So I've been pondering switching to virtual checking because of better interest rates. We currently bank where I've been a member for the past 7 years. Really, we've only stayed out of convenience and have never really considered our options.Our current checking account has a flatlined 0% interest rate. Our savings gets a whopping .2% interest and has a $300 minimum or else we're penalized. Last year we made an anemic $9.41 in interest.
On the other hand, ING Direct offer Electric Orange accounts (aka checking) with 5.3% Annual Percent Yield and savings accounts with 4.5%APY.
However, you don't have paper checks readily available. If you want to write a check, you have to go online and fill out the information and the check will be mailed out. So check-writing is no longer a spur-of-the-moment activity. In the past year, we've probably only written a handful of checks, and I can probably count on one hand the number of those that needed to be filled out and handed over immediately.
But still. It makes me kinda nervous. Also, they pointed out at the Well-Heeled: 20something Money blog that Washington Mutual offers a similar APY AND instantaneous transfers between savings and checking accounts. Which I guess means that ING doesn't offer that.
Has anyone taken their banking complete online? Good idea or bad idea? (Bob B., I'm looking in your direction since you're my finance buddy.)
anyone done it? Advice?
6 comments:
I have no advice, but I am in a similar situation. My interest rates for my checking/savings accounts are about the same as yours, and I keep getting promotional information from ING about the interest-bearing electronic checking account since I have a savings account and some CDs with them. What stops me from going all out and doing checking with them too is the same thing that gave you pause: the fact that you can't write checks in the traditional manner.
My sister's most recent ex-boyfriend/fiance had only an online checking account. He did most of the banking/bill paying online, but in a few situations where people wanted a paper check in hand (rent, for example) it was a hassle for him to get an actual check. Now, I don't know that he was with ING and I don't know that being perpetually late in paying the rent was more a character flaw on his part and less an indicator of the difficulty in getting a check made, but I'm just throwing it out there.
One thing you could do is maintain the original checking account, keep a bare minimum in it (obviously, enough to cover situations where you need a paper check), transfer the rest into the electronic account, and use that account for online bill paying. That sounds like it could be a pain, but I guess if the transfers between accounts are automated, it wouldn't be that much work.
A side note about interest-bearing checking accounts, courtesy of my dad: He was having a hard time balancing my Oma's checkbook, because he couldn't figure out (and the person he spoke to at the bank couldn't tell him) when the interest was added and what the balance was when the interest was computed.
Personally, I never balance my checkbook -- I kind of glance at my statements now and then, and I have a general idea of how much is in the account, but computing the balance to the penny after each transaction is just not high on my list of priorities. I did not mention this to my dad, though; I chose to nod encouragingly and let him continue.
He went on to point out that you have to pay taxes on the interest. My taxes are a massive headache anyhow since I do freelance work on the side and don't bother to make estimated quarterly payments, so computing the tax on another account is not a big deal for me.
Anyhow, all this is by way of saying that I'm interested in whatever you find out and eventually decide to do. Keep me posted!
Your solution of keeping a bare minimum in the bricks-and-mortar checking account is the same thing Keith suggested. Which reminds me--I need to find out if there's a minimum balance we need to keep there.
I didn't realize that we would have to pay taxes on the interest (damn government). So that's good to know. But, similar to your situation, if we start our side business we're probably going to hire someone anyway because our taxes are going to get real complicated real fast.
I'll definitely keep you posted!
Personally I have everything all tied up in a bank that I can walk into. The interest rates from the online banks are very tempting, but I haven't been swayed. I write it off to the fact that I am old school and want to know where my money is exactly when I want it. I have two checking, two savings, and a home equity line of credit all tied together and the work in harmony with my online bills and whatnot. The most I see myself doing would be getting a savings account and dumping money in there every so often, hopefully forgetting about it until I magically come into a windfall of my own money one day.
Anyhow, I think they are good ideas, and the interest is no big deal (one extra screen in TaxCut), but I haven't done it yet.
About the interest:
I think that there's a minimum amount of interest your account has to earn before it is taxable. I want to say that the minimum is $250, but I could be making that part up.
About the online savings account:
I heartily second Bob's idea of getting the online savings account. I have an automatic transfer set up to make regular deposits into my ING account. I keep the bulk of my savings there, and leave only a smidge in the other savings account.
Hi M,
Thanks for mentioning my blog. Actually, transfers between WAMU's checking & saving accounts are instantenous, and transfers between ING Electric Orange (checking) and saving accounts are ALSO instantenous.
The advantage of WAMU would be 1. the higher interest rate (5% vs. 4.5%) and 2. you can write paper checks without having to go online to send them (as you would have to do with ING) and 3. you can access WAMU atms and banks to deposit & withdraw money.
Bob--I like the idea of "magically" falling into a windfall of my own money:)
Wellheeled: Thanks for stopping by! I'm now leaning towards WAMU, because I didn't really like that you didn't have paper checks handy. So if we do WAMU, we could completely close our current account and move everything over, since it would be online and have a physical presence as well. I'm going to check out their locations in my area, but it sounds like a good fit! I'll let you all know...
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