The thrills and spills of online bank accounts

Sam Dunn
Sunday 07 November 2004 01:00 GMT
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The spectre of hackers ghosting into internet accounts to steal money was reawakened last week. Cahoot, the online bank owned by Abbey, was forced to shut down for 10 hours on Thursday after discovering that users could bypass security and access details of customer accounts.

The spectre of hackers ghosting into internet accounts to steal money was reawakened last week. Cahoot, the online bank owned by Abbey, was forced to shut down for 10 hours on Thursday after discovering that users could bypass security and access details of customer accounts.

Although the bank stressed it had not been possible to break into accounts and steal cash, this latest lapse is likely to have an impact on customer confidence.

More than 11 million people now bank online and it is expected that, as mobile phone technology develops, people will access banking facilities from their handsets. However, its popularity is regularly hit by security scares - and not just fears of account hackers.

"Phishing", the fraudulent use of emails to persuade customers to part with bank details and passwords (often under the guise of a security test), continues to plague the industry. NatWest customers were targeted in February this year and Lloyds TSB clients in September 2003. Although people are now more aware of potential threats, some still get caught out, losing hundreds of pounds to fraudsters.

However, if you are happy to bank and save online, internet accounts are certainly worth a look. Although they won't always offer the best savings rate - despite being cheap to run - they will usually be competitive.

Our savings table highlights how many of the best no-notice rates come with online accounts. Last month, Bradford & Bingley launched an e-account - an internet-only savings product paying 5.25 per cent - with a bonus 0.25 per cent on top for the first six months.

Even at the big four high-street banks - LloydsTSB, HSBC, NatWest and Barclays - which don't generally pull out the stops for savers, there are attractive internet-only offers.

A £5,000 balance, for example, will earn you 4.25 per cent interest with NatWest's e-Savings account and a slightly higher 4.33 per cent with Barclays E-savings product.

That said, you can get 5.35 per cent with Alliance & Leicester's Online Saver account and 5.2 per cent with Yorkshire building society's e-Saver.

Remember to monitor how much your money earns: half the top internet accounts listed by information provider Moneyfacts include bonus rates of up to 0.71 per cent. Once these run out, ensure your bank continues to pay a competitive rate, or switch to another account.

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