ING Direct Electric Orange Checking Account

Overview: ING Direct has a free online checking account. Your money earns interest while it's in the account, and you can spend it easily. This account is best for online bill pay -- you don't get a checkbook.

Interest Rate: Because interest rates constantly change, you should visit the ING Direct Electric Orange page for current rates.

Access to Your Money: You have access to your money in the following ways:

• Make a payment from the Website
• Transfer to your linked bank account
• ATM withdrawal or debit card purchase
• Transfer to another of your ING Direct accounts

How to Make Payments Online: To make a payment from your account, you can do one of the following:

• Have ING Direct electronically pay for you
• Have ING Direct print and mail a check for you
• Transfer the money directly to your payee's bank account

You can have checks mailed to your payee, or you can have them mailed to your home so that you can hand the check over personally.

Note that you'll need your payee's bank account information if you want to use the third option above (called the Electric Check). In addition, you can't make these transfers to business accounts.

Pitfalls: If you're considering the account, you should be aware of these potential pitfalls:

• You don't get a book of checks
• You can't walk into a branch
• Electric Checks require effort and exchange of bank information

You can get yourself in trouble if you rely too heavily on this accoun. Without a checkbook or access to a branch, you can't make emergency payments. Keep a brick and mortar account open at a local bank -- and keep some emergency cash in the account.

Fees: The account does not charge fees for normal use. However, you may have to pay fees in special circumstances. They offer an overdraft line of credit at no charge, but you'll pay interest if you end up borrowing money. This is an account with no credit check (according to the Website), but the bank has the right to pull your credit if they want.

Bottom Line: This account is a pretty good deal. You can earn interest on your cash, while keeping it readily available. A highlight of this account is that you actually make payments from the interest bearing money. At most other banks, you have to transfer money from your high yield savings account into your checking account to make payments.

How Free Checking Really Works

Before you sign up for a free checking account, you should understand how free checking works. It is also important to understand why banks offer free checking.

The Free Checking Offer

Banks offer free checking as a way to save you money. They usually require that you make a small deposit in order to open the account, and you qualify for free checking. This usually means that there is no annual fee or low balance fee on a free checking account. Some banks also offer free checks for life with free checking.

Free Checking Features

To make sure you get the good deal on a free checking account, I suggest you look for a free checking offer that has the following:

• No Low Balance Fees
• Free ATM and/or Debit Card
• No charge for ACH and Direct Deposit transactions
• Free online access to your account
• Unlimited monthly checkwriting
• No minimum checkwriting amount

Bonus Free Checking Features

For the best in free checking, see if you can find free checking that also offers:

• At least one free book of checks (or free checks for life)
• Free online bill pay
• Overdraft protection plans (watch out for the costs!)
• No charge to use ATMs outside the banking family
• Reimbursement of ATM fees charged to you by another ATM

Free Checking Drawbacks

It is important to know what you are not getting when you use a free checking account. Free checking typically doesn’t pay interest on your money. This is not unique to free checking – most checking accounts don’t pay much. However, you can link your account to a higher yielding vehicle like an internet bank account and earn interest on the cash you’re not using.

Another service you might miss is the ability to view your checks after they’ve been paid. Some people like to see a copy of the actual check and the payee’s signature. Free checking usually doesn’t offer this, although a few free checking accounts put images online. My opinion is that you don’t need it, especially for personal accounts. There are plenty of ways to track payments – and you can always order a copy from a free checking account if there’s a particular check you want to track.

Finally, you’re giving up perks like free Stop Payments and Cancelled Check Return when you use free checking. Because I rarely use these services, I do not think you are missing much. However, if your situation is different you may want to shop around.

If you keep a relatively small balance in your checking account, the free checking accounts will probably cost less than an account with premium services. If you ever need to use those services, just pay the small fee in the free checking account.

Why Banks Offer Free Checking

Banks offer free checking as a way to drum up new business. If you go to a branch and ask to open a free checking account, they will be glad to help you. However, they will also try to capture other assets and business from you.

Free checking accounts get customers in the door. Therefore, you shouldn’t be surprised if you get a friendly sales pitch while you’re opening your free checking account.

Internet Bank Accounts

While internet bank accounts can help you earn more interest, you have to make sure you get the right one. Compare the most common features of internet bank accounts and decide which ones are most useful to you. We’ve conducted reviews of the most popular accounts, and you’ll know exactly which internet bank account to open.

Overview of Internet Bank Accounts

What exactly is an internet bank account? For our purposes, it means an account that's only offered online. While you may be able to bank with the same institution the old-fashioned way (in person), internet bank accounts are usually only offered to online users.

Aside from the ability to bank in your bathrobe, what are the major advantages of internet bank accounts? The answer is simple: Annual Percentage Yield (APY). By conducting your transactions online, you save the bank money which it ideally passes on to you in the form of higher savings rates.

Key Considerations for Internet Bank Accounts

When shopping among internet bank accounts, you’ll want to look at some key features. Not every bank offers everything, so you have to decide how important these are to you.

1. APY. Usually the most important attraction for rate shoppers
2. Access to the money. If you want to take it and spend it, how much work do you have to do?
3. Number of linked accounts. Can you set up a network of accounts and zap money back and forth through your internet bank account?
4. Additional products and services. Can you buy CDs, get a mortgage, or pay bills online?
5. Leverage of existing banking relationships. If an institution that you already deal with has an internet bank account, you may qualify for some extra perks by keeping all of your business in one place.
6. Customer service options. How easy will it be to get questions answered?
7. Automatic savings plans. Can you put it on auto-pilot and let the money accumulate automatically?
8. Safety and security. Is the bank FDIC insured, and do you trust their security process?

Once you compare the features of various internet bank accounts, you can decide which one is best. For example, you may decide that APY is most important to you. Therefore, you wouldn’t care about any other options – you’d just pick the bank with the highest APY. Be sure to consider the top 3 Reasons to Avoid Online Bank Accounts before you make the jump.

Internet Bank Account Reviews

Here you’ll find reviews of some of the most popular internet bank accounts. This is not an exhaustive list – it’s just to get you started and provide some information to comparing against your own research.

Online Checking Account at HSBC

Consumers looking for a good free online checking account might be pleased with HSBC. They offer online bill pay, free checking, and the ability to zap money back and forth to various banks. Perhaps most importantly, you can move money almost instantly between the online checking account and HSBC’s OnlineSavings account for a competitive interest rate.

Overview of the Online Checking Account Solution

HSBC has a variety of accounts. If you want checking, you just apply for one of their checking accounts. They have a variety of offerings with different bells and whistles, but most people will be satisfied with the Free Checking account.

The free checking account offers:

• No setup fee, no monthly fee
• Free first order of checks
• Free online bill pay
• Ability to transfer money within HSBC and link to other banks
• Move money quickly to and from the OnlineSavings Account, which pays a competitive rate

You can compare this online checking account setup with general free checking features to see what you’re getting into. You’ll find most of your needs covered, and they have an optional overdraft protection program if you want it.

Online Checking Account Setup

To open an account, just visit HSBC’s Website. You give them standard information that any bank would need. In addition, you must mail in a signature card and photocopy of your ID (driver’s license, passport, etc).

After a few weeks, you’ll get your checks. If you already use the OnlineSavings Account, you will be able to see both accounts with just one login.

Drawbacks of the Online Checking Account

There are a few things that make it difficult to use the online checking account at HSBC. First, for many people in the U.S., there is no branch access. You’ll have to do everything over the phone, online, or via mail. Branches are mostly located in the Northeast and the West Coast.

The only other drawback is that it is fairly difficult to figure out how to open the online checking account. I consider myself to be reasonably intelligent (of course I’m biased), but it was tough to figure out what needed to happen next. Don’t expect to have your account opened overnight.

To HSBC’s credit, the customer service people were very friendly every time I called. Only one person told me he would do something that he never followed up on.

If you’re going to use the HSBC Free Checking account as an online checking account, be sure you know some of the more general disadvantages of online bank accounts.

Bank Savings Accounts

Bank savings accounts are a critical part of everybody's financial picture. If you need a safe place to keep money, a bank savings account is often a good choice. Here’s a quick review of what savings accounts are and why you might want to have a bank savings account.

What is a Bank Savings Account

A bank savings account is a type of account designed to simply hold money that you do not need immediate access to. When contrasted with checking accounts, bank savings accounts tend to pay a slightly higher rate.

Easy Access to a Bank Savings Account

Savings accounts offer easy access to your cash. In other words, your money is liquid (meaning you can make a withdrawal easily and quickly) in a bank savings account. Note that savings accounts are not as liquid as checking accounts, because you can get money from a checking account by simply writing a check.

Bank Savings Accounts Grow Your Money

When you have money in a bank savings account, your money earns interest.

This is a nice feature. Your bank savings account pays a rate of return on all the money in the account (your APY). That means that you get "paid" for keeping your money in the account. If you were not going to use the money anyway, then getting paid a little is better than nothing.

Bank savings accounts pay you more on your money than checking accounts.

Bank Savings Accounts are Relatively Safe

Bank savings accounts offer a safe place to keep your money. Suppose that you have $1,000 and you're not going to use the money for another 3 months. You could do several things with the money. You could carry it around with you, you could put it under your mattress, or you could put it into a bank savings account.

The safest thing to do with your money is to put it into a savings account. If you carry the money around with you, you might lose it. If the money is under your mattress, your house could burn down or be robbed. However, if the money is in a bank savings account, your banking institution is responsible for the safekeeping of that money. If the bank burns down, your money won't go with it, and any reputable bank will not just lose your savings.

Furthermore, you earn interest on the money in a savings account. You don't earn interest on cash that is sitting under your mattress.

Imagine the consequences if you didn’t use a bank savings account. You could miss your mortgage payment, for example, or you could wind up having to work when you’re unable to work.

The OH NO in online banking

KAI RYSSDAL: Online banking is all about convenience. You can pay your bills whenever you want. You don't have to buy stamps. You can transfer money without waiting in line. And for those of us who hate balancing a checkbook, it's an easy way to track your transactions.

Sounds wonderful, but. And there is always a but. There's this rule in personal finance: A silver lining often comes with a cloud.

USA Today personal finance columnist Sandra Block joins us. Sandra, welcome back to the show.

SANDRA BLOCK: Good to be here.

RYSSDAL: Let me tell you why we're calling. We got a listener e-mail in, complaining about his electronic banking. He'd had some debits that weren't processed some withdrawals that weren't processed some and he went to check his balance, had more than he thought he had and shabang he got hit with a fee. So we're calling you to talk about online banking mishaps, the things that can go wrong.

BLOCK: The upside to online banking usually is that you do see mistakes faster than you do in the old way where you'd wait until you got your bank statement, which perhaps wasn't the case before online banking and when you only found out once a month where you stood.

RYSSDAL: Can you get yourself into some pretty easy trouble though, setting up all these automatic withdrawals and transfers that kind of happen without you really paying attention to it?

BLOCK: Oh sure you can. The automatic withdrawals are great in that you will pay your bills on time and you don't have to worry about them. But what you have to be very clear of is that you have enough money in your banking account to cover those withdrawals. And if those withdrawals are coming at the same time that you're using your debit card to buy groceries that you're taking withdrawals from your bank account, you very easily could end up with less money in your account than you need. And the charges for bouncing checks are growing more every year.

RYSSDAL: Oh I know. So they are I suppose faster than regular old going and talk to the teller banking but are they really as fast as advertised? I mean it's not instantaneous by any means is it?

BLOCK: It really depends. It's not instantaneous. I've noticed for example, I have direct and I used to have a credit union that it went into, I switched to a bank and I noticed that my check used to land the day that I got it and now it lands the next day. I have no idea why but that's important to know because if I have checks outstanding I need that money to be there. So yes it's not instantaneous you do need to keep track of these things.

RYSSDAL: Are they allowed to do that? Not credit it 'til the next day?

BLOCK: Most of it has to do with notification. What banks will tell you is this is disclosed somewhere. As long as they've told you, most of these things are legal. Where people get into trouble is that these disclosures are so small or so obtuse that they don't necessarily know what's going on.

RYSSDAL: I'm asking this next question for my mom. My mom's a very nice lady, but she still writes herself out a little check to cash, carries into the bank, talks to her teller, gets the $500 for the week or whatever amount of money it is and does it that way because she doesn't trust electronic banking. How are you feeling about security these days?

BLOCK: You know people tell me that all the time. There's this feeling that if you have your account online, that someone can hack into it and steal your money. What I always tell people when they express those concerns is people can do that anyway whether you have an online bank account or not

RYSSDAL: Great.

BLOCK: All that information is still out there on computers. All that your mom is doing is basically preventing her from seeing what's going on. The idea that somehow people can't hack into your account because you don't have it online is a little misleading because these things go on under the radar a lot. It's not like they keep her money in a vault now and nobody can get at it because she doesn't have an online account.

RYSSDAL: (Laughing) Don't tell her that, you're killing me here. Now I'm going to go have a conversation with my mother and explain that it's really OK.

How to Ruin Your Credit

Having access to other people’s money is overrated. If you’re of the same mind, you may want to completely eliminate any chance of somebody lending you money. Here are some tips on how to destroy your credit score.

• What is Credit?
• How Credit Scores Work

Dispute Everything on Your Credit Report

When you dispute items on your credit report (whether it’s a valid dispute or not), the credit reporting agency is required to respond within 30 days. If they don’t, they have to remove the item from your report.

Think about it – if you dispute everything they’ll never have time to respond to all those disputes. The more people you can convince to do this, the harder it will be for them. We’re all in this together, so let’s see some teamwork! This will show the creditors that they cannot mess with us.

If you don’t have anything on your credit report, lenders won’t know if you’re a good borrower or a bad borrower. After wiping the slate clean, you can begin building credit from scratch.

Don’t Pay Bills on Time

By paying late, your creditors will think that you aren’t responsible. They’ll finally get it that you have more important things to do than write checks to them all day. By all means, don’t use a silly online bill pay service to keep your life organized and make bill-paying easy.

Use Revolving Credit Where Possible

Revolving credit refers to open-ended credit like your basic credit cards. These cards give you the opportunity to spend and spend whenever you need more money. They also show lenders that you’re not concerned about the costs of financing and that it doesn’t bother you to pay 20% annual interest.

If you felt like it, you could use alternatives to revolving debt – like installment debt. For example, a home equity loan requires fixed payments until you eliminate the balance. This demonstrates discipline to your lenders. Who wants that? What if you want to borrow more?

Get a Loud Answering Machine and Screen Your Calls

Communication is for the birds. There’s really no point in communicating with your creditors – they just want money. If you screen your calls, you’ll avoid their pleas and veiled threats altogether. It’s best to just let things play out as they will rather than take a proactive approach and fix your credit report. Sometimes if you ignore problems they just go away.

When you buy the answering machine, charge it.

Don’t Review Your Credit Report

Who cares if it’s free? It still takes time out of your busy day. Things like the US Government’s free credit report program are for whiny control-freaks. I’ve read a credit report or two, and it’s about as much fun as watching paint dry.