank online through advertisements, letters, and e-mails, and most banks offer the service free of charge.
Moving their customers toward electronic banking makes good business sense for banks. Most have used automated electronic systems for years; it was only the customer who kept paper copies of their account information. It costs more for banks to produce paper copies than it does for them to produce online account pages. And, according to Pew Internet study findings, customers who bank online make fewer customer service calls and are less likely to switch banks.
One of the banking industry’s biggest pushes is allaying their customers’ apprehensions about online
banking and reminding them that the service exists. Websites for all major banks, from Bank of America to Citibank, invite customers to register their accounts online and be guided through screens that lay out the security features of their sites. Michael L. Jackson, associate director in the division of supervision and consumer protection for the Federal Deposit Insurance Corp., says online banking is generally safe. He recommends looking for a secure Internet page, denoted by a padlock located at the bottom, right corner of your screen; installing an up-to-date virus protection program; and refusing to respond to suspicious e-mails that appear to be from your financial institution without calling to confirm their validity first.The FDIC cautions consumers to be on the lookout for phishing scams—when identity thieves send out fake e-mails intended to look like solicitations from a bank or government agency requesting personal or financial information such as your Social Security number (see “Don’t Go Phish,” Shopsmart, this issue). The e-mails usually direct the consumer to a fraudulent Website in an attempt to steal their identity. “A lot of people are apprehensive about banking online, but if you know how, it is safe,” says Jackson.
In fact, a recent study commissioned by the Better Business Bureau and conducted by Javelin
Strategy & Research this year, found that fears of identity theft are largely unfounded. Family members, friends, and neighbors make up half of all identity thieves. And lost wallets, checkbooks, and stolen mail far outweigh hackers and spyware when it comes to identity theft. “Identity theft is still primarily an off-line crime,” says Jordana Beebe, communications director for the Privacy Rights Clearinghouse, a nonprofit consumer advocacy group based in San Diego. “In general, online banking tends to be a little bit safer because there isn’t a paper trail. A lot of identity theft is the result of stolen mail, and online banking reduces the chance that your personal financial information can be stolen that way. Online bankers also tend to check their accounts more frequently, so any unauthorized activity would be caught sooner [than if you had to wait for a monthly bank statement.]”
Jennifer Goodwin Lyles, 36, has become adept at spotting phishing e-mails. A seminary student who lives in Pasadena, California, she used to receive them regularly from scammers pretending to be her old bank. The e-mails asked her to click on a link and enter her bank account information and account password. “There was something in the font that looked amateur,” she says. “It was as if you had a fake dollar bill. You can kind of tell it’s not the same quality.”
Goodwin Lyles also knew that most of the correspondence she received from her bank was via mail. She immediately called her bank, which assured her it did not correspond with customers via e-mail in regard to their accounts. The bank also told her that it had recently received many such complaints. “I was [thinking] ‘When were you going to tell us that?” Goodwin Lyles says. “As consumers, we should know.”
She eventually switched banks. Now she and her husband, Ron, 42, do their banking online and are vigilant against phishing and other computer scams. One time, the couple’s computer contracted a virus and crashed, and as a safety precaution, they changed their passwords for their online bank accounts.
The FDIC recommends that consumers also do the following to guard against identity theft and phishing:
- Never provide your personal information in response to an unsolicited call, fax, letter, e-mail, or Internet advertisement
- If you decide to initiate a transaction with a bank or another entity on the Web, take some simple precautions. Don’t provide personal information to a Website that uses a link from an e-mail or an Internet advertisement, no matter how legitimate it may appear.
- Quickly report anything suspicious to the proper authorities. Report any questionable e-mail messages or Websites to the real bank, company, or government agency using a phone number or e-mail address from a reliable source. For example, if a Web page looks different or unusual, contact the institution directly to confirm that you haven’t landed on a copycat Website. And if you’re pretty sure an e-mail or Website is fraudulent, contact the Internet Fraud Complaint Center (www.ifccfbi.gov), a partnership between the FBI and the National White Collar Crime Center.
How to Pay Your Bills Online
Banking online is easier than you think, according to BankRate.com, a Website that provides personal finance advice and up-to-date interest rate information. Here are some tips to get you going:
Getting started: Your bank’s site will walk you through the steps of registering the accounts you wish to pay bills from and the payee accounts you wish to send money to. You only need to enter the account information once; your banking site will keep it until you change or remove it. You can always change the accounts you’re paying bills from or add more payees as needed. At the account registration stage, you may also be given the opportunity to receive some of your bills online. An increasing number of larger companies now offer electronic billing, or e-bills, and accept electronic payment.
Scheduling payments: Once you have registered your own and your payee accounts, the next step is to schedule payment. You simply select the account you want the money withdrawn from, the payee account you wish to send money to, the amount you wish to pay, and the date you want the payee to receive the payment. Your bank may set a minimum number of days, often four or five, as the earliest available payment date. You may also have the option to schedule recurring payments, make multiple payments at once, and pay your bills automatically.
Your creditors receive your online payment in one of two ways: electronic payment or check. If the payee is set up to accept electronic payments, your payment is automatically debited from the account you selected and deposited electronically into the payee’s account, just as if you had written a check. If the payee cannot accept electronic payments, your bank will issue a check based on the online payment instructions you provide. This transaction usually takes a little longer to complete, which is why a four-to-five-day grace period is recommended.
Tracking your payments: Naturally, you’ll want to make sure your online bill payments get processed correctly and on
time. Most bill payment sites include a payment activity page that lists all of your payments and their status; scheduled, pending, or complete. Remember, in addition to the four to five days you should allow for your payment to reach the payee, it could take several more days for the payee to apply your payment to your account. For peace of mind, you may want to request that your bank send you an alert via e-mail, wireless device, or bank site to let you know when your payment clears.Warning: Companies sometimes change their billing address or your account number without notification. It’s important to check the monthly statement from your financial institution to verify those details as well as your transactions. If a payee’s billing address changes, you could be hit with late fees. You may receive verification that a payment was made, but it may go to the wrong place or be credited to the wrong account.
Online Banking
Virtual banks, banking institutions without physical branches, are materializing on the Web at an astounding rate and they are offering something many brick-and-mortar banks can not—astounding rates! Virtual banks offer better deals on checking accounts, according to a study done by Bankrate.com, which found that the average yield at Internet banks is 1.05 %, compared to 0.27 % at traditional institutions. And in some cases, it is possible to see interest rates of up to 2.75 % on checking accounts.
Virtual banks offer other perks. An Internet account generally takes less time to set up and use; many offer free accounts, free transfers, and free payment cards. It’s even possible to combine virtual banking with online trading. In addition, virtual banks typically have fewer monthly fees. How do they do it? Well, obviously, virtual banks save on building branches and hiring massive numbers of employees.
However, there are some drawbacks. If you enjoy face-to-face interaction with a teller and the comfort of walking into a bank branch, Internet banking may not be for you. Most transactions will take place online or by phone. Bankrate.com also notes that it’s harder to make deposits at online banks. In most cases, they have to be mailed, which can be time consuming. And transferring money electronically from another account isn’t always possible with personal checks. ATM withdrawal fees can add up also because you’ll probably have to use another bank’s ATM.
To get more information about Internet banks, look into reputable brick-and-mortar institutions that have launched virtual companions such as Citibank, Bank of America, Bank One, and Wachovia. There are also virtual banks listed on Bankrate.com that have solid reputations, including National Int
erBank, ING Direct, E*Trade, NetBank, and Juniper Bank. In March, the Office of Thrift Supervision approved a deal that would form BankBlackwell, an Internet-only bank and the first black, federally chartered African American savings bank in 10 years. Led by James Mundy, former chief operating officer at OneUnited Bank (No. 2 on the BE BANKS list with $478.6 million in assets), BankBlackwell, will target affluent African Americans and is slated to open later this year pending adequate funding.
—Nicole Marie Richardson