With savings and money market rates suffering, investors are looking for alternatives. One possibility is with Online Banking like those from ING Direct and Emigrant Direct. While I am not endorsing these products, after doing a little research, I thought I’d share some thoughts:
- The obvious reason why they can afford to offer higher rates is because they don’t have to pay for brick and mortar locations.
- The major benefit is the FDIC insurance. The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
- There are other options on the web besides ING Direct. A few are EverBank, HSBC, Emigrant Direct, Capital One (offers checks and ATM too), Zions Bank, etc.
- You can search to see which online banks are paying the highest current rates at Money-Rates.com.
- You can get a credit rating of these online banks at Bankrate.com. Proceed with caution. These ratings may or may not be reliable. Remember that before the 2008 market drop AIG has great ratings.
- Some online banks like ING and Emigrant pay the interest at end of month, while others like HSBC pays one month after funds are received.
- Some banks like HSBC account can be established entirely electronically, but there may be a 3 – 5 day delay in availability of funds when transferred back to the bank.
- One of the best ways to use these funds can be as an Emergency Funds. If you don’t have an Emergency Fund, you can read why they are important on a previous blog of mine entitled The Savings Grace of an Emergency Fund.
- If you are interested in learning more about online banking, you can watch a video about how ING Direct’s online banking works here.
In conclusion, whether or not online banking is right for you, that depends. If you have a lot of money, like an emergency fund, or if you are a small business owner with your cushion savings in a bank account earning low or no interest, you might consider looking into whether an online bank account is right for you.
