#AskFarnoosh: Online Banking Thoughts

@danielsequeira on Twitter asks, “What are your thoughts on ING Direct-type banking?”

Hi Daniel, Full disclosure – I have an ING account. I opened one in 2006 as a supplement to my brick and mortar bank savings account for the following reasons 1) a relatively higher savings rate, great for rainy day-type goals 2) convenience 3) difficulty to withdraw on a whim.

Without physical ATMs – and for a while, without a linked debit card – it made it hard to withdraw money from the account. I’d have to make transfers to a traditional bank, which could take 3 days or longer, ensuring fewer impulsive moves. Even now that I have an ING debit card, I’ve tossed it in the junk drawer.

Years later, all these perks still prove true. My ING Orange savings account earns a whopping 0.75% per year with no fees or minimums – which is slightly better than what a brick and mortar bank account might earn these days. In general, online savings accounts top out at about 1.05%, according to Greg McBride at Bankrate.com.

The average yield of a traditional savings account is around 0.08%. Check out Bankrate.com for its free search engine to find the best rates on banks in all 50 states. All the while, I’ve maintained my accounts with physical banks, in case I need to speak with a teller or bank associate in person. “People dealing often with cash and those that want interaction with a teller should bank in person with a traditional institution. But those customers are the exception, not the rule,” says McBride.

In my opinion, by utilizing online and brick and mortar bank accounts, you get the best of both worlds. And just FYI, ING was bought by Capital One recently and come February, its new name is Capital One 360. But not much else will change. You can learn more about the transition here.