Track your online transactions — offline

You should also keep offline records of your online transactions. You can do this by listing your transactions and confirmation codes in a simple Word document or with personal finance software like Money 2003. Scotchmer keeps track of her paid online bills by writing the confirmation number on the bill stubs — her home bank website also has a section that records her bill payments.

Remember to keep these offline records secure. If you're printing confirmation codes of bill payments for example, Murray suggests that you keep them in a locked cabinet with your other financial documents. If you're using Word or Microsoft Money, be sure to password protect your files.

Signing up to bank online,,,,

So "People forget that banking is very much focused on customer service," says Murray. "Privacy and security of information are top priorities for our banks."

Murray says Canadian banks have spent about $17 billion on technological improvements in the last five years. They use 128-bit encryption, a process that scrambles your data while it's being transferred across the Internet to your bank. It's like sending your information as a top-secret code that only your bank can crack. On your end, you'll need a secure web browser. Check your bank's website for security information and minimum browser requirements. And upgrade your browser frequently to ensure you're using the latest encryption technology.

And, while Murray says the system is "very, very secure," he cautions users that the convenience of online banking does bring some risks.

He advises people to rely on the same common sense they'd use dealing with anyone. "Know whom you're dealing with," he says. "Don't give out your credit card information to just anyone online." Murray says if using a shared computer, be aware of who might be using it next. Log off and clear your cache after all online transactions so your session can't be intercepted.

Signing up to bank online....

You can register on your bank's website or call and speak with an online banking expert. They'll issue a temporary PIN that allows you to access their online banking area — generally the same day. You'll use this PIN and your client card number to sign in to bank online. Once signed in, the website will direct you to a listing of your accounts.

You should change your PIN regularly. Shawn Murray, director of communications for the Canadian Bankers Association, encourages people to avoid obvious PINs. "If your wallet or card is lost with any other identification, someone could easily guess your PIN if it's a birth date or an address," he says. Murray suggests using the maximum number of characters your bank allows, and a mix of numbers and letters that someone couldn't easily guess. He also says you should never write your PIN down or share it. If you have, change it right away.

What can you do online?

Most institutions offer the same online banking services, including the ability to:

• Check account balances
• View and print transaction records
• Pay bills
• Transfer funds between accounts
• Update contact information
• Apply for a loan

Bill payment is a common draw. To pay bills online, you create a list of companies much like you'd set up an address book in your e-mail program. When it's time to pay a bill, you simply enter the amount and select a recipient from your list. You can even schedule bills to be paid at a later date or set up monthly payments.

Disadvantages of online Banking...

• Start-up may take time: In order to register for your bank's online program, you will probably have to provide ID and sign a form at a bank branch. If you and your spouse wish to view and manage your assets together online, one of you may have to sign a durable power of attorney before the bank will display all of your holdings together.
• Learning curve: Banking sites can be difficult to navigate at first. Plan to invest some time and/or read the tutorials in order to become comfortable in your virtual lobby.
• Bank site changes: Even the largest banks periodically upgrade their online programs, adding new features in unfamiliar places. In some cases, you may have to re-enter account information.
• The trust thing: For many people, the biggest hurdle to online banking is learning to trust it. Did my transaction go through? Did I push the transfer button once or twice? Best bet: always print the transaction receipt and keep it with your bank records until it shows up on your personal site and/or your bank statement.

Advantages of online Banking

• Convenience: Unlike your corner bank, online banking sites never close; they're available 24 hours a day, seven days a week, and they're only a mouse click away.
• Ubiquity: If you're out of state or even out of the country when a money problem arises, you can log on instantly to your online bank and take care of business, 24/7.
• Transaction speed: Online bank sites generally execute and confirm transactions at or quicker than ATM processing speeds.
• Efficiency: You can access and manage all of your bank accounts, including IRAs, CDs, even securities, from one secure site.
• Effectiveness: Many online banking sites now offer sophisticated tools, including account aggregation, stock quotes, rate alerts and portfolio managing programs to help you manage all of your assets more effectively. Most are also compatible with money managing programs such as Quicken and Microsoft Money.

Origin of online Banking

The advent of the Internet and the popularity of personal computers presented both an opportunity and a challenge for the banking industry.

For years, financial institutions have used powerful computer networks to automate millions of daily transactions; today, often the only paper record is the customer's receipt at the point of sale. Now that its customers are connected to the Internet via personal computers, banks envision similar economic advantages by adapting those same internal electronic processes to home use.

Banks view online banking as a powerful "value added" tool to attract and retain new customers while helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking environment.