Opening my first online bank account
I remember about 8 years ago when I opened my first online bank at Netbank. The thing that stood out to me the most was how much better the interest rates were than at the brick-and-mortar bank I was working in at the time. I remember thinking how Netbank was on the cutting edge and I wanted to buy stock in their company. Turns out it was a good thing I didn’t because if they haven’t gone out of business, they surely aren’t much of a competitor in the online banking arena.
Looking back, I think Netbank was trying to be a fully-evolved online bank, but they just weren’t there yet. The difficulty of withdrawing, depositing, and transferring money makes it clear as to why they fell out of favor and why ING Direct and others now shine.
Do you really need an online bank?
The primary reason that Linda and I bank online is to use ING Direct as a budgeting tool. We have a system in place that works very well for budgeting, so we are still sticking with it. The high interest rates that are normally a big selling feature for online banks have dissipated due to our current economic crisis.
I think some situations will always be more convenient to be in an “offline” bank, but until they catch up with features to their online peers, there will still be advantages to opening an online bank account.
Where should you open an online bank acount?
ING Direct
I have been with ING Direct for years and have loved them (apparently many CPF readers use ING as their online bank too).They are extremely feature rich and have good customer service as well. Also a study was done that indicated that ING was the safest bank. The downside with ING is that they don’t have the highest interest rates in town. Sure, they beat the pants off all the brick-and-mortar banks, but there are quite a few online banks that have slightly better interest rates. For me, I am okay with that, but I know some people just won’t stop until they find the highest bank rates.
Virtual Bank
I have also had a Virtual Bank account for a while as well. They are a very secure bank, but with not as many features as ING Direct. But they were named Money Magazine’s “Best Online Bank” – for what it’s worth.
Others
There are tons of online banks out there – these are just a few of the bigger ones… FNBO Direct, Emigrant Direct, Citibank, HSBC Direct Savings, WT Direct , other high interest savings bank accounts.
Do you use an Online bank?
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I have been hearing a lot of great things about ING even though they keep lowering their rates. I am looking into setting one up for myself. I hear people still keep money in regular banks. I was curious what % to put into an online savings account and what to leave in a regular bank.
I use Schwab and have been very pleased. They have an awesome High Yield checking and savings account. Everything is very easy to use. Would highly recommend.
I am interested to hear what others have to say because I have been a loyal customer of ING since Dec 2000 but am very upset they keep lowering their rates. Even my own local bank has an account that offers 2%. I just don’t know which bank is best… I have been so happy at ING that I think all other banks would disappoint. I like having the money at an online bank because then I forget about it and its harder to access.
I’m curious if anyone has opened a bank account in another country. This is something my husband and I are looking into for insurance against a falling dollar.
Over the last ~4 years I have opened and used accounts with a handful of online banks including ING, Emigrant, Dollar Savings Direct (an Emigrant shoot-off), Etrade, TDAmeritrade (for Suze Ormans “Save Yourself” plan and bonus) and have been relatively happy with all of them when I used them. I slowly switched from using one to another based on rates, ACH transfer time, and feedback from others. I was impressed with Etrade and Dollar for their next day deposit to my brick+mortar bank rather than a 2-3 day wait. I’ve read ING is quicker now too.
I signed up with Alliant Credit Union last year and have enjoyed their savings account. I am thinking of getting a checking account for added convenience. I don’t live in their brick+mortar area, but they have a large ATM network should I ever need it (I haven’t thus far). They have a slower, 2-3 day, ACH transfer time, but their rates have been steadier than other banks (then again they’re a credit union). I read somewhere credit unions sometimes lag bank rate changes (good on the decreases, not so good on increases). I joined my local PTA ($10) to be eligible for Alliant.
My use of online savings accounts has primarily been to earn a few dollars on the money I have set aside for my monthly budget and emergency fund rather than get nothing for it. The online savings accounts keep my money available (6 withdrawals per month) and provide a modest return. A few hundred over the year is better than nothing at all.
I occasionally review http://bankdeals.blogspot.com which lists all kinds of bank deals (reward checking, savings, CDs, etc). The blog has a lot of informative reviews and comments of experiences. If you’re looking around for banks (as Bob’s post is about) I’ve found the blog helpful in gathering background.
I occasionally need to remind myself that a difference of 0.5% (or even 1%) on the few thousand in an account isn’t worth the hassle of moving the money or opening a new account, especially after finding a dependable and predictable bank.
bankrate.com will typically give you the highest interest rates that are available but that has changed. i have seen dollarsavingsdirect (DSD) go from 4% to <3% in a matter of months. i currently have my savings in GMACBank at 2.5% APY plus it is slightly higher rated for stability (i know all these banks are FDIC, but it’s potentially inconvenient for your bank to fail especially when you need the money immediately).
i agree that making any commotion for 1% of interest rate is not worth it unless your net worth is $multimillion (the interest change could be in the $100s) but that’s not me (and i presume most of us here). i would recommend choosing a bank based not only on rates, but ease of access (quickness of turnaround on transfers), budgeting help, stability, and security.
I use Citibank & ING.
I switched over to Citibank a few years back from a brick & mortar that I had been using for years. Citi had lots of great features and interest rates that couldn’t be beat. The brick & mortar savings I switched from had almost no interest and a limit of only 3 savings withdrawals per month.
Later on, I opened an ING Electric Orange account (for my blog) as well as a savings account. I like ING. The downside with them is that you can’t write paper checks against their checking accounts. (They will write and mail checks on your behalf if there is no online alternative. However, there are times when this will not work.)
However, I have NOT totally dismissed my brick & mortar bank. I still have a passbook savings account whose sole purpose is to receive deposits of paper checks. Alas, the one big disadvantage of these online banks is that they don’t receive paper check deposits — at least not in my area (some locales offer a brick & mortar — a CLICK & mortar — that you can use in addition to your virtual account). So, I have to deposit these checks in my brick’s ATM and then transfer these funds to Citi.
Despite the minor paper check inconvenience, I really like banking online. However, the transition from brick & mortar was not entirely painless. If you have a number of automatic debits, it can take some time to convert these to your new bank. (I will probably stay with Citi forever as one of my stock purchase plans have increased the minimum purchase. I am currently grandfathered under the older, smaller miniumum but if I change then I am subject to the higher amount.)
Online banking has made it much easier to save. I have automatic transfers to savings that put my budgets on autopilot. I can pay most of my bills without lifting a finger. The interest rates are better. The online tools are cools. It’s a great setup.
If I could get past the paper check thing, I would be TRULY online.