Sure, brick-and-mortar financial institutions are reassuring. It’s nice to interact with the bank tellers and know that your hard-earned money is going right into your account or coming right into your hands. Transfers between accounts can be done on-site, while a customer service rep or manager will sit with you if you want to open an account.
But nowadays, I find myself doing more and more of my banking online. I pay all bills and make transfers through my bank’s website. My paycheck is direct deposited. My debit card is used for most cash transactions — I just don’t carry much cash on me. Other than checks for invoiced work, I have no need to go to the bank.
Where are the perks for customers like me? Sure, my direct deposit allows me to bypass a monthly fee, but my interest rates aren’t showing any improvement — savings rate is .75% right now. That’s why I’m now considering moving our savings fund to an online bank, where the interest rates are markedly improved over those offered by local banks.
A sampling of rates for savings accounts:
ING Direct — 1.30%
A very popular online bank. I know a number of people who have accounts with them. The $25 referral bonus for both the existing and new account holders is a nice deal-sweetener. Requires a $250 initial deposit.
SFGI Direct — 2.25%
One of my Twitter friends brought this bank to my attention (ED. NOTE: Flexo @ Consumerism Commentary blogged about it), but it only allows people to open accounts at certain times. The banks puts a moratorium on new accounts as it sees fit. Requires a $500 initial deposit.
HSBC Direct — 1.35%
Large bank’s online branch. Just $1 to open an account.
It’s important to keep in mind that transactions take a few business days to complete and that interest rates are subject to change.
Any of these banks would greatly increase the interest on our savings account. While it seems easy enough to transfer money back and forth, I would keep a small savings cushion in my “real” local bank in case an emergency crops up and I’m unable to move the money around fast enough.
I’d likely go with ING Direct, since it has the best track record, from what I read and know. Plus, the $25 referral is nothing to sneeze at. With a $250 initial deposit, the $25 is like making 10% on your savings from the start. And 1.30% is better than .75%.