Saturday, September 27, 2008

money saving tip: banking without a bank

ING Direct offers checking and savings accounts that pay interest at a much higher rate than traditional brick-and-mortar banks, including on your checking account, even if you only have $1 in there!  the rate you get depends on how much money you have in the account (1.75% for less than $50,000, 3.3% for $50,000-99,999 and 3.5% for $100,000+).   and the interest rates are variable,  so they are updated periodically according to market conditions (4.25% about a year ago, 3.50% APY now).  the interest rates are high because there are no bank branches and no paper checks... everything is done online.  with an Electric Orange checking account you can pay virtually any bill online by entering the billing address and your account number. you can also send electronic or paper checks by entering the name and address (and bank account info for electronic checks).  there are no fees and no minimum balances.

last year, we used the account for 8 months and earned about $175.  this year, i figured out that i can earn a lot more interest by using a linked savings account and taking advantage of the free transfers.  the savings account pays 3.00% APY, which is also variable but does not depend on your balance.  so now i keep my money in an ING savings account and just transfer it over to the checking account the day before a bill is to be paid.  you can also schedule recurring transfers to make things easier.

now a couple of caveats/complaints.  you do get debit cards, but the ATM network is not that great.  so we still have our brick-and-mortar bank account for easy access to cash, and it allows us to keep paper checks on hand, just in case.  ING's bill pay system sucks - it doesn't allow you to get your statements  or even reminders online, so that makes online bill pay a lot less convenient.  you are also warned to allow 3-5 business days for payments to be processed, so this wouldn't be good for last minute types.  it also means that they get to cheat you out of a little bit of interest because there are a few days in which your money is neither in your bank account nor in the possession of your payee.  so, for very large bills, i arrange payments from the company's website, which usually requires less than one business day for processing.

oh, and rest assured - your deposits at ING Direct are FDIC insured.

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