On Line Banking

Before we get to a post on investing I mentioned using an online bank as a way to stash away some cash. I’m a fan of using on line banks for a number of reasons. Normally there isn’t any minimum deposit amount. So you can get started with a small amount of money. They also pay a better interest rate for your money. Typically better than a savings or money market account at your local bank. The ones I’m highlighting are FDIC insured, just like your local bank. They are easy to use, all you have to do to make withdraws or deposits is link the account to your primary checking account and transfer money electronically via the website.

Things I like about online banking:

1. Higher interest rates, normally above inflation
2. No minimum deposit
3. Money is easily accessible via checking account
4. Cuts down on impulse purchases, money can take 3 or more days to transfer back into checking account
5. Security has vastly improved in the last 10 years

ING used to be the leader in on line banking. They had the best web site and they offered very competitive rates. They had some of, if not the best available in the business. Lately though they have fallen behind in what they’re paying in interest. I think this is because they invested in a lot of low yield bonds and low interest arms. As the market improves I suspect so will the rates. I have used ING DIRECT for sometime. Currently they are paying 4.00% for deposits with a teaser rate for new money.

An old bank with a new business model is Emigrant Direct. They are a long time New York Bank that decided to get into nation wide direct banking. They are paying 4.50% for your deposit. I had looked into Emigrant when they first started, and I have been following them. As a rule they have better rates then ING. My only complaint was when they first started their website was a little difficult to navigate and was sparse on info. I think they fixed those issues.

CitiBank Direct is offering a 4.50% interest rate. They are another big name banking conglomeration. I have no experience with them so if you’re interested you need to read the fine print. I think you may have to open a checking account with them to get the savings account.

HSBC Direct is the current market interest leader. They are offering 4.80% for deposits. My experience with HSBC is limited to persons in their off shore investment division in London. Based on my contacts there, I would feel confident depositing money with the company. American depositors are FDIC insured, for accounts opened in the USA.

So there you go. I know that there are other On Line banks out there but I think these four are the top ones right now. Several insurance companies offer online banking to, but I don’t have any experience with those. As always do your own due diligence Let us know what experiences you’ve had with any of the ones I’ve mentioned or suggestions for better companies.