Here in the Untied States, ING Direct, a banking arm of the large financial company ING Group from the Netherlands, offers more than just high-yield online savings accounts. The bank also offers investments and mortgages, and some of the latter may have been too risky, like those sold and packaged into securities by domestic banks.
ING Group received a taxpayer bailout of €10 billion ($14.9 billion) and the European Commission is forcing the financial company to restructure in order to repay this loan. Part of this deal involves taking ING’s insurance companies public and selling the United States’ ING Direct by 2013.
The effect of this sale remains to be seen. Some time between today and the end of 2013, ING Direct will be owned by another company. This bank was one of the first to operate without any brick-and-mortar branches and the first to be an unmitigated success. When I first started paying attention to my finances at the start of this decade, the recommendations for ING Direct flowed from every information channel. With the highest interest rates in the savings account business, unusually capable customer service, and a slick and functional website, the bank was a favorite among the die-hard personal finance fans at the Motley Fool discussion boards.
More recently, ING Direct has moved from excellent to very good. I still recommend this bank to people who want a hassle-free experience, but their rates are no longer as competitive and their electronic checking account is not the best in class. For those with more money to put in savings, those who would benefit from a higher interest rate, I usually offer additional options.
ING Direct’s corporate message in response to those customers concerned about recent news of the impending sale is that your money is safe. I don’t think safety is the real concern. Accounts at the bank are insured by the FDIC, so even if the bank fails safety isn’t a problem. These are the questions you should have right now:
- Who will purchase the bank and will ING Direct’s core values change?
- If the core values change, will they be for the better (more competitive interest rates, for example) or for the worse (scaled back operations and customer service, for example)?
- What new account fees will be introduced?
- ING Direct employs about 1,200 in Delaware and another thousand more across the country. Will they have jobs and for how long?
These questions will not be answered for some time.
I do not see the announcement of this sale as a reason to move money out of ING Direct now. I will be watching developments closely, however. With the bulk of my savings in ING Direct, I am very sensitive to the fact that they do not offer the highest interest rate available. For years, the bank has counted on customers like me: those who first deposited when the interest rates were high and competitive and who have stayed around as other banks consistently offer higher rates. But I do not owe my loyalty to a company and will be quick to shop around if I am no longer getting a good deal considering cost, return, and service.
Photo credit: diaper
ING to sell Delaware-based bank in [sic] 2013, Eric Ruth, The News Journal, October 27, 2009
Post-Bailout Blues as Europe Orders ING Group to Sell 2 Units, Eric Dash, New York Times, October 26, 2009
In an effort to attract more new deposits, ING Direct is offering a new savings product with a high interest rate, the “Added Value” certificate of deposit (CD). If you are willing to deposit new money to ING Direct and let the bank hold that money for one year without any withdrawals, ING Direct will pay you a rate of 2.25% APY (as of October 18, 2009). This is the highest rate ING Direct is currently offering; the rate on the “non-Added Value” CD is 2.10% APY.
The interest rate offered on the “Added Value” CD is currently the best rate in the country for 12-month CDs among major national and regional banks. Is this a sign that ING Direct is returning to its roots as the bank that tops the charts for customers who are interested in having their money earn as much as possible while in mostly liquid accounts? I don’t think that’s going to happen; the interest rate on the bank’s flagship Orange Savings Account is currently 1.30%, ranking ING in the middle of the banks who claim to offer “high-yield” savings.
Customers tend to glow about ING Direct’s customer service, which shows that the bottom line is not always the primary, or at least not the only, concern for consumers.
Update: The waiting list is currently full. Keep reading Consumerism Commentary (or subscribe) to be notified when the waiting list is open again.
ING Direct is one of my favorite banks due to their savings account. While ING Direct’s Online Savings Account does not offer the highest interest rate, they are consistently towards the top offering much more to savers than a typical brick and mortar savings bank, have a fantastic website, and offer a smooth experience when dealing with customer service.
While I have started exploring other high-yield savings accounts like FNBO Direct (review), Ally Bank (review), and EverBank (review) I still use ING Direct for the bulk of my cash management.
Here are some of the ways I currently use ING Direct:
- Every two weeks, my pay check is automatically deposited in my ING Direct checking account (known to the locals as “Electric Orange”).
- Each month, several services deposit money directly into a couple savings accounts at ING Direct.
- My money at ING Direct is split into twelve sub-accounts, ten personal and two business, with names like “Orange Vacation Fund” and “Orange Emergency Fund.”
- I have two PayPal accounts, and one sub-account at ING Direct corresponds to each. This way I can maintain very small balances in the linked accounts to prevent problems with PayPal. When I withdraw money from PayPal into ING Direct, I can move the money to a different sub-account immediately.
- ING Direct works with Quicken’s Direct Connect feature, which means I can download my bank transactions from the software and reconcile the account automatically.
- My credit cards are configured to automatically deduct the full amount of my bill from my ING Direct checking account on the date the payments are due.
Although ING Direct’s interest is not competitive with the newest online banks, you can match or exceed the income generated by this savings account by using the bank’s referral feature. For each friend you introduce to the bank, ING Direct will thank you with $10 for you and $25 for your friend in the form of an interest bonus. You have 50 opportunities to earn the $10 bonus for a total of $500.
Unless you’re extremely well-connected, it is unlikely you have 50 friends who are interested in opening an account in ING Direct (though they should be). So for the last year or so I’ve been helping Consumerism Commentary readers by connecting them with potential new ING Direct customers. Through this announcement last year, I’ve already helped over 300 readers earn some extra money towards their $500 limit.
I am running out of names of readers waiting for their turn to earn a bonus so I am re-opening the waiting list. If you are interested in earning bonus interest from ING Direct, comment here (comments on this post are now open) or on any earlier article about ING Direct and mention you’d like to be added to the waiting list. I will cut off the waiting list at about 100.
Update: The waiting list is full again as of 11:15 PM ET on August 18, 2009, eleven and a quarter hours after this notice was posted. Thank you, everyone. I’ll post a new message in a few months when the waiting list is open again.
Every so often I address questions and comments I receive via email. If you have a question, please contact me using the form on this page. I try to respond to everyone, but it might take a while before I read every email I receive.
From Mary Lynn:
I really liked your article that explained how freecreditreport.com isn’t free at all. I was wondering if you knew of any credit report site that doesn’t ask for a fee! I don’t have any credit cards since I just turned 18 and graduated from high school but I need a credit report for this job I’m taking. Please, if you know of any, let me know.
First, to answer Mary Lynn’s question, the one and only website for retrieving the government-mandated three free credit reports each year, one from each credit reporting bureau, is AnnualCreditReport.com. Even there, since the site works with the for-profit reporting agencies, they will try to sell you something. Steer clear of the offers and get your free credit report once every four months.
I find it odd that your employer requires you to get your own credit report and present it. Employers, if they must to a credit check on prospective employees, should do it without requiring you to do anything other than provide your Social Security Number.
From Jake T.:
You seem to open a lot of bank accounts. How many different banks do you have accounts at, and which one is your favorite?
I do have a diversified set of savings accounts. I wrote about reducing your number of banks as a way to simplify your finances, but I like the idea of keeping money spread around. Without Quicken, this would be an organization nightmare. I have accounts with Wachovia (my main brick-and-mortar bank for both business and personal savings and checking), TD Bank (formerly Commerce Bank, open on Sundays, my secondary brick-and-mortar bank), Ally Bank, FNBO Direct, HSBC Direct, ING Direct, E*TRADE Bank, and Emigrant Direct. I’m also in the process of opening an account at EverBank. Of these, ING Direct and FNBO Direct stand out as favorites.
If you have questions, let us know. You can email your questions directly to me (or to Smithee, Jeff, or Tom) or leave your questions in the comments area.
It has been awhile, but I now have a new set of $25 bonus referral links available for new customers of the ING Direct online savings account. ING Direct is currently, as of June 16, 2009, offering an interest rate yielding 1.5% APY on this savings account.
Here is how this works. If you open an account using one of the referral links available here and deposit at least $250, you will receive a $25 bonus, and the bonus is considered interest. Although ING Direct’s interest rate is not the highest among high-yield savings accounts, depending on how much you deposit you could earn more with this bonus and ING’s interest than you would with just interest from another bank.
The referral links posted on Consumerism Commentary have been provided solely by other readers. When you earn $25, the reader who donated the link will receive a $10 referral fee. After you sign up, you will receive your own referral links to share. Everybody wins! I have a long waiting list of readers who are waiting to have their links posted. The waiting list is closed at the moment, but when I need more links I will post an announcement and allow people with new referral links to be added to the waiting list again.
Even though ING Direct has lowered the interest rate offered on the Orange Savings Account, one of the most popular online savings accounts. The bank is still offering $25 bonuses to new customers who open this savings account or the high-yield paperless checking account with an initial deposit of $250 or more.
In addition, when you become a new customer of ING Direct, they generally provide fifty referral codes for your own use. You can share these with your friends, earning $10 for each customer you send their way. Each of your friends will earn $25 for opening an account. It’s quite the pyramid scheme, and it’s been successful for the bank so far. The good news is that the bank’s customer service is among the best, as is the bank’s website.
If you’d like to earn $25 as a new customer, use one of the new $25 bonus referral links posted here, and be sure to clear your browser’s cookies before attempting to use any of the codes.
For more banks, see the latest savings account interest rates.
It’s not your imagination. Banks are now looking for ways to actively discourage new deposit accounts. It’s not just through lowering interest rates, they are scaling back marketing. It makes sense from a business standpoint; the economy is not so great, so companies are saving their operating expenses.
Here is a summary of the most recent interest rate declines, listed as annual percentage yields (APYs) as of June 13. These accounts are recommended. I have accounts here and I’ve never had any problems with the banks.
- FNBO Direct Online Savings Account dropped to 2.15% (1.50% as of November 2009)
- E*TRADE Bank Max-Rate Savings Account dropped to 1.95% (0.50% as of November 2009)
- HSBC Direct Online Savings Account dropped to 1.85% (1.55% as of November 2009)
- ING Direct Orange Savings Account dropped to 1.65% (1.30% as of November 2009)
- Ally Bank Online Savings Account dropped to 1.64% as of November 2009 (Formerly GMAC Bank)
These accounts are recommended by others but I have no personal experience with the banks.
- ShoreBank Direct Online Savings Account dropped to 2.80% (1.95% as of November 2009)
- Kirkpatrick Bank Savings Square dropped to 2.30% (1.55% as of November 2009)
- Dollar Savings Direct dropped to 2.25% (1.60% as of November 2009)
For a history of savings account interest rates for the last fourteen months or so, take a look at this history of high-yield interest rates. With banks decreasing their rates almost every week, it’s difficult to keep up with the changes.
Where do you keep your savings?
It’s true that high-yield savings accounts offer interest multiples above what you can usually find from your typical state or national bank. For example, a “high performance” money market account (savings account) at Wachovia in my area earns a maximum of 0.8% APY — and that’s only on balances above $250,000. The APY on the first $5,000 deposited is only 0.04%. High performance?
In comparison, ING Direct’s recent drop to 1.85% APY seems like a gift. Even this rate is dangerously low if you keep a large amount of money in savings. Over time, inflation will eat away the purchasing power of your money in savings, particularly when interest rates are low.
ING Direct’s Orange Savings Account isn’t the only “high-yield” account that has fallen lately. Look at this historical chart of interest rates. Everything in red has dropped since the last update. Even DollarSavingsDirect, which has been at the top of the chart since I added them in November 2008, is no longer the leader with a 3.05% APY.
GMAC’s Online Savings Account has dropped from 2.5% to 2.25% APY. HSBC Direct now matches GMAC, having fallen from 2.45% to 2.25% APY. E*TRADE Bank’s Complete Savings Account has recently fallen to 2.15% APY.
I am tempted to move more of my money around. A large portion of my cash is still held at ING Direct, one of the best banks for savings accounts. But I would like to earn more with my uninvested money. The problem is there is no way of predicting which banks will consistently offer the highest rates. Banks which hold the lead for a while, like HSBC Direct and OneUnited, eventually fall to more competitive rates. I expect DollarSavingsDirect, which has offered the highest rates recently, will eventually fall to the middle of the pack. Chasing the highest rate is a time-consuming, frustrating philosophy.
Email this article
Print this article
