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.

How to Fix Your Credit Report

In order to get the best loan rates, sometimes you need to fix your credit report. For a variety of reasons, credit reporting agencies may have bad information. To fix your credit report, follow these simple steps. Then go back and get the loan terms you deserve.

• What is Credit?

Steps to Fix Your Credit Report

The most effective way to fix your credit report is to attack it from two directions:

1. Fix your credit report via the credit reporting agencies
2. Fix your credit report via the creditor that reported the error

We’ll start by trying to fix your credit report by correcting the information at credit reporting agencies.

• How Credit Reporting Agencies Work
• What Information do Credit Reporting Companies Store?

First, you need to know what’s wrong. If you haven’t seen a recent copy of your credit report, get a free government credit report and find out what it says.

Next, gather evidence that proves that a credit agency needs to fix your credit report. You’ll want to make copies of related documents. You may have to try to fix your credit report several times, and you don’t want to give away the originals.

Send a letter with all the documentation and instructions on how they should fix your credit report. Include the following:

• Your full name, address, date of birth, and Social Security Number
• Any previous names or addresses used during the disputed period
• The creditor’s name and details of the account in question (account number, when opened, etc)
• Specific instructions on what is wrong, and how to fix your credit report
• Notes and references to enclosed documents

Send the letter via registered mail. The credit reporting agency must investigate legitimate claims to fix your credit report within 30 days, and they will inform you of the results after that. The FTC has a nice sample letter on their site.

As a safeguard, it’s also a good practice to fix your credit report errors with the creditor that reported them. Send them the same information you send to the credit reporting agency. After a few weeks, call and ask what the status is. This will ensure that you don’t have the same problem in the future.

Why You Might Have to Fix Your Credit Report

There are plenty of reasons that you might have to fix your credit report. Some common causes include:

• A clerical error in recording payments at one of your lenders
• An ex-spouse’s credit problems are still linked to you
• Somebody else’s Social Security Number had digits transposed and the bad debt was linked to you
• You were a victim of identity theft and everything didn’t get cleaned off

As you fix your credit report, you may need to build credit to increase your attractiveness to lenders.

ING Direct - Banking Reviews

One of the online-only banks is ING Direct. With prominent and sophisticated marketing, ING Direct is collecting a lot of deposits. That orange ball gets consumers’ attention.

Below you’ll find my understanding of the product. I won’t quote rates because they constantly change. You should visit the bank’s website and read all the fine print if you’re thinking of using their services.

The Offer

ING Direct is a simple online savings account with a few extra bells and whistles. The main attraction is the APY (Annual Percentage Yield). You can typically earn more than brick-and-mortar banks. Furthermore, there are no fees for the service or minimum balance requirements. You can literally open an account with $1.

With ING Direct, you keep your existing checking account and link it to your ING Direct account. To move money back and forth, you login to your ING Direct account and request a transfer (transfers are free on the ING Direct side, however you should check with your bank to make sure they won’t assess a charge).

For details on other ING Direct offers, see the following:

• ING Direct Electric Orange Checking account (pays interest)
• ING Direct Orange for Business (business savings)

The Extras

Besides a simple savings account, you have a few other options at ING Direct. You can get CD’s ranging from 1 to 5 years. The rates seem competitive, so if you’ve got some cash that you’re not going to spend, you can zap it into a CD.

They also do mortgages and home equity loans, however I have not looked into the details on those offers.

The Competition

Be sure to compare ING Direct with the other leading offers to get what's best for you:

• HSBC Online Savings Account
• CapitalOne High Yield Money Market Account (offers checks)
• GMAC Bank Money Market Savings (offers checks)

The Process

You can open an ING Direct account in a variety of ways. The first option is to submit your information online and skip any paperwork. You can also print their application and mail it in. Either way, you’ll need all your basic information and a checking account number.

The setup process can take several weeks. ING Direct will create a few small transactions in your linked checking account to make sure that they got all the numbers right (and that the account is really yours). After you verify these transactions and validate your PIN (which comes via mail), you are ready to roll.

Requesting the transfers at ING Direct’s website is really easy and intuitive, and it seems like they go through quite fast. If you want to get a savings plan on auto-pilot, you can also set up an automatic monthly draft.

Customer Service

ING Direct operates efficently by urging users to do-it-yourself. You should sign up for their program for the financial value, not the customer experience. While I've heard some great customer service stories, I'm not yet convinced that the service level is the highest available (and maybe it doesn't need to be).

In 2004, Business 2.0 reported that ING Direct actually fires customers that are too high-maintenance. I don't know the accuracy of that claim, but there's one way to keep costs down.

Security

One of the first things you hear if you call ING Direct is “We take security seriously” – and it seems like they do. Each time you change something on your account, they will freeze the account for several business days and send you a letter. While this can be a hassle and slow things down, it’s probably for the best.

Just remember that this is for short-medium term cash. If you’re going to spend the money next week, you probably shouldn’t zap it into your online-only account. Both ING Direct and the bank with your checking account may place a hold on funds that are zapped back and forth – they need to make sure that the funds truly arrive.

In the interests of full disclosure, I should note that I am an investment advisor representative and registered representative with Financial Network Investment Corporation (FNIC). FNIC is an ING-owned broker/dealer. This means that I am capable of offering the ING Direct product to my clients, although I don't always do so.

HSBC OnlineSavings Account Review - Banking Reviews

HSBC does business in a few select regions. However, you can take advantage of their services anywhere with their HSBC OnlineSavings Account. At the time of this writing, the HSBC OnlineSavings Account offers one of the highest-paying savings accounts (without imposing fees or minimums).

Below you’ll find my unofficial summary of the product. I won’t quote rates because they constantly change. You should visit the HSBC website and read all the fine print if you’re thinking of using their services.

The Offer

The HSBC OnlineSavings Account is like a lot of other online savings accounts. The main attraction is the APY (Annual Percentage Yield). You can typically earn more than brick-and-mortar banks. Furthermore, there are no fees for the service or minimum balance requirements. You can literally open an account with $1.

With HSBC, you keep your existing checking account and link it to your HSBC OnlineSavings account. To move money back and forth, you login to your HSBC account and request a transfer (transfers are free on the HSBC side, however you should check with your bank to make sure they won’t assess a charge).

The Extras

The HSBC OnlineSavings Account gets you a decent rate, and they also send you an ATM card. This makes it easy to get cash fast, and you can keep your daily spending money in the account – not in a lower yielding checking account.

If you want to write checks with HSBC, you can link the account to a more traditional HSBC account. This will make transfers to your checking account faster than moving the money to a different institution. Even better use an HSBC checking account and zap the money back and forth quickly.

There may be fees for checking accounts, however HSBC will consider all of your balances (Mortgage, Credit Card, etc) together when they calculate how much you have with them. This makes it easy to have an interest-earning checking account with no monthly fees.

The Process

Opening an account is really fast and easy. You just fill in all your personal information and wait for HSBC to make some test deposits to your linked account. The process moves fast, and your initial deposit can end up earning the HSBC OnlineSavings Account interest rate within a week.

Service

I’ve found that the customer service at HSBC is pretty good. Of course this is unscientific and your results may vary. So far, I haven’t encountered any long hold-times and the representatives have been knowledgeable and helpful.

Your HSBC OnlineSavings Account Review

Have you used the HSBC OnlineSavings Account? Well, what do you think about it? Share your experiences and contribute your own review to our banking forums.

Emigrant Direct American Dream Savings Account Review

Emigrant Direct mostly does business in New York. However, you can take advantage of their services anywhere with their American Dream Savings Account. At the time of this writing, the Emigrant Direct American Dream Savings Account offers one of the highest-paying savings accounts (without imposing fees or minimums).

Below you’ll find my unofficial summary of the product. I won’t quote rates because they constantly change. You should visit Emigrant Direct’s site and read all the fine print if you’re thinking of using their services.

The Offer

Emigrant Direct American Dream Savings Account is like a lot of other online savings accounts. The main attraction is the APY (Annual Percentage Yield). You can typically earn more than brick-and-mortar banks. Furthermore, there are no fees for the service or minimum balance requirements. You can literally open an account with $1.

Emigrant Direct, you keep your existing checking account and link it to your American Dream Savings Account. To move money back and forth, you login to your Emigrant Direct account and request a transfer (transfers are free on the Emigrant side, however you should check with your bank to make sure they won’t assess a charge).

The Details

Emigrant Direct compounds interest daily and credits the interest monthly. This makes for a pretty good deal.

You can have up to 2 linked accounts with Emigrant Direct. This makes it easy to get money anywhere you need it. I’d prefer to see them offer more linked accounts, but 2 is enough to get your money from point A to point B.

You can also set up automatic deposits to your Emigrant Direct American Dream Savings Account (as well as direct deposit from your employer or other income source).

The Process

Opening an account is a matter of filling out an online application and verifying your identity. Emigrant will mail you a letter with the final details. They do this for security – if the letter makes it to your home then they know where to find you (and it indicates that you’re probably giving truthful information).

Service

Because I haven’t worked with Emigrant Direct, I don’t know what the service is like. They do provide a toll-free number if you want to speak with a representative. If you can contribute an Emigrant Direct Online Savings Account review, please post your experiences in the banking forum.

GMAC Bank Money Market Savings Account Review

GMAC Bank, part of the General Motors organization, has an online savings account worthy of review. GMAC Bank raves about how they keep costs low and pass the savings on to you.

Here's an unofficial summary of the GMAC Bank offering -- without rates because they constantly change. You should visit the GMAC Bank website and read all the fine print if you’re thinking of using their services.

The GMAC Bank Offer

GMAC Bank has a money market savings account with a some nice added features. The main attraction is the APY (Annual Percentage Yield). What sets this account apart from other online savings accounts? You have easy access to your cash – with checks, a debit card, and linked accounts.

The GMAC Bank account is technically a money market account. Among other things, this means that:

You are limited to six pre-authorized electronic fund transfers and telephone transfers, checks and point of sale transactions per statement cycle. Of these six transactions, you are limited to only three transactions by check or point of sale.

Highlights of the GMAC Bank Account

• $50 minimum to set up
• No periodic fees if your balance stays above $500 (GMAC Bank charges hefty fees if you fall below that amount, so be careful)
• FDIC Insured up to $100,000
• Check/Debit Card available
• 50 free checks from GMAC Bank (you’ll have to pay for reorders)

Is GMAC Bank Any Good?

I personally haven’t used the product. However, I’ve read a number of customer testimonials. The majority of customers had a great experience, but there are some inevitable bad experiences reported. The 2 factors that impressed me most were:

• Very fast setup at GMAC Bank
• Apparently no limit to the number of external linked accounts

It sounds like GMAC Bank is making it easy to test their product, and they’ll even make it easy to get your money out. This suggests that GMAC Bank is confident they’ll be able to keep your business.

GMAC Bank Pitfalls

At any bank, your return can decrease based on fees that you pay. GMAC Bank may charge fees for a variety of reasons – make sure you know what they are and how to avoid them. For example, there are fees for overdrafts, statement research, and additional checks. Keep this in mind as you evaluate any bank account.

Share Your GMAC Bank Story

Again, I personally haven't used the product. If you have, please share your story so that everybody out there knows what to expect. You can post your own review in our banking forums.

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.

Capital One High Yield Savings Account Review How the High Yield Savings Account Works

A prominent online bank offering is the Capital One High Yield Savings account. This is like a lot of other online bank accounts. However, there are some unique features to the High Yield Savings account.

Updated: 4/3/2007

Capital One no longer offers the plain-vanilla High Yield Savings account. This account has been replaced by a High-Yield Money Market Account. The main difference is that you get free checks and a debit card for easy access to your cash. Keep in mind that some money market accounts (such as this one) are required to limit your withdrawals during each statement cycle -- so plan ahead.

Below you’ll find my unofficial summary of the Capital One High Yield Savings account. I won’t quote rates because they constantly change. You should visit the bank’s website and read all the fine print if you’re thinking of using their services.

The Offer

The High Yield Savings account is like a lot of other internet bank accounts. The main attraction is the APY (Annual Percentage Yield). You can typically earn more than brick-and-mortar banks. Furthermore, there are no fees for the service or minimum balance requirements. You can literally open a High Yield Savings account with $1.

With Capital One, you keep your existing checking account and link it to your High Yield Savings account. To move money back and forth, you login to your High Yield Savings account and request a transfer (transfers are free on the Capital One side, however you should check with your bank to make sure they won’t assess a charge).

What I Like About the High Yield Savings Account

Capital One is nice because they appear to allow unlimited account-linking. This allows you to network a variety of different accounts for lots of flexibility. You can simply pass money through the account and avoid using the mail.

The High Yield Savings account is supplemented by another nice offer from Capital One. You can get a Money Market account with checks and a debit card. With a $100 minimum balance, you’ll have easy access to your money. This is a nice alternative to free checking accounts.

Finally, you can open a High Yield Savings account over the phone (although you really need internet access to use the account). Using the phone may be more comfortable for people who are unsure of the setup process.

What You Might Not Like

One of the complaints I’ve heard is that the High Yield Savings account imposes fairly long hold times on deposits (10 days). Some people aren’t willing to wait that long, and there are other internet bank accounts with shorter hold times.

Share Your High Yield Savings Account Review

Have you used the High Yield Savings account? Please share your experiences with your fellow readers. With a wealth of information, we can all make better choices. Submit your review in the banking forums.

Debit vs Credit - Using Debit vs Credit Cards in Everyday Life

Fees: At first glance, fees might make you favor debit cards in the debit vs credit competition. The worst fee you'll find in a typical debit card is a POS fee -- charged when you use your debit card at a retailer using PIN number. While the tide is shifting away from banks charging these fees, they're still around. More importantly, there are more factors than fees to the debit vs credit debate.

Liability Risk: Consumer protection varies when it comes to debit vs credit cards. Lawmakers put debit cards and credit cards into different categories. To reduce the debit vs credit divide, many issuers offer to give you a similar level of protection -- but there are differences. The greatest risk is the fact that you open your checking account to the world (see below). For details on how the laws differ, see Debit vs Credit Liability.

Card Blocking: When you use plastic at some retailers (gas stations in particular), they 'block' your card. This means they authorize and reserve money in your account - typically $50 to $100. They don't know exactly how much you'll buy, but they want to make sure you can afford it. If you only buy $20 worth of gas, they won't release the remaining amount immediately -- it can take several days. During that time, you don't get to use the blocked money and you might bounce checks or incur overdraft charges.

There is no difference in how retailers block debit vs credit cards.

Opening Your Account to the World: Your checking account hold liquid cash that you're planning to use soon. By using debit vs credit, you expose that cash to the world. Any retailer can make a mistake and pull too much money -- and you'd be out of luck (at least for a while). Furthermore, you might use your PIN all over town. If that number (intentionally or accidentally) gets into the wrong hands a scammer could create a fake card, use your PIN at an ATM, and walk with your cash. Again, you might get your money back after you prove it was fraud -- but you'd have to jump through some hoops.

Overdrafts and Rubber Checks: Using your debit card as you run around town doing errands can create bounced checks and overdraft costs. Even a $4 sandwich can create a $40 overdraft charge. Why not just use credit? Even a $60 annual fee on your credit card is a small price to pay for knowing you won't bounce checks and start a chain reaction of overdraft fees.

Not Accepted Everywhere You Want to Be: 9 times out of 10, nobody will know whether you're using a debit card vs a credit card. However, some companies won't treat them the same way. Rental car companies have been known to demand a real credit card and deny debit cards. Their argument is that a credit card implies a minimum level of creditworthiness and responsibility.

Giving up Free Money: A common reason for using debit vs credit is that you're spending money you actually have and avoiding interest charges from the credit card company. If you indeed do have enough money for your purchase, why not use a credit card and get a 30 day interest free loan? If you don't carry a balance on your credit card -- and you wouldn't have a balance if you use the reasoning above -- then you can generally pay off all your purchases monthly without paying interest. Keep your cash in a savings account, earn a high yield, and pay once a month.

Annual Percentage Yield - APY

Annual percentage yield (APY) is a tool for evaluating how much a deposit earns you. Why would you look at an account’s APY? Because it is a standardized way of comparing investments. Your job as a consumer is to put your money where it will get the highest APY.

What is APY?

As the name suggests, APY is the yield you earn on a deposit over a year. It refers to your earnings – how much money you’re making. Because we all want our money to work for us and grow, it is important to get a good APY from the bank.

What is Unique About APY?

APY is notable because it takes compounding into account. In very simple terms, compounding means making earnings on your earnings. This means that the quoted APY is telling you how much you’re really making on your money. Other ways of quoting a rate don’t necessarily show you the whole picture.

How to Get the Best APY

In general, you’ll find that the APY is higher for more frequent compounding periods. Ask your financial institution how often they compound. If your money is compounded daily as opposed to quarterly, you’ll be able to earn a better APY.

You can also pump up your own “personal APY”. I always urge people to look at all of their assets as one. In other words, don’t think of one CD investment as separate from your checking account – they all go together and should be considered one. Think of yourself as the Chief Financial Officer of You, Inc.

To pump up your personal APY, find ways to make sure that your money is compounding as frequently as possible. If 2 CD’s pay the same interest rate, pick the one that pays out interest most often (monthly instead of at maturity, for example). Then, you can reinvest your interest payments and start earning interest on that payment.

How to Calculate APY With Ease

Calculating an investment’s APY can be tricky. If you want to just find out what an APY is with Excel, here's the function:

=POWER((1+(A1/B1)),B1)-1 where A1 is the Rate and B1 is compounding frequency.

Try pasting this formula into any cell on a spreadsheet (except A1 or B1). In cell A1 you’ll put the stated annual interest rate – in decimal format. For example, if the stated annual rate is 6%, you’ll type “.06” in cell A1. Then, you put the number of times you’ll compound each year. For example, for daily compounding you’d enter “365” (or 360 depending on the institution) in cell B1.

In the example I’ve used, you’ll find that the APY is 6.183%. In other words, if you get 6% annually with daily compounding, your APY = 6.183. Try changing the compounding frequency and you’ll get an idea of how the APY changes. For example, you might show quarterly compounding (4 times per year) or the unfortunate 1 payment per year (which just results in a 6% APY).

The APY Formula

If you like doing math the old fashioned way, here’s how to calculate APY:

APY = (1 + r/n )ⁿ – 1 where r is the stated annual interest rate and n is the number of times you’ll compound per year.

Finance people will recognize this as the Effective Annual Rate (EAR) calculation.

Wrap-up

Now that you’re up to speed on APY and how it works, go out and find the best APY you can get!

Cashier's Checks - Overview

Cashier’s checks are checks issued by banks. Cashier’s checks are most often used when a payee is not certain that a check will clear, or when rapid settlement is necessary. Here, we’ll cover some of the details on cashier’s checks.

Safety and Cashier’s Checks

Traditionally cashier’s checks have been among the safest checks to accept. This is because the promise to pay is made by the bank issuing the check – not the person who uses the check.

Let’s contrast a cashier’s check with a personal check. When you write a personal check, you’re supposed to have available funds in your account to cover the check. However, you may know that the payee won’t get the check to the bank for a few days, and that processing will take another few days. Therefore, your account won’t be debited for several business days after you write the check. If you don’t have the funds available today, you can always hope that they’ll clear before the check is presented to your bank for payment (so you write the check anyway). This practice is called floating checks.

Unlike personal checks, cashier’s checks debit your account when they are issued. This means, of course, that you can’t get a cashier’s check unless you actually have available funds in the account. Once your account is debited, the bank is responsible for paying the payee.

Now, if you’re a merchant who accepts checks from customers, which would you rather take – a cashier’s check or a personal check? Of course, your odds of being paid are better with a legitimate cashier’s check.

Typical Uses for Cashier’s Checks

Because of their relative safety, cashier’s checks are often used in infrequent transactions where the customer and merchant don’t know each other. Personal checks aren’t acceptable to the seller because if the customer’s check bounces, it would be a significant financial challenge.

Of course you can use your personal checks at a lot of places where they don’t know you. However, I’ll bet that these are transactions that are relatively insignificant to the seller. If your $38 check to the grocery store bounces, they’ll be upset – but they won’t go broke.

Cashier’s checks are also used in transactions where the money needs to settle quickly. In a real estate transaction, nobody wants to wait for processing on a personal check – again it’s a significant asset being sold. Likewise, brokerage firms may require settled funds for certain transactions, and cashier’s checks can be used here also.

How to Get Cashier’s Checks

Getting a cashier’s check is easy. Just go to the bank and ask for one. They will debit your account in the amount of the check and print it. You may have to pay a small fee for the service.

Credit Unions - Overview of Credit Unions

Most people never notice the differences between credit unions and banks. However, as an educated consumer looking to get the best deals (that is you, right?) you should know how the institutions differ. By reading these fast facts about credit unions, you’ll know what to expect.

Who Owns a Credit Union?

A credit union is an institution owned by the “members” or customers. Contrast this with banks where the customers are just customers. Banks answer to profitability – usually shareholders own a bank and expect financial performance from bank management.

Credit unions are nonprofit organizations that strive for service over profitability. Note that I said that credit unions are nonprofits, however they are not charities. Credit unions must make sound financial decisions.

Who Runs a Credit Union?

If all the customers own the credit union, then who has time to run the place? Credit unions actually have the same types of personnel as banks. Upper management consists of a board of directors who makes decisions on credit union operations. This board is composed of elected volunteers. They don’t do it for pay – rather, they’re credit union members who want a say in how the place is run.

Who Can be a Credit Union Member?

So, what does it take to be a member of a credit union? It depends on the credit union. Credit unions simply have to limit their offerings to people who have a common bond. This bond may be the geographic community, a workplace, a religion, or other type of bond.

Credit unions cannot simply offer their services to anybody who has a pulse. Instead, they are limited to working with those who share the common bond. If a credit union fails to limit membership in this way, they risk losing their status as a credit union.

What Products do Credit Unions Offer?

In its simplest form, a credit union gets money from its customers and loans that money out to other customers.

Credit unions will typically offer the same products and services as larger banks. However, some credit unions will choose not to offer every product and service out there. The reason is that these credit unions do not do the same amount of volume that larger banks do. Banks can afford to have “loss-leaders” or products that get customers in the door. Credit unions will more likely only offer the products and services that a large portion of the membership is likely to use.

Remember how we talked about the members owning the credit union? Some credit union products have different names than their banking counterparts. Your deposits are called shares because they represent ownership (like shares of stock) in the institution.

How Competitive are Credit Unions?

Small credit unions give the big banks a run for their money. Because credit unions tend to focus on service over profitability, the rates can be better at a credit union. If you are a rate shopper, you may not find the attractive CD sales as often. However, a long-term relationship with a good credit union can be profitable.

Remember that some credit unions do not offer the whole universe of products and services that larger banks will. This can give the banks an advantage if you happen to want those particular services.

Online Bank Account Reviews

Online Bank Account Reviews

Emigrant Direct Review

HSBC Online Bank Account Review

ING Direct Review

More Resources

Errors: How to Fix Your Credit Report

How to Ruin Your Credit - Really

Online Banking Mishaps - Audio Story

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Online Bank Accounts

3 Reasons Not to Use Online Bank Accounts

Online bank accounts are great. They typically offer high rates for web-savvy saver. However, the high returns come at a cost. You need to know what the tradeoffs are to avoid unpleasant surprises. Here are a few reasons NOT to use online bank accounts.

1. Customer Service With Online Bank Accounts

One reason to avoid online banks is that you may run into bad customer service. With a brick-and-mortar bank, you’ll likely have some familiarity with the staff. At a small credit union, the staff might know you well.

Why does this matter? It’s easier to get good service if you know the staff and they know you. You can pick and choose who you deal with. However, if your online bank account offers any phone service, you have to take your chances with the “1-800 Lottery”. You might get somebody helpful and knowledgeable, or you might not.

2. Online Bank Accounts and Speed of Clearing

The internet is supposed to make things faster. However, you might have to wait a long time for checks to clear. You certainly can’t ask for a cashier’s check if you’re in the middle of a crisis and you need settled money yesterday.

Likewise, deposits to your online bank account can be really slow. If you get a big check and want to start earning interest, you can expect to wait. Now, the higher APY you earn may still make it worth your while, but it’s just no fun to wait.

3. You Can’t Spend It From Your Online Bank Account

You can’t take it with you when you go, so why not use some of that money? Online bank accounts make it hard to spend your money. You really have to plan on keeping your money in the account.

To mitigate the problem, you can use accounts that offer online bill pay or debit cards.

• Debit Cards: Should You Choose Debit or Credit?
• CapitalOne High Yield Money Market Account (pays interest)
• ING Direct Electric Orange Checking (pays interest)
• GMAC Bank Money Market Savings (pays interest)

More Reasons to Avoid Online Bank Accounts

Technical difficulties. Sometimes online banking Websites go down. When this happens, there's no backup branch that you can go to -- and the phone lines will be clogged. To protect yourself, always keep a local bank or credit union account open with some emergency cash so you won't be penniless while they fix the problem.

Internet Bank Accounts

What to Look For Before You Open an Internet Bank Account

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.