How does online banking work?

Internet banking helps you keep track of your balance and make payments 24 hours a day without going to a branch. Here is how to bank online on your computer, phone or tablet.
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Online banking is fairly standard these days and a quick and easy way to access your money and manage your finances. It means you can do this on the go, from a computer, laptop, tablet, or mobile from anywhere in the world - rather than going into your bank when it’s open. Discover everything you need to know about online banking.

What is online banking?

It is a feature that comes with most bank accounts that allows you to access your account through a computer, smartphone or tablet via your bank's website or app.

You can sign in using an internet browser or the bank's own app to:

  • Check your balance so you know how much money is in your account

  • Check transactions or statements, which makes it easier to spot suspicious activity or make sure a payment has come in

  • Send money to a friend or family member's bank account

  • Pay a bill to a company, like your energy provider

  • Set up direct debits and standing orders to make regular payments, like your mortgage or rent

  • Send and receive secure messages to and from your bank

Online banking is available on current accounts from most banks and building societies. Each one offers slightly different features.

Pros and cons of online banking

Pros

Available 24 hours a day

Helps to keep track of your spending

Lets you send payments quickly and easily

Cons

Increased risk of fraud

Some banks offer fewer features

You need to remember your password


How much does online banking cost?

Online banking is a free service with most current accounts. Some other financial accounts may also offer it without cost.

Bank accounts charge for some features like overdrafts, but online banking could help you save money by staying on top of your finances and avoiding fees.

Is online banking safe?

Online banking could be less secure but only if someone:

  • Found out your login details

  • Hacked your phone, computer or bank account

  • Hacked into your bank

Banks try to make online banking as safe as possible, however, and many offer free security and antivirus software. Online security has also improved greatly since online banking was first introduced.

If you do think your account details have been compromised, or someone knows them, contact your bank immediately. It will let you know what to do and can put a hold on any payments if needed.

You can also take steps yourself like keeping your login details secret and setting a PIN or other screen lock on your phone. Setting up two-factor identification is a good idea as it makes it harder for a criminal to access your accounts. Two-factor identification means there are two things you need to do in order to log into your account, such as entering your password and a code sent by text to your phone.

How to set up online banking

Ask your bank or building society if it offers online banking, and can send you the details you need to set it up.

If it doesn't offer the features you need, you can find bank accounts that you can run through internet banking using our comparison. It’s easy to switch so there’s no reason to stick with a bank that isn’t offering you what you need.

When you set it up on a new or existing bank account, your bank will send you login details, usually by post or email. Some banks let you set up these details in person when you apply.

When you log in, you will usually have to enter:

  • Your username or customer number

  • A password

  • Other memorable information like a place or date

Keep this information safe and do not write it down. Here is how to keep your banking secure and how to set a strong password.

Using card readers

Some banks give their customers card readers, which are plastic devices that you use to log into your account:

  • Insert your card into the reader

  • Enter your PIN

  • The card reader displays a code that you can enter online to log in

Some banks offer a key card instead, which works in a similar way.

How to use online banking

It’s easy to use online banking and saves you having to visit a branch to manage your finances.

How to check your transactions

You can log into your account to check:

  • Your balance

  • Recent transactions on your account

  • Full monthly statements for your account

If you spot a suspicious transaction, such as money being paid out for something you did not buy, contact your bank as soon as possible.

Most banks let you choose to access your statements online instead of sending you monthly paper statements.

Some even offer rewards like a higher interest rate or no monthly fee if you go paperless.

How to send a payment

You can transfer money online from your bank account to:

  • A friend or family member's bank account

  • Another account in your own name

  • A company's account if you need to pay a bill

To send a payment you need to:

  • Sign in to your online banking on your computer or through your bank's app

  • Select the send a payment option

  • Enter the sort code, account number and name of the destination account

  • Choose a reference (usually your name or what the payments is for). If you are paying a bill, some companies specify the reference they want you to use

  • Check the details are correct

  • Send the payment

Once done, the funds leave your account immediately.

Some banks have extra security requirements if you need to send money to an account you have not paid before. They may need you to:

  • Enter your password again

  • Generate a passcode using a card reader, key card or the bank’s app

  • Enter a code sent to you via a text message

  • Log in using a computer rather than an app

How long does it take?

Most online transfers are sent as faster payments. Funds usually arrive within two hours but can sometimes take just a few minutes. It’s best to allow 24 hours, however, as in some circumstances payments can take this long..

How to set up regular payments

Sign in to your online account, choose to set up a new standing order, and enter:

  • The amount

  • The date it starts

  • The frequency of the payment

  • The payment account number and sort code

  • The account name

You can use standing orders to regularly pay friends, family, companies or an account in your own name. You can usually also cancel them through online banking.

How to set up direct debits

You can only set up a direct debit by contacting the company you need to pay. You can use internet banking to check the direct debits on your account or cancel them.

How to send a secure message

Most banks let you send a message to their customer service team via online banking, which works like an email.

Sign in to your account and select the secure messages option to send a message or check your bank's reply.

How to use mobile banking

You can use most internet banking features through your mobile phone if your bank has an official app.

You can download the app and follow the instructions on the screen to register for mobile banking. You can then use features like:

  • Checking your balance

  • Checking statements and recent transactions

  • Moving money between your own accounts

  • Sending money to other people if you have paid them with online banking before

  • Checking your direct debits and standing orders

  • Sending a secure message to your bank

Here is how to make mobile banking safe.

Send and receive payments with Paym

This service lets you link your mobile phone number to your bank account so you can:

  • Receive payments from another person

  • Send payments to someone else

Here is how to use Paym to send and receive payments using your mobile phone number.

Text message banking

Many banks offer a text message (SMS) banking service, which lets you set up alerts to your mobile phone. You can get regular balance updates, and messages including:

  • If your balance drops below zero or an amount of your choice

  • If an international payment is made

  • If a large amount is sent to or taken from your account

Some banks also let you send them a text to request things like confirmation of your current balance or most recent transactions.

Here is everything you can do to keep your banking secure.

New bank accounts are offered all the time, so compare all of the best options to make sure you get the right one for you.