If anything does change, there will be an update to this post to let you know.

A friend of mine recently recommended ING Direct (soon to be renamed Capital One 360) in a post on her Facebook page. When the question was asked…

“Tell me more about ING. Do you use them? What are the advantages? I was thinking about switching from our BofA…”

Fingers were pointed at me for an answer. This happens to me a lot.

After I gave my detailed response, another friend popped in to say “Uh oh… You’ve unleashed the financial beast!” Rawr! Financial Beast Stephonee is here to smash fees and helpfully describe her favorite bank accounts! RAWR!

For your benefit, Financial Beast Stephonee presents a cleaned-up and better-formatted repost of my answer on Facebook:

Me: “Are we talking about their checking or their savings accounts here, specifically?”

Reply: “Either or”

Well then!

ING is different from most banks…

ING Direct in General

The lack of a physical brick-and-mortar presence might be bothersome to some people, but I’ve never felt like I needed it. Also, that’s the downside to any high-yield online-only account, so it’s not really a surprise – it’s just the way these types of accounts work.

They do make up for their lack of physical presence by having the best customer service anywhere. Not just of any bank, but anywhere. Keep in mind that I say that having worked in customer service, and while having accounts at many, many different banks over the course of this blog.

ING Direct’s Electric Orange Checking

Interest and Fees

They offer interest on the checking account, no minimum. Very, very rare for a checking account. Also the way they handle overdrafts is different – they give you an overdraft line of credit, at a super low interest rate. Which means if you overdraft and then put money into the account soon after, you pay only pennies in overdraft fees.

Moving Money In and Out of the Account

The Electric Orange Checking account has every standard feature I’ve seen in checking accounts nowadays: online bill pay, check deposit via phone app, free debit card, etc. etc..

They also offer Person2Person payments with a checking account, which means you can transfer money to anyone else, via ACH electronic transfer. If it’s to another ING account, the transfer is instant – if it’s to another bank, it takes a couple days. I use the Person2Person payment whenever I can, instead of a check.

One of the really great features they have is online checks: you put all the check details in online, and they create, print, electronically sign and mail the check to your intended recipient (all for free; they don’t even charge you for the postage).

Free ATMs at any AllPoint ATM (which includes most 7Eleven ATMs and a ton of other places). You can buy a checkbook from them if you need one, and a book of checks only costs $5. Buying a checkbook is the only fee I have ever had to pay ING, ever.

Downside?

Check deposit used to be the only downside I could think of, since they don’t have physical banks or their own ATMs for you use. You used to have to rely on direct deposit or transfer from another bank account to get money into the account (or, they do offer the option to physically mail your checks into them, but I never used it).

But I don’t even think that applies as a downside anymore, now that they offer check deposit via the mobile app, and I can just snap 2 pictures of any physical check to get it into my ING checking account.

ING Direct’s Orange Savings Account

You get a higher interest rate than brick-and-mortar banks, but lower than most other online-only high-yield savings account. Many people have skipped over these accounts because of higher rates elsewhere. But you see, there are some things I really like about Orange Savings…

Multiple Accounts for Multiple Goals

They let you open as many savings accounts with them as you wish, and once you have one savings account with them, opening another one take about 10 seconds. I use this feature to partition savings goals into separate accounts, like an “Emergency Fund” account, a “Travel” account, etc. etc.

Transferring money between the accounts (and into and out of an ING checking account) is instant. The only restriction (and this is a federal law designed to prevent money laundering) is that you can only make 6 transfers out of any one savings account per month. Transfers into the savings account are unlimited.

There are no minimums or fees associated with the savings accounts.

Downside?

Pretty much the same as the checking: getting money into the account from outside of ING. The “Check Mate” deposit-by-smartphone app also works with their savings accounts, so it’s actually easier than it used to be.

Bonuses!

This was all brought up in the context of the bonuses ING Direct is currently offering when you open a new account – bonuses that you, too, can take advantage of.

What do you think? Have you used ING Direct at all – and are you as stupid in-love with it as I am, or do you have a different opinion? Is there another bank out there that has won your heart? Tell us in the comments!

Related posts:

1. College Money Tip #3: Bank Better
2. Back to Basics #3: Checking Accounts
3. Back to Basics #2: Savings Accounts

Credit unions have been around since the 1840s when a group of weavers in England banded together to form the Rochdale Society of Equitable Pioneers. Credit unions continue to be pioneers in the financial world, providing a level of service to their members that traditional financial institutions cannot match. But why should you join a credit union? Here’s what’s in it for you.

Money, money, money

Credit unions typically offer higher rates of interest on savings accounts and lower rates for loans. This can put more money in your pocket every year, and save thousands over the life of the loan. Some federally charted credit unions are legally enjoined from charging interest rates over 18 percent on their loans; this can make a significant difference for consumers with troubled credit histories. Additionally, credit unions are not-for-profit organizations.

What does this mean for you?

For one, it means the credit union doesn’t have a vested interest in charging you outrageous fees for every transaction. Because all profits are redistributed among members (yes, this means you as well), credit unions are less focused on wringing every last cent out of their members and more interested in providing services for them. Most credit union credit cards don’t require an annual fee; free checking accounts and lower penalties for overdrafts are typical features of most credit unions.

Security

The National Credit Union Administration insures credit union deposits up to $250,000; this is similar to the protection the FDIC affords to depositors in traditional banking institutions. Credit unions have weathered recent financial difficulties remarkably well, due in part to the sense of community they foster among their members. When credit unions do fold, they are typically assimilated into another credit union, allowing consumers to continue banking as usual through the new organization.

Statistically, credit unions have outperformed traditional banks; this is especially true in recent years during the housing and financial crisis. In 2008, only 1.37% of all loans held by federally insured credit unions were delinquent. Only 1.19% of home loans were delinquent. These figures represented significant increases, but not the crippling blows that other types of banking institutions experienced over the same period.

Community

Unlike money deposited with large, impersonal banking institutions, the money invested with credit unions stays within the community and is put to work helping individuals and businesses in your own home town. The money you deposit, for instance, may go toward a new building project or a franchise opportunity that will offer services for the entire area. Because credit unions are largely locally-owned and operated, the entire community reaps the benefits of your investment.

The sense of community extends to new members as well. Many credit unions are open to high school or college alumni, members of local churches or religious groups, through work-related affiliations, or residents within a specific geographical area. No matter what your occupation or work status, there is likely a credit union in your area that will welcome you as a member.

Credit unions were established in the United States in 1934 by the Federal Credit Union Act. Franklin D. Roosevelt stated that credit unions were intended to “promote thrift and thwart usury,” and they have done just that for over 70 years. With more advantageous rates and better services than traditional banks, credit unions put their emphasis directly on customer service. Credit unions are not-for-profit; this places them squarely in the sights of traditional banks that see them as threats to the all-important bottom line.

If you enjoy paying exorbitant fees for substandard customer service, then credit unions are not for you. But if you are interested in saving money while investing in your local community, credit unions offer great benefits and security for your hard-earned cash.

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Have you checked the interest rate lately on your checking account?  If you haven’t, there’s a good chance you’re raking in a whopping fraction of a percent on your money, or maybe even nothing at all.

I checked my “high-interest” checking account this morning just to see where I stand.  Are you ready?  .08% APY!  What a joke.  And that’s exactly why I leave the bare minimum in this account at all times.

It just doesn’t make economic sense to leave any more cash than absolutely necessary in an account that won’t reward you for storing your hard earned dough.  The banks are making good money off your cash (theoretically), so why shouldn’t you be able to at least beat inflation? Besides, there are loads of better options right at your fingertips.

If your goal is to find a safe and highly liquid investment that offers the best interest rates at little or no cost to you, online savings accounts are hard to beat.  You probably know that already, but what you may not realize is online savings accounts can also be used as a convenient way to pay for monthly expenses such as your credit card bills.

Yes, you can certainly do this from a checking account as well.  However, you’ll be missing out on the extra interest you could have earned, and you may also run the risk of not having enough in your checking account each month.  Enter the dreaded overdraft charge – I’ll bet you can think of a million better ways to spend $30!
In fact, this leads to a common excuse for keeping too much cash in a regular checking account.  Many individuals, young and old, struggle with developing a monthly budget and reconciling financial accounts.  So, we argue that it’s just easier to leave extra money in our checking accounts to make sure all the bills are covered.

It might be the easier route to take, but it’s definitely not the financially savvy thing to do.  I don’t care if you have $1,000 or $100,000 in savings, you should always make an effort to be smart with what money you do have.  Making a couple of extra percentage points on $1,000 might not turn you into the next Warren Buffet, but the interest still adds up over time.

That said, if you don’t already have a high-yield online savings account, try opening one today with a reputable company that consistently offers competitive rates.  ING or HSBC Direct are both great options with user-friendly sites and decent customer service.

Next, transfer your existing savings to the new account and set up automatic savings to pull as much as your budget will allow from checking into your online savings account each pay period.  Finally, make a visit to your credit cards’ websites to schedule auto-payments directly from your online savings.  Keep in mind that AMEX still doesn’t allow payments to be made from online savings accounts.  However, most other major credit issuers, including Citibank and Capital One, don’t have an issue with it.

Now, sit back and watch your savings grow without ever worrying about credit card late fees or bank overdraft charges again. If you like how this setup works with your credit cards, you may even wish to schedule auto-payments for other big-ticket bills like your car payment or rent.  Online savings accounts allow up to 6 ACH transfers each month, so you might as well use them all up while still enjoying the higher interest rates.

Editor’s note: For an example of what Josh is describing here, check out my post Using ING Sub-Accounts to Save Hundreds on Student Loans, where I describe the process of paying my student loans automatically out of an ING savings account! – Stephanie

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The black arrows represent near-immediate deposits or transfers, which take only a day or so. The gray arrows are slower deposits or transfers, which typically take three days or more.

So, if you look at the diagram that I crudely constructed, you’ll see that all of my income and deposits came into my Bank of America checking account, and then largely sat there, until either being moved to one of ING accounts, or used to pay one of my two credit cards.

Note: nearly all of my purchases are made using Credit Card 2, to earn rewards points and offset my purchases by one month before I pay the bill in full.

So what’s the problem with this? Convenience-wise, not a whole lot, except that the Bank of America checking account doesn’t earn me any interest, and that’s where most of my money was sitting most of the time. So I decided to entirely rework things, and came up with this new setup:

Ok, so, the paycheck from my on-campus job still direct deposits into my BoA account, and it’s still the convenient account for depositing checks at the ATM. But I’m quickly moving that money from BoA to my ING Checking account, so that it can earn interest, leaving only enough in my BoA account to pay the minimum payment on the credit card with the balance.

“Only the minimum payment?!?” you cry out, in shock and alarm. But, you will see that I’ve also got a new ING account in this setup. ING allows you to set up multiple savings accounts with minimal work and as quickly as humanly possible – I timed how long it took me to setup my new Credit Card Fund savings account, and it came out to 42 seconds!

Instead of making payments to the card itself, I’m now putting aside $140 of my monthly $160 payment (the other $20 is the minimum payment I make directly to the card) in the new savings account to earn interest. Then, the month before my 0% APR period ends, I will take all of the money in the account and pay off the credit card in full.

NOTE: This “paying your card off in your savings account” only works if you meet two conditions:

A) Your credit card interest rate has to be lower than your savings account interest rate. My savings account earns nearly 4%, and my credit card is at 0% for now, so it works. If your credit card interest rate is MORE than the card, then you should just pay off the card directly.

 

B) You treat payments into the savings account just like any other bill. You make the payments regularly, on time, and in the full amount. More importantly, do not take the money out of the account for any other purpose! Although it can technically serve as a second emergency fund, taking money out of the account is just the same as putting purchases on your credit card – it will completely counteract your credit card payoff efforts.

So, what are the advantages to my new setup, over the old one?

1. Interest, interest, interest. I’ve got much higher balance in my ING checking this way, so that’s earning much more interest. And I’m earning interest on the credit card payoff account, as well. Altogether, I’ve calculated this setup will earn me an extra $60 in interest this year. Which may not seem like a lot to some of you, but to me? A poor college student? That’s some serious gains just for rearranging my accounts!
2. Faster transfers. If it looks like there are more black lines in the second diagram, that’s because there are. Using mainly only ING accounts means instant transfers between three of my accounts – not even 1 day transfers, but instant!
3. Shows my undying adoration for ING. Sure, they don’t have the best interest rates around, but they’re still competitive, and I love them to pieces. Plus, I made as much money from their referral program last year as I did working my on-campus job for the fall! Out of the four high-yield accounts I have (the others being E*TRADE, Emigrant, and Citibank), I like ING’s interface and usability the best.

All in all, it might seem like I’m a little crazy to obsess over such minute details, but I figure it probably only took me a half an hour of work, and netted me $60, so that’s an hourly rate of $120! Not bad at all!

Anyone else have any little “bank life hacks” like this?

Related posts:

1. Back to Basics #3: Checking Accounts
2. Back to Basics #2: Savings Accounts
3. ING Direct – or How It’s Possible for Me to be In Love with a Bank

So what’s to be done with this sudden, extra, seemingly-free money? “BUY BOOZE!” you say. And that’s a valid use of it (also not the best use of it), but I’m not necessarily talking about what you should spend it on. I’m talking about where you should put it.

You’re probably already making out the deposit slip to drop in your usual checking account at your brick-and-mortar bank. But is that really the best place for your money?

In a checking account, your money is basically just going to sit in the account until you’ve depleted it. Even in a regular savings account, it’s probably not going to earn more than .2% interest (a fifth of a percent). And sure, interest is good, but how much money is .2%, really?

What’s the average you get back on a refund check? I don’t know, but I’ve never gotten more than $350. Some people actually get enough from their checks to pay for their off-campus room and board for the semester, so it might be a lot higher, like $2,000. So let’s just use $500 for the example, because it’s nice and round.

So $500 in your savings account earning .2%. Now that $500 isn’t going to stay there for a solid year, but let’s pretend it did. After a year, you would have earned… *drum roll please…*

$1.00

Wow, that hardly seems worth it. In fact, considering you’ll deplete that $500, and won’t even earn a whole dollar, it doesn’t seem worth it at all to put it in the savings account instead of the checking.

But hold up – I’ve got an idea. In fact, it’s what I’ve done with this term’s refund already. Are you interested? I’ll be getting a 3.5% (not 3/10ths of a percent, a whole 3.5 percent) return on my refunds. And I got a $25 bonus.

So how much of a difference can 3.5% and a $25 bonus make? Well, to start with, there’s that $25 bonus. So we’re up to $525 in our example already. And $525 at 3.5% for the year would be… *drum roll again…*

$18.37 – putting the total up to $543.37. Without breaking a sweat.

Alright, alright, so you’re sold on the 3.5% with a $25 bonus idea – where can you get it? ING Direct’s Electric Orange Checking account. It works just like a regular checking account, with a few differences:

1. You get a 4% APY on money sitting in the checking account. You can also open a Orange Savings account with them, and link the accounts together. Money in the savings account earns 4.3%.
2. The account comes with a debit card, but no check book. If you need to send a check, they have an electric check system – or you can move the money to your brick-and-mortar checking account (so don’t cancel your old account!)
3. You get an Overdraft Line of Credit instead of “courtesy overdraft protections” - that thing where when your account drops below $0.00, instead of declining your purchase, your bank graciously lets the charge go through and then slaps you with a $35 fee? Yeah, instead of charging a flat, outrageous fee, ING charges a normal interest rate on the amount your account went below $0.00. If you manage to make a deposit in the next few days to bring the account back into the positive, you’d only be charged pennies – instead of $35.
4. You get a $25 bonus if you open the account with a referral link and your opening deposit is $250 or more.

So that refund check sitting in your checking account? The one that’s probably for $250 or more? Go open an account with it. Remember how I said you could move money from ING to your brick-and-mortar checking account? That link works both ways – you can move $250 from your regular checking to ING for the opening deposit.

So whether you’re saving this refund for next term’s textbooks, or you’re slowly draining it for expenses – it doesn’t really matter. Either way, you should be making some money off of it while it sits in your account. 

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Savings accounts are cool and all, but sometimes, you actually want to be able to exchange your money for goods and services. Checking accounts make this easy to do, by allowing you to fill out a little form, appropriately named a “check,” handing over some of the money in your account to someone else.

No Interest?
Although, just like in a savings account, the bank is borrowing your money, they don’t pay you any interest on it. Your money sits there and doesn’t grow at all. This is almost like a “fee,” you’re forgoing the interest in favor of easy access to your money – at least, in most cases. Some banks have checking accounts where if you keep enough money in the account (usually north of $5,000), they’ll pay a very small amount of interest on it.

New technologies have profoundly changed the way we use checking accounts. Debit cards, which are basically the hybrid of a check and a credit card, allow you to easy spend money out of your checking account. They’re also a nice way for the bank to try and get more of your money.

Overdrafts
If you draw out more money from your checking account than you actually have in there, you’ve done something called “overdraft.” There’s a series of different ways the bank might handle this, but most of them involve charging you a fee of some kind.

One thing you can do is have your bank set it up so that if you overdraft, the bank can just take the extra money out of your savings account. But the best solution is simply to pay attention to how much money you have in the account, and not spend more than that. Seriously, it’s not that hard, especially now that you can check you balance from home, using the computer, as many times a day as you want.

Checking on the Interwebs
The other technology transforming checking accounts is online bill-pay and echecks. Using just the account information for your checking account, you can pay many businesses online, including most of your bills. It’s gotten to the point where many people don’t even use paper checks anymore.

Which is where the online banks are starting to swoop in. If you no longer need paper checks, then you can get an online checking account. ING recently rolled out their online checking account, “Electric Orange,” which can be used for online bill-pay and echecks, and comes with a debit card, but no paper checks. However, you can contact ING and they will issue a paper check (for example, to your landlord). Still, the account pays 3+% interest on money sitting there. For the time being, this account is only open to customers who have an ING Orange Savings account, but that’s easy to get, with no fees or minimums.

My philosophy when it comes to my checking account: don’t let money sit in there, earning no interest, if I don’t have to. I only keep enough in there for what I’m going to need in the next two weeks.

Related posts:

1. Back to Basics #2: Savings Accounts
2. Rethinking my Bank Accounts
3. Using ING Sub-Accounts to Save Hundreds on Student Loans