If you haven’t yet embraced online banking, the Covid-19 outbreak gives you a new reason to do so. With federal stay-at-home guidelines extended until the end of April, we’ll all have at least one more cycle of bills to pay, preferably without going to the mailbox. And if you expected to deposit your federal stimulus check in person, you may find the nearest bank branch closed, or not want to hazard the potentially infectious surface of an ATM touch screen.
True, there’s a workaround with the stimulus checks, (also called economic impact payments), which are supposed to start going out within the next few weeks. Taxpayers who provided bank account information on the most recent federal return, so that a refund could be direct-deposited to their account, will automatically receive the stimulus payment that way. So will those Social Security recipients who weren’t required to file a return because they didn’t owe taxes.
What if the IRS doesn’t have your bank information – for example, if you most recently paid taxes rather than getting a refund? The Service announced March 30 that, “In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.” As a public service to blog subscribers, I plan to send an update by e-mail; if you would like to receive it, you can use the sign-up box at the foot of my website’s homepage.
Still rather get a check? Most banks now have an app that enables you to deposit it in the safety of your home, and perform almost every other function that previously required a trip to the branch. Lately these apps, as well as online banking sites, warn customers about what Chase calls “extremely long wait times if you call us.” Call center employees, like so many of the rest of us, are working remotely.
But the advantages of online banking go far beyond the latest crisis. Tree-huggers and travelers were early adopters. Promotion by financial institutions and new, consumer-friendly apps helped fuel the trend. My quick check with spokespersons for a handful of them indicated that 47 percent of “retail” (not institutional) customers at T. Rowe Price, 72 percent at Fidelity and 75 percent at Vanguard have opted for paperless statements.
Morgan Stanley wouldn’t share that information, but Susan Siering, a spokesperson, said there had been a “significant” increase in customers enrolling for paperless communication as more and more of the country were ordered to shelter-in-place. Those who haven’t will find a “’statement stuffer’ on electronic capabilities” enclosed with the latest mailing, for the quarter ending March 31, she says.
“The coronavirus is going to widely accelerate some business trends in this area that were already happening because people are being forced to adopt these things, whether they like it or not,” says David H. Holtzman, an internet security expert and author of Privacy Lost: How Technology Is Endangering Your Privacy.
Holtzman, a late adopter of online banking (he didn’t go paperless until last year), can tell you more than you might want to know about the risks of data breaches. And sadly, in the time of Covid-19, the scams are proliferating, especially as people await their stimulus checks, the IRS warned this week.
But as with people who initially resisted cell phones and ATM machines, it’s inevitable that the convenience of online banking will win over the holdouts, Holtzman says. “Paying bills online is a lot easier than mucking around with stamps and envelopes.” He now has recurring monthly expenses like mortgage and utilities automatically debited from his bank account; receives rent from his millennial tenants via the payment app Venmo; and uses Apple Pay to split checks when he dines out with friends.
I can totally relate, having gone paperless five years ago in preparation for spending several months at a time overseas. It’s easiest to make the transition one bill at a time, and as you receive the latest financial statements – mail that you may not even want to open right now, given the drastic stock market decline during the first quarter of 2020.
Whether you are just embarking on this journey, or rethinking systems already put in place, the following strategies can help you maximize the conveniences and minimize the risks of leading a paperless financial life.
Diversify. The old maxim, “Don’t put all your eggs in one basket,” applies here for the same reasons that it does in other contexts. And though I have argued elsewhere for consolidating financial accounts, this is a good reason for keeping at least some assets in separate buckets. For example, you might have recurring monthly expenses debited from a bank checking account, and keep your nest egg at a brokerage house.
Use two-factor authentication. Holtzman calls this the “gold standard” in online security. I wouldn’t do business with a bank that did not offer this feature, which you can set up either when you go paperless or at a later date. Here’s how it works: After you sign on to the account with your username and password, the bank sends a validation code to a secondary source that you have designated, which is usually your cell phone. That way, if a hacker gets your password, they can’t get to the next step in the transaction.
Set secure passwords. Some sites require you to choose a password that’s a combination of letters, numbers and symbols, but this takes “only a couple of nanoseconds longer to crack” than one that’s just a single word, Holtzman says. Your best protection is to have a unique password for each account, he adds.
Few mortals can keep track of all that, but there are digital password managers, such as Dashlane and 1Password, that, for a nominal fee, can generate passwords, store them securely for you and sync to all your devices. When you’re online and need to enter a password for any other site, the app (available for Apple and Android devices) retrieves it for you. Under this arrangement, all you need to remember is one password that functions as the keys to the kingdom.
Match the bill-pay system to the need. Some recurring expenses – my health insurance and homeowner’s insurance, for example – can be paid with a credit card. Charging such costs, rather than putting them on auto-pay from your bank account, reduces your potential exposure to bank account hackers (though not to those who hijack your credit card). It gives you a “float” on the money, because it postpones by one billing cycle when you must actually pay the expense. (This assumes that you pay off the entire balance each month, and don’t rack up credit card debt.) And it allows you to accumulate frequent-flyer points or cash-back rewards as you pay your bills.
For transfers between individuals, you have a variety of choices. In addition to those already mentioned, PayPal (which works internationally) and Zelle, which can be used to move money from your bank account to that of a friend, family member or colleague, are options.
Contrary to popular misconception, you don’t need the person’s account information to use Zelle – just the e-mail associated with it. But heads up about a system quirk: If you want to use Zelle with more than one of your own accounts, you will need to have a different e-mail associated with each, or the system will get confused and put a freeze on your transactions.
Don’t take unnecessary risks. In the not too distant past, we lived in a society in which people traveled around a lot and even smart people did stupid things, security-wise. Examples: relying on unsecured airport Wi-Fi systems and leaving electronic devices unattended in hotel rooms, where they can be vulnerable to what security pros call an “evil maid attack.” And whether you’re a nomad or a homebody, you should never, ever use your Facebook sign-on information as a shortcut to access other websites, Holtzman says. Zoom users, take note.
Another thing to look out for, especially in hotels, are networks with names that mimic that of the place where you’re staying – a favorite hacker’s trick, Holtzman says. So be careful to sign on to the right network. Some frequent travelers use a wireless device called a MiFi to establish their own cellular connection, but data charges can be pricey.
Many more rely on the added security of a VPN (virtual private network), which can be useful both at home and on the road. It’s a software-based system, available free or for a nominal charge, that encrypts your internet traffic, protects your online identity and can be used to hide your location.
Monitor vigilantly. Though Holtzman thinks consumers who bank online need stronger legal protections, he’s never heard of a case where money was lost through a data breach and a bank didn’t eventually fix the problem. But customers, for their part, should be watchful for improprieties. “You’re the only one who will spot anomalous transactions in your account,” he says.
With online banking, you still get monthly or quarterly statements, but accessing them takes a bit more effort than opening an envelope. The financial institution sends you an e-mail notice that it’s available. After that, you must sign on to your account, navigate to the appropriate page on the company’s website (the message typically gives you directions) and download the statement.
Between statements, you should keep a close watch on the account for unauthorized activity. The easiest way to do that is to set up e-mail alerts for any transactions, or, if you don’t like getting pinged a lot, for those that exceed a specific amount.
Plan for contingencies. Covid-19 has changed our lives in unimaginable ways, reminded us of human frailty and given us plenty to worry about as we lie awake at night. Once you have made the transition to online banking, you’ll do your loved ones a favor if you give them a road map to your assets and liabilities, and how you pay your bills.
Whatever way you choose to organize the information, try not to leave them feeling technologically challenged. Some people find it’s easiest to create a loose-leaf binder with tabs for everything needed to manage their online financial life. Keep it in a secure place accessible to only those you trust. Then hope that the Covid-19 pandemic will be history before they ever need it.
Deborah L. Jacobs, a lawyer and journalist, is the author of Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide. To purchase the book at a 15 percent discount, order it here and, once it is in your shopping cart, enter the promo code COVID19.