Online banking appeals to many because it’s fast, easy and convenient. But some still shy away from it, and for all the wrong reasons, according to recent data.

The 2006 Identity Fraud Survey Report, released by the Council of Better Business Bureaus and Javelin Strategy & Research, provides new insight on how identity fraud occurs.

Bottom line? The Internet is safer than you might think.

According to the report, 90 percent of data compromise takes place through traditional offline channels. In fact, online banking can reduce the harm caused by identity theft because electronic account monitoring is the fastest way to detect fraud.

“Frequent monitoring of your finances is made easier through online banking,” said Barry Miller, director of technology and information security for NetBank, an Internet-only bank. “A consumer who banks traditionally and receives a statement in the mail can only monitor their account activity every 30 days at best.”

Online banking also eliminates the paper trail. The majority of theft cases, Miller says, are a result of information being obtained offline, through paper bank statements and credit card receipts, for example.

Based on the Javelin study, the Better Business Bureau and other experts offered some steps to protect consumers from identity theft, urging people to replace paper bills, statements and checks with online versions; reviewing bank, credit card and bill statements weekly, which is easy through online account access; and using e-mail-based alerts to monitor transfers, payments, low balances and withdrawals or to detect any out-of-pattern activity.

Online banking continues to grow in popularity. The Online Banking Report puts the number of U.S. households using online banking at 40 million. And according to a survey conducted by Feedback Research, customer satisfaction is high.

Eighty-three percent of the respondents who banked online were either “very” or “extremely” satisfied with their online transaction experiences, 79 percent said the transactions were easy and 77 percent said they were generally hassle-free. Almost 10 percent said they banked with an Internet-only bank.

The biggest concern that people have when they start using Internet banking is security. The media is full of scare stories about foreign hackers breaking into thousands of bank accounts and draining out all the money, leaving some poor old couple missing their life savings. Many people have even been scared out of signing up for Internet banking at all by these kind of stories, thinking that it somehow puts them at risk. However, as long as you take the time to learn a little about the Internet, nothing could be further from the truth.

Before we go any further, there is one thing that is absolutely the most important thing you can know about Internet banking security. It is this: there is absolutely no guarantee that emails are from who they say they’re from. E-mail was designed back before people were concerned about Internet security (that’s why you get so much spam), and if you know what you’re doing, it’s really very easy to make an email look like it came from absolutely anyone, anywhere. With this in mind, you should simply ignore any email that says it comes from your bank, and never click any links that the emails may contain.

That’s the biggest risk out of the way, but there are still a few other things to watch out for. When you go to your bank’s website, make sure that you’ve really ended up at the right place by looking for the address in the address bar towards the top of the screen – it should be the address of your bank’s website, not anything strange. Also, make sure to look for the padlock icon in the bottom-right of your screen, as this tells you that your connection is secure. If you’re ever in doubt, close your web browser and start again, copying the bank’s website address carefully from a letter they sent you.