Online vs. brick-and-mortar, for the timid
November 20, 2010 10:10 PM Subscribe
Help me get over my (unexpected) paranoia about online savings accounts.
I have a modest sum of money that I've wanted to use to start up a "travel fund" for myself, by putting it in a high-interest savings account. I've done a bit of the legwork in terms of picking one with a fairly good interest rate, and I already know that generally I wouldn't even come CLOSE to hitting the maximum per-month withdrawls from this account that most hit you with (usually no more than six per month - I'd be surprised if I have to hit this up six times per DECADE).
But something about setting up this transaction online, rather than being able to walk into a brick-and-mortar place and physically hand tangible money to an actual person, just wigs me out. I am suddenly afraid of vague and unclear "things going wrong," and it's been sitting in my main savings account with a crappy rate.
Can anyone reassure me that "yes, it's really okay and your money will not disappear"? Or point me towards a particular good bank? Or tell me "thus-and-such is your recourse if they get hacked and your money goes to fund wart cure research in Tibet" or something?
I have a modest sum of money that I've wanted to use to start up a "travel fund" for myself, by putting it in a high-interest savings account. I've done a bit of the legwork in terms of picking one with a fairly good interest rate, and I already know that generally I wouldn't even come CLOSE to hitting the maximum per-month withdrawls from this account that most hit you with (usually no more than six per month - I'd be surprised if I have to hit this up six times per DECADE).
But something about setting up this transaction online, rather than being able to walk into a brick-and-mortar place and physically hand tangible money to an actual person, just wigs me out. I am suddenly afraid of vague and unclear "things going wrong," and it's been sitting in my main savings account with a crappy rate.
Can anyone reassure me that "yes, it's really okay and your money will not disappear"? Or point me towards a particular good bank? Or tell me "thus-and-such is your recourse if they get hacked and your money goes to fund wart cure research in Tibet" or something?
It's hard to imagine a brick-and-mortar bank nowadays that doesn't do operations on the Internet. And once you hand that money over to a teller at a brick-and-mortar bank, it just becomes numbers in a system like any online deposit would. So the same theoretical internet bank thieves that would raid your online savings account would be just as likely to raid an offline savings account. Furthermore, as long as you use an FDIC member bank, your deposits of up to $200,000 are guaranteed.
In short, I can't think of many things that are safer than online banking -- as long as you practice safe habits like not clicking on links in strange emails from scammers pretending to be your bank, etc.
And, this page at the Get Rich Slowly blog is probably the best resource for comparing online savings accounts.
posted by ctab at 10:27 PM on November 20, 2010
In short, I can't think of many things that are safer than online banking -- as long as you practice safe habits like not clicking on links in strange emails from scammers pretending to be your bank, etc.
And, this page at the Get Rich Slowly blog is probably the best resource for comparing online savings accounts.
posted by ctab at 10:27 PM on November 20, 2010
Best answer: Well I've had a savings account with ING Direct since 2005 and it's been the easiest bank account ever. I have direct deposit from my pay check, and they let you set up multiple accounts if you like. So I have my 'emergency' fund and my 'travel' fund. Having my savings account somewhat separated from my checking is also good for stopping impulse buys (the accounts are connected but it takes about 3 business days for transfers to complete).
Granted these days "high-interest" is 1.10% but that seems pretty standard.
Oh and at least ING Direct (and I'm pretty sure all the others) are FDIC insured just like a 'real' bank. So if your money goes poof, or if they go under, you're covered.
posted by grapesaresour at 10:28 PM on November 20, 2010 [1 favorite]
Granted these days "high-interest" is 1.10% but that seems pretty standard.
Oh and at least ING Direct (and I'm pretty sure all the others) are FDIC insured just like a 'real' bank. So if your money goes poof, or if they go under, you're covered.
posted by grapesaresour at 10:28 PM on November 20, 2010 [1 favorite]
I've had an online savings account with ING for at least six years. I've always been able to get or move my money when I've needed it. Also, reputable online banks are FDIC-insured like brick and mortar banks. You'll be fine.
posted by ignignokt at 10:34 PM on November 20, 2010
posted by ignignokt at 10:34 PM on November 20, 2010
"Yes, it's really okay and your money will not disappear." Most of these high interest savings accounts are offered by large banks with international presences. I have an HSBC online savings account. When I signed up, they sent me an HSBC debit card, which works in HSBC ATMs worldwide. You get your statements electronically, because it saves them money which allows them to offer lower rates. These accounts are FDIC insured, meaning that you're covered even if the bank goes under, up to $250,000. People move millions of dollars around by electronic transfer all the time, and money doesn't just disappear. The electronic transfer process is the same thing as being paid by direct deposit. Truly, it's often the same thing as being paid by check, since so many businesses convert checks to electronic payments automatically.
Looking at the top savings account rates on Bankrate, I see Discover Bank (the same people who issue Discover cards), OneWest Bank (the successor of IndyMac with 80 some-odd branches in Southern California), HSBC (a gigantic international bank), ING (a large international bank), and Ally (a division of what used to be called GMAC, the General Motors loan people, and currently owned in large part by the US Government). All are major banks and are FDIC insured. Do banks screw up sometimes? Sure, but Bank of America, Wells Fargo, and Chase screw up too, and they pay a tiny sliver of a fair market rate for interest, so the choice is obvious.
Print a copy of your paperwork when you setup the account for your records, but really, it's no different from opening any bank account anywhere. Happy savings and happy future travels!
posted by zachlipton at 10:36 PM on November 20, 2010
Looking at the top savings account rates on Bankrate, I see Discover Bank (the same people who issue Discover cards), OneWest Bank (the successor of IndyMac with 80 some-odd branches in Southern California), HSBC (a gigantic international bank), ING (a large international bank), and Ally (a division of what used to be called GMAC, the General Motors loan people, and currently owned in large part by the US Government). All are major banks and are FDIC insured. Do banks screw up sometimes? Sure, but Bank of America, Wells Fargo, and Chase screw up too, and they pay a tiny sliver of a fair market rate for interest, so the choice is obvious.
Print a copy of your paperwork when you setup the account for your records, but really, it's no different from opening any bank account anywhere. Happy savings and happy future travels!
posted by zachlipton at 10:36 PM on November 20, 2010
I once opened an account with a bank in New Jersey online. Their site was a little crappy, but it worked well enough and they gave me back the money. So yeah, it'll be ok.
posted by wierdo at 11:04 PM on November 20, 2010
posted by wierdo at 11:04 PM on November 20, 2010
Well, just to drive home ctab's point: I vividly recall a spate of Kaupthing advertising in late 2008 and its demise soon afterwards. You might want to read up on Icesave and make sure that your bank is actually regulated by the FDIC or whatever other authorities apply.
Your money is as safe as your counterparty and/or its regulatory framework.
posted by themel at 2:24 AM on November 21, 2010 [1 favorite]
Your money is as safe as your counterparty and/or its regulatory framework.
posted by themel at 2:24 AM on November 21, 2010 [1 favorite]
Best answer: Open the account with a small amount of cash, make a few deposits and withdrawals. As you get more comfortable with how it works, start gradually increasing the deposits. You may feel safer opening two or three accounts to spread the money around.
posted by Lanark at 2:46 AM on November 21, 2010
posted by Lanark at 2:46 AM on November 21, 2010
Lanark makes a great suggestion: Open an account with just a small amount of cash until you feel more comfortable.
I have (had?) the exact same concern as you. The way I handled it was by diversifying across a few different banks. If you still aren't comfortable after making a small deposit, then use the two bank solution to spread your money out a bit. One of my personal favorites is Personal Savings by American Express. Straight forward, easy to transfer money, and they NEVER send me junk mail. And they've been holding steady at 1.30%, which is actually high these days.
In case someone hasn't already noted: The six transfer per month limit is a U.S. law...not the banks. Welcome to the post-9/11 world.
posted by Yunani at 5:42 AM on November 21, 2010
I have (had?) the exact same concern as you. The way I handled it was by diversifying across a few different banks. If you still aren't comfortable after making a small deposit, then use the two bank solution to spread your money out a bit. One of my personal favorites is Personal Savings by American Express. Straight forward, easy to transfer money, and they NEVER send me junk mail. And they've been holding steady at 1.30%, which is actually high these days.
In case someone hasn't already noted: The six transfer per month limit is a U.S. law...not the banks. Welcome to the post-9/11 world.
posted by Yunani at 5:42 AM on November 21, 2010
One thing to think about, a "high" interest rate savings account is paying about 1% now. Your local bank is probably paying close to 0%. How much is a "modest sum"? If it is $10,000, the difference in interest payed is roughly $100/year. Probably worth it to set up an account and move the money. If a "modest sum" is $1,000 I don't think it's worth the effort.
posted by cosmac at 6:49 AM on November 21, 2010
posted by cosmac at 6:49 AM on November 21, 2010
I can definitely point you to a good online bank. I use EverBank, and they have reasonably good rates, better than a 'real' bank. It is scary at first, but it's like using PayPal - after a few transactions you get the hang of it and it is fine. EverBank has real people available, on the phone, 24 hours a day.
I recently had my account compromised (I think from an insecure site) and EverBank staff walked me through the entire thing and were there during the whole ordeal whenever I had a tiny question. They were unfailingly polite and genuinely seemed like they wanted to provide me with great customer service. I will stay with them for as long as I can.
posted by amicamentis at 7:11 AM on November 21, 2010
I recently had my account compromised (I think from an insecure site) and EverBank staff walked me through the entire thing and were there during the whole ordeal whenever I had a tiny question. They were unfailingly polite and genuinely seemed like they wanted to provide me with great customer service. I will stay with them for as long as I can.
posted by amicamentis at 7:11 AM on November 21, 2010
Response by poster: So far so good, but I think I should clarify a couple things that I didn't earlier:
I do have a couple accounts with a traditional bank (Citibank) and do 99.9% of my banking online -- transfers, balance inquiries, etc. But I think the comfort level there is that if I had something go screwy online -- i.e., I set up a transfer between accounts, but the money got taken out of my savings but then never deposited into my checking -- I could go up the street and show them my records and ask "so what happened?" And I don't see how I could do that with ING Direct or Ally, say. On the other hand, Citibank's savings rate isn't as good as ING Direct or Ally's.
But I'm already feeling a bit better, and Lanark's idea to start small is a good one, to sort of "prove" that it's trustworthy.
posted by EmpressCallipygos at 7:39 AM on November 21, 2010
I do have a couple accounts with a traditional bank (Citibank) and do 99.9% of my banking online -- transfers, balance inquiries, etc. But I think the comfort level there is that if I had something go screwy online -- i.e., I set up a transfer between accounts, but the money got taken out of my savings but then never deposited into my checking -- I could go up the street and show them my records and ask "so what happened?" And I don't see how I could do that with ING Direct or Ally, say. On the other hand, Citibank's savings rate isn't as good as ING Direct or Ally's.
But I'm already feeling a bit better, and Lanark's idea to start small is a good one, to sort of "prove" that it's trustworthy.
posted by EmpressCallipygos at 7:39 AM on November 21, 2010
This doesn't directly answer your question, but ING Direct's phone customer service is AWESOME. Get this: the default option is putting you through to a PERSON; you may opt to press 1 (or whatever) to access their menu. What could be better! And my completely subjective opinion is that I am on hold for much less time than with other banks.
So, if something screwy happened with your money, you would probably be able to talk to a person sooner than with your brick-and-morter bank!
I'm a customer since, hmm, 2005 or so? Joint checking account with my boyfriend (also have a checking account at Bank of America), one savings account for general savings, one for emergencies, one for travel, one for grad school, and a CD for grad school. I LOVE ING Direct!
posted by teragram at 8:34 AM on November 21, 2010
So, if something screwy happened with your money, you would probably be able to talk to a person sooner than with your brick-and-morter bank!
I'm a customer since, hmm, 2005 or so? Joint checking account with my boyfriend (also have a checking account at Bank of America), one savings account for general savings, one for emergencies, one for travel, one for grad school, and a CD for grad school. I LOVE ING Direct!
posted by teragram at 8:34 AM on November 21, 2010
nthing that they have amazing customer service.
I have online savings accounts with HSBC and ING. ING wins hands down. I have never once been frustrated by ING's service and unlike HSBC, no one ever reads off a script.
posted by special-k at 10:37 AM on November 21, 2010
I have online savings accounts with HSBC and ING. ING wins hands down. I have never once been frustrated by ING's service and unlike HSBC, no one ever reads off a script.
posted by special-k at 10:37 AM on November 21, 2010
I have both savings and checking accounts with Ally, and they are wonderful.
The 24 hours customer service is helpful and friendly, and I've yet to have any problems.
Good luck!
posted by bibliogrrl at 10:59 AM on November 21, 2010 [1 favorite]
The 24 hours customer service is helpful and friendly, and I've yet to have any problems.
Good luck!
posted by bibliogrrl at 10:59 AM on November 21, 2010 [1 favorite]
I use American Express savings, and they have wonderful customer service. I'm getting 1.30% which seems like peanuts, but I don't have to have direct deposit, no set number of withdrawals, and no charge to transfer money to my regular checking account.
posted by Ideefixe at 11:29 AM on November 21, 2010
posted by Ideefixe at 11:29 AM on November 21, 2010
The last time I walked down to the local branch of my megabank, the teller said "We can't handle that here, have you called customer service?" and pointed me to a phone sitting on a desk in the corner.
I wouldn't count on the local branch being terribly useful, if a problem comes up.
posted by xil at 1:27 PM on November 21, 2010
I wouldn't count on the local branch being terribly useful, if a problem comes up.
posted by xil at 1:27 PM on November 21, 2010
I don't have an account with ING but many, many of my friends do. They all say its a great place to do banking with.
posted by cowmix at 1:42 PM on November 21, 2010
posted by cowmix at 1:42 PM on November 21, 2010
Response by poster: Upon reflection, I think what I'm most afraid of is the initial setting-up-of-the-account. From what I've seen, ING only lets you do it via an online transfer -- and I'm just afraid of some kind of weird limbo-state where Citibank withdraws the funds from my account, but ING says, "...we...never got it, sorry." When it comes to other online stuff, I'm fine, but it's the initial transfer I'd rather have - wanting to be looking someone in the eye when I give them my cash and say "hang on to this for me."
Those of you who've talked about ING -- anything you can say to reassure me about doing the initial setup online?
posted by EmpressCallipygos at 4:23 AM on November 22, 2010
Those of you who've talked about ING -- anything you can say to reassure me about doing the initial setup online?
posted by EmpressCallipygos at 4:23 AM on November 22, 2010
Well, I think the initial transfer can be $1. So if it is lost, fine.
But that's probably not very helpful, you probably don't mean the literal initial transfer so much as the "large amount of money" transfer. You could move it in increments of 5% of the total amount you wish to move, so if something gets screwed up, you stop?
posted by teragram at 6:09 AM on November 22, 2010
But that's probably not very helpful, you probably don't mean the literal initial transfer so much as the "large amount of money" transfer. You could move it in increments of 5% of the total amount you wish to move, so if something gets screwed up, you stop?
posted by teragram at 6:09 AM on November 22, 2010
Hey, you don't have to do the initial setup online! ING has a bricks and mortar location in our fair city. Emailing you the address.
posted by SaharaRose at 10:45 AM on November 24, 2010
posted by SaharaRose at 10:45 AM on November 24, 2010
This thread is closed to new comments.
Is it possible to do it with a company you already have a relationship with, probably a credit card company? Amex just sent me an offer for a high-interest savings account, and I'm considering it because it feels a little less sketch in that they're already linked in to my money management radar.
posted by charmcityblues at 10:19 PM on November 20, 2010