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I’m Asking You – Should I Open an Online Savings Account?

Something’s on my mind, and I’m looking to you for some help.

The other day I blogged about online savings accounts. I also read a great post by Leo about automating your finances. One of my favorite personal finance bloggers even has an ING account.

So now I’m thinking that maybe this is the way to go. The savings account at my bank earns practically 0% interest. But ING is currently paying out 4.5%. Even with not much money to earn interest, 4.5% is a darn good rate.

Pros and cons

The best thing (in my opinion) about online savings accounts is the high interest rates. It’s also good (in some respects) that you can’t just walk into the bank and get all your savings. But you can transfer money online when you need to – even automatically every month.

Personally, I’m a bit nervous about opening an account online. It’s a little unnerving to give money to someone you can’t actually look in the face. I know that I’m being crazy, but that’s the weird feeling I have.

Do you have an online savings account?

Now is where I’d love your input. I’m curious what you guys think about online savings accounts. Do you have one? Do you want one? Why, or why not?

[tags]financial, money, online savings account[/tags]

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24 Responses to “I’m Asking You – Should I Open an Online Savings Account?”

  1. Leo
    April 22nd, 2007

    Hi Andrew … thanks for the mention of Zen Habits … and yes, as you’d guess, I’d recommend you open the account. Really, it’s just as safe as a physical bank, and is federally insured and everything, but they don’t spend all the money of a physical bank on a nice bank building and a lot of tellers, so that’s how they can pay the extra interest.

    Btw, you should shop around … ING was one of the early ones, and so is a very popular brand, but there are others that are just as good with slightly higher rates. Try bankrate.com, or the other two banks I linked to in my article. Good luck!

  2. Leo
    April 22nd, 2007

    Oh, and btw, I’m really loving this new look for our site. It’s pretty awesome.

  3. Andrew Flusche
    April 22nd, 2007


    Thanks for your thoughts on this. I figured you would vote in favor of opening an account. I’m glad you pointed out the decreased overhead (i.e. no offices, tellers, etc). I have always wondered how they could pay so much interest, but never really thought about. Genius! I guess it’s kind-of like the internet store model, just for banking.

    Thanks for the shop around advice, too. I’ll definitely do extensive homework and research before plunging into anything.

    And I’m glad you like the redesign. I’m lovin’ it too!

    Take care,

  4. Andrea
    April 22nd, 2007

    We’ve had ING accounts for a few years now with no problems. I know there are other online banks with slightly higher interest rates but we’ve stuck with ING….great customer service and website is easy to use. Great place to stash the emergency fund we all need. Have transferred money in and out of accounts at least once a month with no problems at all. Give it a try!

  5. Carm Scott
    April 22nd, 2007

    I would also be a little nervous about moving my money to an online bank, but that’s just because I’ve never done it before.

    I can’t remember which blog pointed me to this sute, but it’s an online banking rates list: http://savingsaccounts.com. Be sure to investigate each offer because I noticed the first one on the list gave you the rate for only a very short period of time before returning you to their “regular” rates.

    Also this post and its comments might be helpful:

    Good luck to you.

  6. Bryan
    April 22nd, 2007


    I have had online only accounts for years and ING really took the whole concept to the next level. They continue to provide the most innovative services and best customer service. I also have a CapitalOne account, but the signup process was difficult and I ended up having to mail in a physical check to fund the account. I still don’t know how to access that money.

    ING recently added an electronic checking account with FREE ATM access at gas stations and Target stores nationwide. This gives you near instant access to your cash once it has survived the 5 day hold. I do a lot of direct deposit into my account which does not seem to have the same 5 day hold. I also pay most of my credit card bills through automatic withdrawal from the ING savings account which maximizes the time the money spends in interest bearing accounts.

    I am sure the competition will catch up, but ING is still way ahead of everyone else.

    good luck!

  7. Alberta
    April 22nd, 2007

    Andrew, I’ve been wondering about this very same thing! I was brought up that a bank was made of brick & mortar with tellers & such! I eventually got comfortable with the whole debit card idea and then online banking services. Perhaps I should just have faith and jump in….or at least look at it again.

  8. chickpea
    April 22nd, 2007

    Hey Andrew,

    I signed up earlier this year with an online savings account with HSBC. They were offering a promotional 6% interest for all new money before April 30. After that, the rate is a nice 5.05%.

    The start up process is pretty easy (you have to wait for your debit card and sign-in info though), so I would recommend it.

    If you don’t go with HSBC, at least open an account. It’s definitely a smart move!

  9. Brandon Hopkins
    April 22nd, 2007

    Andrew, I’ve had an ING account for over 2 years…love it. It’s easy to use and is FDIC insured just like a brick and mortar office. Instead of thinking like ING as a bank, think of it like banking arbitrage…they take your money and 4.5% and loan it the next day at 6% on a home loan. They make 1.5% and can offer low cost loans and high savings rates.

    As for the banking part of it, once the money clears it’s the best. It is a little slow (4-6 days) from the date your bank sends the money until it is available.

    At first I started small with $100. Then felt comfortable with $1k. Now I have well over that in the account and I love watching the interest compound daily. It’s so much fun I log in almost daily just to see the new number :)

  10. Andrew Flusche
    April 22nd, 2007

    WOW! Apparently you guys had some feedback on this topic. That’s terrific. Maybe I’ll start posting “I’m Asking You” topics more often. :)

    I must say that you’ve all provided some excellent food for thought about online savings accounts. This will be something to discuss with my wife, once we start full-time work in August.

    I wish I could respond to each of you individually, but I have a classroom trial tomorrow – must finish preparing and get some sleep.

    I’m still trying to wrap my head around 5% interest. Brandon’s banking arbitrage helps. :)

    Take care,

  11. zen
    April 23rd, 2007

    I’d recommend either ING (for their excellent customer service) or HSBC (for their high rate and ATM card). Both have done well for me!

  12. Andrew Flusche
    April 23rd, 2007

    Whoops! I accidentally deleted a comment that got caught in moderation. Here it is:

    posted by: Carm Scott

    I would also be a little nervous about moving my money to an online bank, but that’s just because I’ve never done it before.

    I can’t remember which blog pointed me to this site, but it’s an online banking rates list: http://savingsaccounts.com. Be sure to investigate each offer because I noticed the first one on the list gave you the rate for only a very short period of time before returning you to their “regular” rates.

    Also this post and its comments might be helpful:

  13. Andrew Flusche
    April 23rd, 2007


    Thanks for the recommendation. It sounds like ING and HSBC are definitely the top choices of you readers. That gives me a great place to start with my research.

    Thanks for commenting,

  14. Andrew Flusche
    April 23rd, 2007


    Thanks for commenting on the post. I’ll definitely be investigating rates and offers in full. I’m sure there’s lots of fine print to wade through.

    Take care,

  15. PT-LawMom
    April 23rd, 2007

    Go for it! I’ve had an ING account for several years and it’s a great way to save for special things – vacations, new electronics, etc. I do automatic withdrawal every payday and I like that it takes a few days to get my money if I need it. I’m less likely to impulse buy that way. ;)

  16. Andrew Flusche
    April 23rd, 2007

    Hi PT-LawMom,

    I’m glad the ING account helps curb your impulse spending. I’m not sure it would have that benefit for me. I haven’t given up credit cards…yet. So I’ve always got an easy way to pay for something.

    But I definitely like the idea of automatic savings withdrawals. Even if we’re only putting $10/month in savings, it’s something we’re going to start soon.

  17. Nick Kasoff
    April 23rd, 2007

    I had some cash to park, and just opened one with Citibank last week. I knew there were a few that were higher, but the Citi one had no gimmicks – no teaser rate, no tiered rates, etc. So far, they’ve been great – I had one question, and got phone customer service in a lot less time than it’d take me to wait for a “personal banker” at my local bank.

    One thing you’re wrong about, though: It is no less easy to spend your money from this account. They send you a debit card, so spending it is quite easy.

    Nick Kasoff
    The Thug Report

  18. Andrew Flusche
    April 23rd, 2007


    Thanks for the Citi recommendation. We’ve got a Citi credit card, and I’ve always been happy with their customer service. I might have to check into their online banking as well.

    Thanks for commenting,

  19. Brett McKay
    April 23rd, 2007

    Sorry, I’ve taken so long to get in the conversation. Finals and a brief are holding me hostage from blogging.
    Definitely go with an online bank account. I’m with ING right now and I love it. The interest rate kicks my local bank’s 1.4% interest rate butt.

    I put all my student loan money in this account and use the interest I earn from the savings account to pay my student debt.

  20. Andrew Flusche
    April 23rd, 2007


    It’s good to hear from you. I’m intrigued by the student loan plan. That’s a great idea!

    Finals suck, don’t they?! But it will all be over in a little while. Best of luck to you!


  21. Law School
    April 24th, 2007

    Some of the highest online interest rates are not FDIC insured. That means your money is not secured by the U.S. government. Rather, your money is only secure if the bank stays in business. This is just something to keep in mind when comparing interest rates.

    Like your other readers, I have had a positive experience with INGdirect’s Orange Savings Account, which is FDIC insured. One nice feature about that account was being able to transfer money between my brick-and-mortar bank account and INGdirect using INGdirect’s online tools.

  22. Andrew Flusche
    April 24th, 2007

    Thanks for commenting!

    I’m a bit surprised by the number of recommendations for ING. They must be doing something right.

    Thanks for the word of caution about non-FDIC-insured banks. I would definitely check that with any bank. :)

    Take care,

  23. Lisa
    May 1st, 2007

    The rates online are much better right now. I have my money online getting 5%. As long as the bank is FDIC-insured, I feel comfortable with it.

  24. Andrew Flusche
    May 1st, 2007


    Thanks for chiming in here. You’re right that FDIC insurance is the key.

    Maybe I’ll get to researching accounts soon.

    Take care,

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