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As a PC World reader, you know how the Internet can make your life easier. But when it comes to conducting sensitive financial transactions--such as applying for a loan, paying the mortgage, or trading stocks--are you inclined to close the browser and reach for the phone?

If so, you have lots of company. The TowerGroup research firm reports that only about one in four banking customers use online banking (numbers are a bit higher for customers age 40 and under). While online banking is clearly gaining in popularity--eMarketer estimates 40 million U.S. households will bank online in 2006, with 5 million more coming on board each year thereafter--it's easy to see why folks might think twice. Every day brings reports about hacker attacks, customer-information thefts, and other security breaches. TV ads feature identity theft victims looking hapless as a stranger's voice crows about buying stereos and trips to Maui. It's enough to make you yearn for your old paper passbook.

The American Bankers Association says consumers cite identity theft as their top concern about online banking. And both the Federal Deposit Insurance Corporation and the Gartner research firm say banks don't adequately educate customers about fraud prevention.

But before you log off your bank's Web site for good (or decide never to check it out at all), remember that most experts agree identity theft is still extremely unlikely to occur as a result of using online banking services. A study by Javelin Strategy and Research found that unsecured online transactions were responsible for fewer than 2.5 percent of identity theft cases. The report even recommends canceling paper bills and statements in order to reduce the risk of theft or loss.

Safer Than Paper

Bank of America e-commerce executive Sanjay Gupta says less than 1 percent of fraud at the bank occurs via online transaction. Online banking actually helps protect against fraud, he adds, since it allows customers to confirm transactions and check account balances quickly and easily. Still, Gupta says, "There's a perception that when money is in the vault, it's somehow more secure. We want customers to feel that [online banking] is just as safe--or safer."

To this end, Bank of America and other leading banks and financial institutions have recently introduced new security measures. Bank of America's program, called Sitekey, bolsters simple password protection by adding images and secret questions. The bank also touts a "zero liability" promise that protects customers against any unauthorized charges.

Meanwhile, banks are giving customers incentives to go online. Some banks have eliminated fees for online services, while charging for things like sending cancelled checks. And financial software programs are increasingly tying features to online banking. For example, most new versions of Quicken let you attach electronic images of cancelled checks (available from some banks) to transaction records, even storing them in encrypted form. Sure beats digging through an old shoe box full of paperwork.

Still on the fence? Here are some tips on keeping financial transactions secure.

Beyond the Password

Check your bank's online security for features that go beyond a single password. If its security seems bare-bones, ask about plans for improvement.

Make sure the banking site you visit is the real McCoy. Research shows that most online banking fraud now results from phishing--where you unwittingly give account and other personal data to a convincing copycat site, typically by clicking a link in an e-mail message. Many ISPs offer antiphishing tools; use them.

Never click on an e-mail link to enter a Web site; use a bookmark or manually enter the URL into your browser instead. And look for signs--such as a secure-encryption icon and working links to customer service--that the site is legit.

Clear your browser's cache periodically to delete the trail of Web sites you've visited. To do this in IE, go to Tools,Internet Options and click Delete Files under Temporary Internet Files. In Firefox, go to Tools,Options, click the Privacy icon, then click the Clear button next to History.

If you use a feature like Google Desktop Search, be sure it's set up to exclude secure pages (those with URLs that start with "https"). To find the setting, right-click the application icon, select More, and then click Preferences. Enabling the setting will keep others from accessing sensitive Web pages--those holding account numbers, balances, and other information--by simply doing a desktop search.

Keep in Touch

The best way to ensure that all is as it should be with your bank account is to check in regularly. Print or save PDFs of key transactions. If you store electronic statements and payroll check stubs, it's more important than ever to back up your system regularly. Many banks let you set up automatic notifications when unusual transactions take place, if account balances go below a certain level, or for other circumstances. Consider taking advantage of this feature, if available.

While you're monitoring your bank balances, consider checking your credit report for mistakes, or clues to potential fraudulent activity. Federal law allows you to obtain one free credit report annually from each of the three major credit reporting companies: Experian, Equifax, and TransUnion. Download your report in minutes at www.annualcreditreport.com.

Finally, you've heard it all before, but it bears repeating: Keep your virus protection updated, use a firewall, disable pop-ups, use passwords that contain both letters and numbers, and change the passwords periodically. Consider securing your PC with a biometric fingerprint reader, generally available for about $30.

Crooks will always be out there, just waiting for a chance to mug you through the Web. But with a little education and some protection for your PC, you can safely bank through your browser.

Anne Kandra is a contributing editor for PC World. E-mail her at consumerwatch@pcworld.com.