Tuesday, June 16, 2009

Fw: Get Rich Slowly-- Online Banking

I am a serious cheerleader for online banking. My bank (a credit union) makes it easy once the frustrations of the sign-up security is done. Banking and paying bills can be done in a hurry!

Get Rich Slowly

Online Banking: 12 Choices for Higher Interest Rates and Increased Security

Posted: 16 Jun 2009 05:00 AM PDT

In its July 2009 issue, Consumer Reports Money Adviser published a brief overview of the best online banking options according to their research. "Online banking, despite a rocky start, is becoming the rule rather than the exception," the article says, noting that online banking can net savers better interest rates and increased security.

I'd love to be able to point you to an online version of this article, but none exists. And I'm not about to reproduce large chunks of the text here. (Consumer Reports doesn't like that.) But I can highlight their main points about online banking, as well as list the results of my own research into online banks.

Some of the article's main points:

  • Traditional banks that have moved into online banking (such as Bank of America and Wells Fargo) generally offer lower rates and impose higher fees than established online banks like ING Direct and HSBC Direct.
  • If you're worried about bank failures, remember that the FDIC currently insures deposits of up to $250,000. (This limit has been extended through the end of 2013.) You can research the financial safety of online banks (and traditional institutions) using BauerFinancial's bank safety ratings.
  • The biggest thing that holds people back from online banking is concern over security. Via Twitter yesterday, @thenonconsumer told me, "My husband is very skeptical about using an online bank like ING Direct for savings." He's not alone. But according to Consumer Reports Money Adviser, online banking can be safer than traditional methods because there's less of a paper trail, and your transactions are digitally encrypted.

Here's a list of online banking options I compiled in four hours of research yesterday. I haven't tried to be comprehensive here (a comprehensive list would be huge), but have based my research on my own interests and the requests of my Twitter followers. I've made no attempt to rank these banks. They are listed in alphabetical order. Rates are annual percentage yields. All accounts are FDIC insured.

[Ally Bank]
Savings 12-month CD Money market Bill-pay
2.05% 2.35% 1.85%
Notes: No fees, no minimums. Money-market account appears to act as a checking account and has no ATM fee. Ally Bank is the newly-renamed GMAC Bank.

[Capital One Direct Banking]
Savings 12-month CD Money market Bill-pay
1.75% 0.50% 1.40% Free
Notes: No fees. Savings rate is 1.01% for balances below $10,000. $5000 minimum balance for certificate of deposit. No minimum for money-market account, which includes an ATM card. Capital One does not charge for ATM withdrawals or balance inquiries, but the owner of the ATM may.

[Charles Schwab Bank]
Savings 12-month CD Checking Bill-pay
1.35% 1.25% 0.75% Free
Notes: No fees, no minimums. ($1000 minimum for certificate of deposit.) Charles Schwab is a discount broker, but also offers banking services. Checking has no ATM fees.

Savings 12-month CD Checking Bill-pay
1.40% 1.70% 1.50% Free
Notes: $500 minimum for certificate of deposit. No fees, $100 minimum for savings and checking. Checking is actually "ultimate money" account and may require a second account. To earn the 1.50% "ultimate money" rate, you must make at least two online bill payments each month. ATM access for checking.

[Dollar Savings Direct]
Savings 16-month CD Checking Bill-pay
2.00% 2.25%
Notes: No fees, no minimums. ($1000 minimum for certificate of deposit.) No ATM. Sibling to Emigrant Direct.

[Emigrant Direct]
Savings 12-month CD Checking Bill-pay
1.55% 2.00%
Notes: No fees, no minimums. ($1000 minimum for certificate of deposit.) No ATM. Sibling to Dollar Savings Direct.

[E*Trade Bank]
Savings 12-month CD Checking Bill-pay
0.95% 0.40% 0.70% Free
Notes: No fees, no minimums on savings. $1,000 minimum for certificate of deposit. Checking has minimum balance of $5,000, else rate is 0.05%. No ATM fees (and ATM card appears to be available for savings as well as checking).

Money market 12-month CD Checking Bill-pay
3.01% 2.00% 3.01% Free-ish
Notes: $1500 minimum to open accounts. Low-balance fees may apply. Money-market APY is a 3-month promotional rate, after which APY drops to 2.00% (with conditions!) for the rest of the first year; it's fixed at 1.65% after that. Checking APY is a 3-month promotional rate, after which APY drops to 1.96% for the rest of the first year; it's variable (1.02% - 1.65%) based on account balance after that. Online Bill-Pay costs $8.95 per month if you do not maintain a $5,000 balance in checking. Checking has no ATM fees.

[FNBO Direct]
Savings 12-month CD Checking Bill-pay
1.65% 1.50% 0.00% (?) Free
Notes: No fees, no minimums. No ATM. The FNBO site used to be more informative; I had trouble finding the data I needed for this article.

[HSBC Direct]
Savings 12-month CD Checking Bill-pay
1.55% 2.00% 1.00% Free
Notes: No fees, no minimums. ($10 minimum for certificate of deposit.) No ATM fees for checking. ATM available for savings, but I can't determine fee structure.

[ING Direct]
Savings 12-month CD Checking Bill-pay
1.50% 1.50% 0.25% to 1.65% Free
Notes: Easy to set up multiple accounts. No fees, no minimums. Checking allows ATM access.

Savings 12-month CD Checking Bill-pay
0.75% - 1.77% 0.75% 0.50% - 1.51% Free-ish
Notes: No fees or minimums for savings account. $10,000 minimum for certificate of deposit. $500 minimum for checking. Free bill pay for 90 days. Free bill pay if you maintain an average $10,000 balance in checking. ATM card available on some accounts.

To compile this list, I pulled information directly from bank websites on 15 June 2009. I also used the tools at Money Rates to fill in gaps. Note that many of the checking accounts above are simply online bill-pay accounts — you can't use paper checks with them. Please let me know if you spot errors.

The Consumer Reports Money Adviser article about online banking included a handful of brick-and-mortar institutions. My list leaves most of them out. I visited every website that CR mentioned, but I have to say, a lot of traditional banks have terrible web presences. Bank of America? Wells Fargo? Chase? Good luck trying to figure out how online banking with any of them or what rates you'll receive. They're still marketing to the pre-Internet generation.

For more info, you may want to visit Money Rates or check out some previous GRS articles about online banking:

One final note: The Money Adviser article emphasizes that rates are low right now. It might seem silly to worry about the difference between 1.50% and 1.65%, but eventually rates will rise and there will be more differentiation between online banks.

If you have thoughts about any of these online banks (or about online banking in general), please leave a comment.

Related Articles at Get Rich Slowly:

Daily Links: Worry, Planning, and Sufficiency

Posted: 15 Jun 2009 04:00 PM PDT

I've written before that I'm not a natural handyman. I'm thinking that maybe it's time to develop those skills. We've been working with contractors all spring to do repairs around the house, and the constant drain on the pocketbook is beginning to hurt. I'd rather do some of this work myself. (Of course the reason we need to hire these folks is that the previous owner did a lot of the work himself — and he did a crummy job.)

Let's think about happier finance stories, shall we? Here are some recent money articles that have caught my eye:

Have I mentioned that Chris Guillebeau at The Art of Non-Conformity has my favorite blog right now? He does. I enjoy following his adventures as he travels the world, but I also think he does a great job of discussing topics more relevant to my own life. Today he writes about sufficiency, the state of having enough. "For me, the most important principle of personal finance is self-awareness," Chris writes. "To become self-aware, it helps to know exactly what sufficiency looks like for you." This is a great post.

Yahoo! HotJobs has a quick list of 8 fast-growing, high-paying jobs. If you're looking for new work, you might want to check this out. Several of the careers are computer/tech-related. The list also includes physician's assistant, plumber, and media buyer.

Kris and I recently went to see Up, the new animated film from Pixar. I loved it. I thought about writing a short post discussing the movie's message that you should not postpone your dreams, but Lucia at moneyStrands has already done it for me. She writes: "We often dream about things like going on our fantasy vacation, paying off student loans or buying a brand new car, yet unexpected expenses and mishaps in life always seem to get in the way. So what can we do to better prepare ourselves financially so that we have an emergency fund but can still save for a vacation? Create a financial plan!"

Finally, David at MoneyNing has some thoughts on how not to worry about money. He has a good life and his finances are solid, but he still worries about money sometimes. This is interesting. I, too, worry about money even though my financial situation has never been better. I think we all worry. How can we learn to just let go? (Maybe this is what I need to do with our remodeling projects!)

Related Articles at Get Rich Slowly:

The Personal Finance Hour, Episode 12: Earning Extra Money

Posted: 15 Jun 2009 12:58 PM PDT

We'd all like to earn a little extra money, but sometimes it's difficult to know where to begin. Today on The Personal Finance Hour, Jim and I will discuss our own experiences trying to supplement our regular incomes. We'll talk about blogging for dollars, it's true, but we'll also talk about finding side jobs and selling the things we already own.

We would love to have you share your own experiences! There are four ways to hear the show. You can listen through an audio feed at the show page, or you can dial the call-in number at (347) 327-9144. You can also listen through this widget:

Note that the widget always holds the archive of the most recent episode. So, right now it contains last week's episode about frugal weekend fun. Later this afternoon it will contain episode number twelve.

We're also on iTunes! You can subscribe to The Personal Finance Hour as a weekly podcast by following this link (which will open iTunes).

Jim and I do this every Monday — and we hope you'll join us. We think this is a fun way to connect with readers and to help everyone learn more about money management. You can catch The Personal Finance Hour live at 3pm Pacific (6pm Eastern) every Monday.

Related Articles at Get Rich Slowly:

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