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Internet banks?
Peen
Registered User regular
Registered User regular
Anybody have any experience with online banks like ING? My current bank is making some policy changes that I'm not happy about so I've been considering a switch but don't know anybody who uses an online bank. I'm intrigued by things like their ability to offer higher interest rates on basic savings accounts but I don't know if there are any downsides.
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ING while it doesn't have branches like Bank of America, it does have buildings and a physical presence in the real world. It's a large company and is one of the safer ones.
I am an ING customer and a TD employee. I save my money at ING but am aware of the risks I take if I need a large withdrawal. The interest rate is worth it, though, as deposit confidence and rates have been incredibly low for the past two years.
PAX Prime '10-'13 Triwizard Drinking Tournament || Hufflepuff Head of House!
Twitter: @jujukoo
[E]
3-4 years ago my parents were putting money into CDs with a 5-6% interest rate. Deposit rates are crap but certain lending rates are improving. My bank as well as others are backed up with mortgages and re-fis.
PAX Prime '10-'13 Triwizard Drinking Tournament || Hufflepuff Head of House!
Twitter: @jujukoo
[E]
If you're in the United States and you are putting your money in the bank, the first $250,000 is guaranteed by the government. End of discussion. You are no more "at risk" of losing your money in a U.S. "internet" bank than you are in a U.S. "brick-and-mortar" bank. If it is FDIC insured, you can't lose your money.
A friend of mine has been using ING for years and he is happy because he managed to jump on when interest rates were several points higher than "standard" banks, and even now he is earning +1% return, which is far better than the sub-1% you'll get pretty much everywhere else.
I've used Discover Bank for about two years, and was happy with it, since I expected not being able to access my money right away in exchange for a higher rate of return. I recently switched over to Everbank, and could not be happier. I'll probably end up closing my account with Discover Bank and moving the bulk of my funds to either my Everbank Checking or Everbank Money Market account. Both are extremely flexible, allow ready access to money (including a debit card you can use anywhere and have "charges" reimbursed, and free checks), and pay fantastic interest.
For over a decade I've been using Bank of America as my primary bank under the illusion that its size and breadth was a "benefit" for me. The truth is, it wasn't. The vast majority of it is just perception. So you can access any BoA ATM nationwide. How often exactly do you GO somewhere that requires this ability? Do you go often enough where the $5 savings is actually worth keeping your money in a lower-interest account with higher minimum requirements and more nickel-and-dime fees?
The only reason I've kept my checking account active is because in the past year, I was living and working out of Australia, and Bank of America has a deal with a national Australian bank to withdraw money without fees. Now that I'm back home, I'm taking all but the bare minimum out of that account. And frankly, I could've gotten away with never having the account, doing the research I would've done before I left anyway, and opened a "new" account with them when I needed it.
Lately, my main issue with big banks has been that all of them (except perhaps Wells Fargo) have essentially made their money by not being banks. Instead of doing the work of lending people money, they've been finding ways to screw people (particularly the poor and uneducated) out of their hard-earned money by enticing them with "great" offers and then slamming them with fees and fines. That "free checking" that you get? It's only free because the schmuck who doesn't read the fine print or can't afford the minimum balance is getting hit with fees while you pay nothing (while also earning nothing on your money). Now we are at the stage where the only way these banks can stay in business is by keeping large deposits of people's money on hand as collateral for their other "work". Essentially, Bank of America needs my money on hand to ensure that they don't have to renegotiate atrocious mortgages or figure out how to loan people money for meaningful business instead of creating new financial "products". Screw that noise. I'm taking my money and putting it elsewhere where I also happen to earn a rate of return that is actually higher than inflation.
Out of curiosity which bank do you use now? I am also unhappy about changes one of my banks is making, and will be closing my account with them.
Is there some reason to consider savings as an investment I'm not aware of? there's several threads about it and it doesn't make sense to me. If you care about ROI, why use a savings account at all? Wouldn't it make more sense to keep a smaller savings in an accessible amount and have the rest in a mutual fund or something?
I host a podcast about movies.
It's not an investment, but you should have an emergency fund that can cover car repair, losing your job, etc. You obviously don't want to risk this money by investing it and high interest savings accounts are one of the few options that combine no risk, decent yield and quick access. There's also really no downside to having both a account at a bank with a physical location and one at ING so you might as well benefit from the increased rate.
edit: The difference between ING (1.1%) and what the say a normal account offers (.17%) on 5k is about $50 a year which obviously isn't great, but I don't think anyone would turn down a free video game and like I said it doesn't actually cost you anything to do it.
Basically this.
The yield isn't astronomical, but it might be a few dollars a month (minus tax). That's not bad for doing almost nothing.
Let 'em eat fucking pineapples!
But if it's a question of putting your emergency money where it takes days to get?
so if you have 5 thousand in the bank at 1%, you make 50, vs 4 thousand at 2% and 1 thousand at 1%, you make 90. Assuming you hold those balances for an entire year. Before any fees or time cost or postage cost or anything. So you make approximately 3.75 dollars a month to screw with a bunch of extra stuff? And for this I face not being able to get to my emergency fund in an emergency? A gain that will be almost entirely negated if you have to pay a single late fee or wire fee during the year if you have to use your funds fast?
I say decide your liquid money is for emergencies, so place it where it's most useful. Put your savings above and beyond that in an instrument where it makes more money and is actually hard to access.
but hey I routinely go broke what do I know?
I host a podcast about movies.
If you are unable or unwilling to maintain a meaningful (read: at least 3 months' worth of living expenses) balance in order to hold a bank account, then go ahead and use whatever local or national bank you want. The only reason you would need a bank in that case is to handle your checking needs, because holding both a savings and checking account in that case is probably going to be more trouble than it's worth.
And generally speaking, the only way you'll be able to have a checking account in those situations is if you: 1) use direct deposit from your paycheck into the account, 2) you can barely keep your account balance above the minimum requirement, 3) you pay them whatever fees they want. #1 and #3 are probably the safest bets, and #2 is playing with fire if you don't have any money in the first place (read my rant on "free checking is a penalty on poor people" in my previous response).
I'm really at a loss to discuss any of the other points regarding "accessibility", since it's been made clear that there are plenty of internet banks which are just as, if not more accessible, than "brick-and-mortar" institutions. What exactly do you need beyond the ability to use any ATM (with or without a $5 fee) and write/deposit checks? Even if you're using a less-than-stellar internet bank, you can just use a credit card in emergencies and then pay off the balance with your bank account the next day. In all honesty, I have no idea what kind of situation you would be in that would require you to pull out thousands of dollars at a moment's notice (particularly where using a credit card would not be possible). In those cases, the vast majority of financial institutions mandate strict withdrawal limits anyway, particularly the "brick-and-mortar" ones which have those "accessible" ATMs. I'm guessing we're talking about amounts in the several hundreds, in which case, like I said, you have more pressing concerns to deal with, and you're better off just getting a checking account somewhere and leaving it at that.
@Khain, my point is that should any constraint you place on your banking to make a few tens of dollars a year backfire on you at any point, the entire gain would easily be negated. I'm talking about 3rd party fees you might have to pay in a fiscal emergency. Even a five dollar ATM fee would quickly eat into 1 percent interest on 6 month expenses for most people. Since we're talking about an interest rate of one percent here, which is barely competitive with other banks if you're going to leave that 3-6 months of expenses in the bank, I don't see where it's worth crossing the street for.
Now when ING was offing 3-5 in 2006? Different story.
If all things are truly equal, sure, higher rates are better than lower, obviously. But this isn't a remotely life-impacting sum of money, so I don't see it being a make or break feature on an account. That's my whole point.
I host a podcast about movies.
Yeah. It makes sense.
You're only making $100 at 1% if you have $10,000 in for an entire year. More like $75 after taxes. However, some people might need that much liquidity to cover (the recommended) six months of living expenses.
We can agree that it's a bad time to expect returns on liquidity or short-term investments. Rates are either low or risky. Fortunately, (I've heard) inflation is low right now, so the no-interest checking/mattress option isn't that bad.
Let 'em eat fucking pineapples!