The New York Times catches on to what bloggers have been talking about for years: online savings accounts earn more interest and are overall much better than the paltry traditional savings account.
ING Direct led the newest initiatives in the United States in 2000, when it introduced the Orange account, and until recently it had little competition. In 2005, Emigrant Savings Bank of New York and the United States unit of HSBC dived in, as did various smaller banks around the country, all of them viewing the product as a low-cost way to bulk up by collecting deposits nationally.
Of course, there was no mention of the bloggers and other internet-savvy individuals who have been talking about these accounts for years. My first post about ING Direct was back in July, 2003, after I had an account at the online bank for a year (thanks to the forums on The Motley Fool) and had seen the interest rate plunge.
With mainstream exposure, perhaps competition will heat up and we’ll see some better rates. Be careful — with higher rates and a smaller profit margin for the banks, I’d be willing to bet we’ll see more creativity in addition to increasing rates, such as more promotion-only rates and restrictions.
There is one piece of new information in the article. Wachovia is looking into a competitive offering, but they’re looking for an option that “makes sense for our brand and our business model.”
Updated February 6, 2012 and originally published May 5, 2006.