STEPHEN LEWIS logs on to the world of Internet banking

WE COULD be on the threshold of a revolution in banking habits.

Millions of Britons are waking up to the attractions of banking online - leading to an unprecedented surge in the number of Internet accounts.

Figures provided by the Association of Chartered Certified Accountants (ACCA) reveal that the number of people in the UK using online banking services rose by 37.5 per cent to 5.5 million customers in the space of just six months to October 2001.

Further projections suggest the UK online banking market is expected increase to 13.3 million consumers by 2005, or 22 per cent of the UK population, ACCA says. And that is probably just the beginning.

The attractions of Internet banking, at least to those for whom access to a PC is easy, are obvious - instant, 24-hour access, without the need for trips to your local high street branch to pay in cheques or get a statement. Some Internet accounts also offer lower overdraft charges and higher interest rates on credit balances.

York accountant Craig Manson, a director of Garbutt and Elliott, admits he wouldn't now be without his online account.

Craig, who lives in Askham Bryan, says it's the ease of access and the way that, at the click of a button, he can keep tabs on his account, that are the main attractions.

"I can check on my account at any time, and get the full picture," he says. "Living in Askham Bryan, I would have to drive into York to use a bank. Not having to do that, or to ring up to require a statement, makes it so much easier - particularly in a rural community."

When he switched banks a while ago, he was without a online account for a time. "It was dreadful!" he admits. "Once you've had it, it makes life so much easier!"

For those new to or unfamiliar with the Internet, however, it can all seem a bit daunting. So where should you start if you're thinking of opening an Internet account? And are there any pitfalls to be wary of?

One common misconception is to think that if you bank online it will help you cut down on the reams of paper cluttering up your home or office.

But, according to ACCA, that's not necessarily so.

ACCA's advice, especially for those unfamiliar with using the Internet, is to keep hard copy records of all online account transactions.

That will mean you can still access your account details should your computer system crash, says ACCA's head of taxation, Chas Roy-Chowdhury. More importantly, it will help you make sure that you've carried through a transaction properly.

Internet banking is such a new area that, for those unfamiliar with the workings of the Internet, it pays to take precautions, Mr Roy-Chowdhury says. With some systems, for example, failure to move your mouse for two minutes will lead to you being cut off.

"So you need to be sure that the transaction you thought you had carried out has actually happened." Keeping hard copies is a way of doing that.

Nevertheless, he stresses, Internet banking offers plenty of benefits - especially with online banks such as cahoot competing aggressively with traditional high street banks which now offer Internet accounts for business.

That, coupled with the lower overheads, means you can get some good deals.

Craig Manson has an Internet account with a traditional high street bank - it means that as well as having the ease of access he wants, there is also a personal connection. "I can pick up the 'phone and speak to someone who is half a mile down the road," he says. It's possible, however, that you may be able to get better interest rates if you are prepared to sacrifice personal service.

Brian Capon, of the British Bankers Association (BBA), says generally the more facilities an Internet account offers, the less the interest rate you will earn on your credit balance. It's a trade-off, he says - so the important thing is to find an account that suits you.

To make choosing an Internet account easier, the BBA website - at www.bba.org.uk - has a 'direct banking table', which lists all the banks offering online accounts. The table details what services each bank offers online, and gives telephone numbers for you to contact to find out more. Simply click on the consumers section, then scroll down to 'Direct Banking'.

Updated: 09:44 Thursday, January 17, 2002