Several years ago, ING Direct made a name for themselves when they introduced the Orange Savings Account. At the time, the concept of an online savings account was as foreign as its owners, Dutch-owned ING Group, and many folks wondered if the offer was a scam. At the time, I know my credit union’s savings account APY was sub-1% and here ING was offering 2.60%! It was unheard of!

I had my reservations though. First, the company was Dutch so I didn’t know if that had any implications (it doesn’t). I was new to managing my own money so I was always wary of doing something stupid (I still do stupid things). Lastly, I didn’t want to jump too quickly even with the $25 referral bonus dangling out there. Fortunately, my comfort with all things online coupled with my inexperience pushed me towards opening an account at ING Direct and I’m glad I did.

Since then, many banks have begun offering high yield savings accounts and ING Direct has ceased to be one of the top interest rates out there… but it still has some merits and a warm place in my heart.

Account Signup

Signing up for an account takes mere minutes and is actually one of the strengths of ING Direct when ING first started. Back then, opening an account online was practically unheard of. You always had to visit a physical branch so that a teller or account representative could go through the screens themselves. Now, a quick account signup process is the norm.

Account Features

One feature that is noticeably absent from many other online banks is the ability to add new accounts as quickly. Once your first account is opened, subsequent accounts can be added in mere seconds. Everything managed through the same login, which recently benefited from a face lift, and it really does help you save more.

For example, opening new savings accounts are trivial and, given the ability to name them whatever you’d like, you can easily open an account for the purposes of a saving goal. If you have a big expense, such as a vacation, coming up in the future you can set up an account specifically for that. Once you set up an account, you can establish automatic transfers between all of your linked accounts (ING Direct accounts are automatically linked). So, you could set up a monthly transfer from your checking account to your ING Direct savings account and then intra-ING Direct transfer from your main ING Direct account to your vacation savings account. This transferring feature isn’t unique to ING Direct but the ability to add new accounts so easily is.

ING offers a CD laddering form that makes CD laddering a cinch. While the interest rates aren’t especially competitive, the 12 month CD is 3.40% APY and the 60 month CD is 4.00% APY (compared to FNBO Direct’s 3.50% APY high yield savings account), this feature is the only one of its kind I’ve seen available anywhere. When their CD rates become more competitive, I can see this form getting a lot more use.

Overall, I was very pleased with ING Direct. While their rates have lagged their competitors lately, I think the intuitive and friendly interface really puts new online banking customers at ease. I have accounts at Emigrant Direct and HSBC Direct and their banking screens look very antiseptic and austere. While you can’t judge a book by its cover, ING Direct does a great job putting the softer elements into its interface that puts someone at easy.

A reader emailed me, after reading my post about best online banks, asking whether Emigrant Direct should even belong on the list. She recommended her number one choice, FNBO Direct, because it crushes Emigrant’s 3% APY interest rate. I think I was always partial to Emigrant Direct because they’ve been around for so long, but, she had a point. There are plenty of banks on the north side of 3% and Emigrant doesn’t offer any particularly innovative features that would justify it being in the top five with that rate, so I sought to review her number one choice. (Another name that appeared a couple times in the comments and emails was Provident Direct, the online bank of Provident Bank).

Application Process

Last week, I opened an account at FNBO Direct, a process that took less than five minutes. There were all the obligatory personal information fields, a quick credit verification (where they ask three questions from your credit report), and my online savings account was “opened.” A few more screens later (login credentials, funding the account) and I was done.

One nice feature in the process, one that HSBC Direct also uses, was online bank account verification. You enter in your online access credentials and they try to login to verify you are who you say you are. While it worked at HSBC Direct, it didn’t at FNBO Direct and I had to wait for the two trial deposits. Those arrived the very next day (the ETA was 3 business days). I went back to the FNBO application, entered my two trial deposits, and my application was complete. Within an hour, FNBO sent me an email indicating the initial transfer was being initiated. The next day, I was told my account activated and I could log in.

Here’s where I ran into problems, all of my own doing. I tried to login and was prompted with two security questions - two questions I had never answered. Turns out that at the end of the application, on the page that said “Done,” there was an Activate button. That’s where I was supposed to setup all the security information, select the personal message, etc. After that brief three page process I was set up.

If you were like me and somehow missed that, you can always return to the application, view the confirmation page, and then hit the “Activate” button on that screen.

Account Features

The features of the FNBO Direct account are your standard options for a high yield online savings account. To the right I included a screenshot but it’s very plain looking - which is exactly what I like in a bank website. I want a bank website to be fast loading, simple to navigate, and FNBO delivers on both points. You won’t find a fancy CD laddering form like you can on ING Direct (they’re the only ones, as of this writing, that offer it) but I’ll take a fast loading site over a fancy form any day (ING loads fast too). Plus, the less time they put towards their website, while still giving you the basic functionality, the better. It means they can offer a higher yield.

In the screenshot you’ll see the standard Account Detail, Account Services, Transfer Funds, and BillPay buttons. They all lead to your standard screens with all the expected functionality. I won’t go into those.

Overall, FNBO Direct is as I expected it to be. A functional high yield savings account with a 3.50% APY yield with no minimum balance requirements. I’m going to try to link up other high yield savings accounts to this one, to expedite any transfers, but otherwise this matches up with every other bank.

A few years ago, the only high yield online savings account available was ING Direct. Their rates blew people’s minds. Until then, the only way to get that type of interest rate on an essentially 100% risk-free asset was to lock it up in a 60-month CD. Even today, check out the rates for CDs of your local bank and you’ll be hard pressed to find one under 60 months that comes close to beating the rates of high yield online savings accounts.

Now the landscape is slightly different (and more crowded). There are half a dozen reputable banks offering these high yield savings accounts and they differ by fractions of a percent. At the moment, FNBO Direct is offering 3.50% APY with no stated end and HSBC Direct is offering a 3.50% APY good until at least September 15th. E*Trade isn’t far behind with a 3.30% APY, ING Direct sports a 3.00% and Washington Mutual boomerangs in with a 3.75% APY. You would do far better with your funds in any one of those banks than in the one you’re in now (probably).

On Interest Rates

Despite what you may think, interest rate isn’t everything when you’re trying to decide which online bank to put your deposits. It’s important, but there are many other features to consider. Even if you had the FDIC limit available to save in an account, the difference in interest earned between FNBO Direct’s & HSBC Direct’s 3.50% APY and ING Direct’s 3.00% APY is $500 before taxes. If you’re in the 25% tax bracket, that’s a take home difference of $375. You might say - that’s nearly $400, that’s a big difference! Remember that’s on a balance of $100,000… if you’re putting in $10,000, that’s only a difference of $37.50. If you’re talking $5,000, that’s a difference … you get the idea.

Interest rates change frequently. Between when I opened my E*Trade account and when I funded it, the rate fell from 3.50% APY to 3.15% APY (it’s now that 3.30%). Unlike CDs, there is no guarantee on the rates. You get whatever the bank feels like offering. So if you pick a bank based on rate alone, you could be making a mistake because those rates chance quickly.

Don’t decide on rate alone, it’s the features of the account that are important. Those features will help you in save more.

Feature Set

Linking High Yield Savings Accounts:
I was surprised when HSBC Direct let me link my HSBC Direct account with my ING Direct account. The ability to transfer from one high yield savings accounts to another is great, it cuts your transfer time in half (the alternative is to transfer to an intermediary checking account). I was surprised because many other accounts don’t let you do that. You can’t log into an ING Direct account and link it to the HSBC (or E*Trade or Emigrant Direct) account because they require a paper check. In fact, to my knowledge, only HSBC Direct (of the major banks) lets you link up to other online savings accounts (I could be wrong).

Corollary: Linking to Brokerage, Checking Accounts:
The one advantage E*Trade has over the competition is that you can link your savings account with a brokerage account. This allows you to transfer funds instantly between the two, so you’re earning the best possible rate on your cash. E*Trade also has a checking account and that can be linked to the savings account, maximizes the rate.

Washington Mutual, E*Trade, and ING Direct all offer a high yield checking account, in addition to the savings account. You can get checks, an ATM card, and access to your funds whenever you need them. WaMu has the added bonus of brick and mortar branches, if you have one nearby then that’s a definite plus.

Create Additional Accounts Easily:
ING Direct makes it absolutely painless to create sub-accounts. Each of these accounts have their own account number, but they are managed through one customer login. This is valuable because it helps you save more money. If you are able to create a new account for each of your savings goals, you’re more likely to actually save. Planning a cruise over the holidays this year? Open the Carnival Imagination 2008 account, schedule monthly transfers, and start packing your bags. You’re more likely to save because: 1) you’ve made it automatic with monthly transfers, 2) you can see the account grow, rather than seeing some master account grow and “remembering” some of it is earmarked for the trip (or your children’s education, or a new house, etc.)

ING isn’t the only bank that offers this, HSBC does too (Emigrant Direct does not), but they are definitely the easiest.

Promotions:
This is the least important “feature” about a bank. ING Direct has had a standing referral bonus of $25 for new accounts. Click a referral link, deposit more than $250, and you’ll receive $25. The referrer earns $10. HSBC used to run a $50 promotion that expired several months ago but, to my knowledge, no one else has ever run that type of promotion.

The Best Online Bank

The best online bank is the one that has the features you need. If you have savings goals and are having a difficult time achieving them, perhaps ING Direct is your best option. If you don’t need the help and want the highest rate, HSBC Direct has the highest rate.

If you want the flexibility of checking, ING just released their checking program while WaMu and E*Trade have had checking products for quite some time. If you have a checking account at the same bank you have the high yield savings, you can transfer between the two instantaneously (plus the interest rates on the checking accounts are far superior to standard rates).

So don’t pick a bank on interest rate alone, pick the one that offers the types of services that will help you reach your goals.

(Photo by Hummy)

E*Trade just sent out an email notifying us that the interest rate will be increasing from 3.15% APY to 3.30% APY, effective tomorrow, July 2nd. This takes their interest rate from 6x the national average to 8x the national average. This is a better rate than both ING Direct ($25 sign-up referral bonus) and Emigrant Direct but less than the 3.50% APY available from HSBC Direct, but that rate is only guaranteed through September 15th.

There’s no mention of how long this rate will be active but E*Trade is on an upward rate trend, as are other banks, and there’s no indication this is a promotional offer.

I don’t know if TreasuryDirect changed their policy or if EmigrantDirect changed theirs, but my attempt to purchase Series I Bonds and take advantage of the potentially awesome new rates was foiled! I received the following message from TreasuryDirect:

Dear JIM,

We’re sorry, but your purchase request IAAAB was canceled. While trying to collect payment from your bank, they returned our debit. Please check the Investor InBox section of your TreasuryDirect account for more detailed information.

Thank you for using TreasuryDirect.

It was entirely my fault. It wasn’t Emigrant Direct’s fault, or the Treasury Direct’s fault, it was Jim Direct’s fault. The only linked account I had was from an Emigrant Direct savings account and I assumed it would still be valid to make another purchase. I had purchased $100 in Series I bonds a while back just to play with the system and assumed everything was still good. Unfortunately, TreasuryDirect now debits the linked account rather than a regular ACH transfer (I think) and so a savings account doesn’t debit! (The other explanation was that there were insufficient funds, but I confirmed I had enough)

So the only solution is to head over to the bank and buy a paper Series I Bond so I can still take advantage of the upcoming favorable rates. I suspect it should be pretty easy, the government always makes it easy for you to give them your money :).

This is comprehensive review of the best online banks, specifically those with a high interest savings account available (high interest refers to the interest rate and all these banks have above a 3.0% APY interest rate). FNBO Direct, HSBC Direct, ING Direct, E*Trade, WaMu, and Emigrant Direct are looked at.

There are dozens and dozens of online banks offering all manner of savings and checking accounts. Some banks you’ve heard of before and some you’ve never heard of. Makes you wonder what the best online bank is huh? Before you ever deal with any bank of any kind, online or in person, be sure to double check that they have FDIC insurance (lookup) and that they’re a legitimate bank. That being said, all of the banks on this list are legitimate, have FDIC insurance, and have been in the business of banking for a few years. These aren’t no-names but their names may not be familiar to you (if you read a lot of personal finance, all of these names will be recognizable) and they’re all banks that I’ve dealt with personally or talked extensively with someone who has dealt with them personally.

Best Bank: FNBO Direct - 3.50% APY!

At the behest of a reader, I opened an account at FNBO Direct and wrote up a review of FNBO Direct. With a compelling 3.50% APY savings account offer, FNBO Direct stands better than HSBC because they have no end date for the promotional offer. Much like the other banks, there’s no minimum deposit to get this rate. If FNBO doesn’t sound familiar, it stands for the First National Bank of Omaha (FDIC Cert #5452) and was established in 1857 and has been FDIC insured since January 1, 1934 (when FDIC started). This bank has been in business much longer than many of the banks on this list.

#1b. E*Trade

E*Trade, known more as a discount broker than as a bank, takes the number one-A spot in my list of top online savings banks because you can link your savings account to a brokerage account and instantly transfer funds between the two. If you’re an impulsive gambler and like to plow money into penny stocks, you don’t want an E*Trade online savings account or its 3.30% APY interest rate because you’ll probably turn it into a -100% interest rate account. That being said, the appeal of this account for me is the speed and convenience of being able to transfer between the two without having to wait several days for an ACH transfer. If you have more than $5k and fancy a checking account, they have a checking account too.

#2. ING Direct

For the longest time, ING Direct did not have the best of rates. While other banks were up in the 5’s, they were in the 4’s. When others were in the 4’s, they were in the 3’s. Now that the others are in the 3’s, it’s glad to see ING Direct is still in the 3’s. I’m a fan of ING Direct because of how easy they make everything. Their interface is intuitive, fast, and I can easily refer other people to take advantage of their $25 new account bonus. I can commit funds to a CD in minutes and then manage it all in one place. To be completely frank, interest rate is an important factor but not the most important factor when the rates differ by fifty basis points (half a percent on $1,000 is a mere $5, plus it’s taxed!), it’s about reliability and consistency and they’ve delivered on both.

ING Direct also has a promotion where you can get $25 if you open a new account and deposit $250, the only caveat is that an existing member has to refer you. You can visit this ING Direct $25 new account promotion referral page for a list of referral links. The referrer gets $10 for referring you.

#3. HSBC Direct

How could I put HSBC Direct, the online bank rated 2006 Best Overall Online Bank by Kiplinger’s Personal Finance, at third? Sometimes that first mover advantage is difficult to overcome. Many banks appeared before HSBC but none had HSBC’s brand name power and once you have a high yield savings account, is there a real need to get another one? I actually do not have an HSBC account but many of I recently opened an HSBC Direct account and agree with my friends who have said it’s definitely one of the best in terms of features (and rates, they’ve been consistently one of the highest interest rates since their inception). The minimum amount you need to deposit to get the best rate is $1, which is the same as some other banks but E*Trade (checking) requires at least $5,000; so a minimum of $1 is not true across the board.

#4. Washington Mutual (WaMu)

If you are not comfortable with a completely online experience and there are no HSBCs near you, you might want to consider Washington Mutual and their Free Checking account as an option. You can link up your regular Wamu accounts, get free checks for life, cash-back on your debit card purchases, no monthly account fees, and the awesomely powerful 3.75% APY interest rate on a checking account. For me, I already have a checking account and the desire to have such a flexible and lucrative checking account isn’t enough for me to open up another one (plus there isn’t a branch near me, on the biggest advantages of a B&M type place).

#5. Emigrant Direct

Emigrant Direct probably has the least amount of branding power compared to the rest but they were the second online bank account I opened because they had competitive rates. Their CD buying process is also quite simple, not as simple as ING Direct, but their online account system looks and acts a little dated. One knock against them, which was the big bonus for ING Direct, was their reliability. When they revamped their system, it went down for a few days. That’s not what you want in a bank where the only access is online access.

There you have it, my five top online banks (though one was brokerage first and several of them have brick & mortar presences) according to my experience with them or my research of them. Please feel free to share your opinion and vote for which of these banks (or ones I left off the list) you think makes for the best online bank. (If you’re interested, here is more discussion about the best interest rate banks.)

5.05% APY is a pretty healthy yield and one of the highest in the nation now that the Fed has been pulling interested rates down (much to the chagrin of overseas travelers and those shorting gold) so last week I opened up an E*Trade Complete Savings account yielding exactly that. To open an account, just go to this application page and submit your information. Now, here are a few tips after you open the account as I found the start-up and activation process to be a little confusing (it was the first time I called up the help services of any bank to assist me with opening an account, if that’s any indication).

Incidentally, E*Trade Bank is FDIC insured and has been since June 23, 1955; much longer than I had thought they’d been.

Online Access

After you create the account, you can log into E*Trade but the account won’t immediately appear. At first I chalked it up to the account not being established yet; but after I received all the account documentation in the mail and didn’t see the Complete Savings account listed in my Accounts Complete View, I was surprised. Apparently what you need to do is click on the “Banking & Credit Cards” tab located at the top of your screen and then look for an “Apply for access” link. I thought I already applied! Anyway, there will be three boxes that appear for you to enter in your social security number, your account number, and your zip code. After that, you new account will appear. I’m not sure why this is necessary or why none of the introductory material had a “Get Started” section to explain this. Another way to reach this is to find the link that says “Don’t see one of your accounts?,” that’ll bring you to the same page.

Adding External Accounts

When you first open your account you need to add an external funding account, I added my Bank of America account since everything funnels through there. Well, the initial $100 was withdrawn but I can’t immediately transfer money yet - I have to verify it! To do that, look for the “External Account Added” in the “Alerts” section to the right of your screen, click that and then click on “Verify your external account now” in the window that pops up. That will take you to a page that details the external account, click on the Verify link next to the “Verified on:” text label. (There are about a million ways to get to the verification page, so don’t fret).

Now there are two ways to verify an account, username and login or two small deposits. I’m willing to wait and go the two deposits route even though they claim that “Your external account login information is maintained within a secured session and will not be stored to perform this verification.” That’s okay, waiting 2-3 business days for two small deposits is acceptable.

What I don’t understand is why I need to verify an account that already has been debited in the first place. My Bank of America account was used to fund this account so why would I need to verify it one more time? The only time this makes sense is if I were to open up a bank account in someone else’s name (knowing all their information), gave it an initial deposit, but didn’t want that person to have access to my bank. Is that scenario common? I wouldn’t think so. I am pretty sure every other bank I’ve worked with has automatically added the initial funding link without having to go through this process.

Fast Help Desk

I did have to call 1-800-ETRADE-1 (1-800-387-2331) to find this and it took me about two minutes to reach a representative (it was also 8AM this morning), very quick considering I didn’t feverishly hit “0″ in an attempt to reach a representative ASAP. They were very helpful and we resolved this issue, probably something they hear all the time, in about a minute. Unfortunately, I have no basis for comparison because I’ve never had to call ING Direct or Emigrant Direct for anything.

There are five finance related accounts in the personal finance world that I think every single person must have and they should get it as soon as possible. They run the gamut of the obvious, an accessible checking account, to the not so obvious, a high yield savings account (as surprising as it sounds, this is not obvious to most people because they are amazed when I tell them you can get 5% from a regular savings account). So, please enjoy this list of five accounts you absolutely must have and three that you absolutely must avoid.

These Five Accounts You Absolutely Must Have

1. High Yield Online Savings Account
Number one definite must have account is a high yield savings account getting you at least 4%, at the very very least. If you assume inflation at around 3%, anything less and you’re losing money. Take your pick of ING Direct, HSBC, Emigrant Direct, Citi, and you’ll get over 4%. My recommendation is that if you have a Citi or an HSBC bank account, go with one of them because your transfers will be instant between accounts. If you don’t, I use Emigrant Direct but both they and HSBC offer 5.05% APY.

2. Savings and/or Checking Account at a Credit Union
A relationship with a credit union is an absolute must for anyone looking to ever get a loan for anything. The typical rate for a 5 year loan on a new car from Tower Federal Credit Union (some local credit union in my area but I do not have an account there) is 5.74% (currently they have a promotion where the rate is only 5.34%) and for a used car it’s 6.19%. Compare that with a Bank of America rate of 5.89% for new and 6.54% for used. While the difference isn’t all that great, for the typical rates, why pay more than you have to? Also, the interest rates on your savings and checking accounts will typically be higher as well.

Why are the rates low on loans and higher on savings accounts? It’s because the basic premise of a credit union is that it’s there to pool the collective resources of its members and work for its members. It’s a not-for-profit so it’s not looking to earn money off you, at least as its primary focus, and so that’s why the rates are always so much more favorable than a regular bank. Whereas a bank is FDIC insured, credit unions are covered by the National Credit Union Share Insurance Fund (NCUSI) administered by the National Credit Union Administration, so you’ll see NCUA-insured on the placards (also up to $100k).

3. Retirement Account (Roth IRA, 401k or equivalent)
If you have a job and your employer offers a 401k, with or without a match, you should be participating in your 401k (or an equivalent depending on your employer). If you can, budget-wise and income-restriction-wise, definitely participate in the Roth IRA as well. Just as how squirrels save away nuts for the winter, you should be doing the same through a tax-advantaged retirement account. The 401k will let you save pre-tax money but it will be taxed when you take payments in retirement. A Roth IRA will let you save money post-tax but it won’t be taxed when you take payments in retirement. It’s important to use both so that your retirement assets are tax diversified.

4. Accessible Checking Account (Ubiquitous ATMs)
I think that most checking accounts are pretty much the same and it really doesn’t matter which bank you go to, with several exceptions and the biggest one is the location of its branches and ATMs. I chose to do my main banking with Bank of America because they have a branch near my home and my work place plus they have ATMs everywhere. In fact, BoA has 16,000 ATMs and 5,700 branches, so that I can probably find one anywhere I go and I can avoid those stupid ATM fees everyone hates.

5. Credit Card Account
If for nothing else other than to have a safety blanket, having a credit card builds credit and will pay dividends down the road. You can leave it out of your wallet or purse and it’s still building you some solid credit because it’s lengthening your credit history. Don’t ever carry a balance either.

These Four Accounts You Absolutely Must Avoid

1. Store Branded Credit Card Accounts
We’re talking department store credit cards, the ones where they offer you 10% off today’s purchase if you’re approved, and you should avoid these because the APR on these babies are usually pretty high and the payoff, the 10% off, is usually not worth it. If you want free cash for credit cards, here’s a list of credit cards with sign-up promotional offers that you can take to the bank and spend the rest at the store.

2. Finance Accounts From a Dealer, Store, or Anywhere That Isn’t A Reputable Bank
Buying a car? Buying a TV? Avoid the financing from the auto dealer or the electronics store unless it’s a 0% APY for a year, or something great like that. Also be aware that if you do get that offer, it’s likely that once it ends, all of the interest that was deferred during that period will come due (read about how 0% financing offers work). It’s a very insidious practice but one that’s well documented but not well explained to borrowers. If you need a loan, try to get it from your bank or credit union either before you buy or immediately afterwards. If you can get some sort of discount or promotional offer for using their financing, you can always use their financing and then secure your own afterwards.

3. More Than One Checking or Savings Account
This one isn’t that big of a deal but you really should consolidate your banking for a few reasons. First, it’s always better to simplify your life and deal with as few things as necessary. There’s no sense trying figure out which account has what because you’ll start to go crazy. Secondly, you want to consolidate balances so that they’re higher and you can avoid any low balance fees if your bank has them. Lastly, the fewer accounts you have the fewer opportunities there are for your information to be compromised, either by the bank or by you on accident. Simplification is crucial.

4. Reward-less Credit Card Accounts
Your credit card is charging each merchant you deal with somewhere in the neighborhood of 2-3% for each transaction, there’s no reason why you shouldn’t get kicked back a little piece of that. It takes about thirty seconds to apply for a card that will give you 1% cashback on all of your purchases, which is an automatic 1% discount on everything you buy. I use a variety of cards but I like my Citi mtvU card for 5% cashback at restaurants, movies, and bookstores; a Discover Open Road card for 5% cashback on gas purchases; and an American Express Costco TrueEarnings card for 1% cashback everything else with no annual limit.

I’ve recently been getting a lot of emails asking what I recommend for folks looking to open an online savings account and, having not kept up to date with the APYs, I didn’t really have much advice other than that they should take advantage of the ING Direct new account referral bonus and then select either Emigrant Direct or HSBC for their main online savings account. (which actually turns out to be good advice)

Until recently, there were a couple folks in the high yield category, including Citi e-Savings, Emigrant Direct, and HSBC. However, just a few days ago the Citi e-Savings dropped their yield down to 4.75% so they are no longer in line with the leaders of the back (I define inline as within a tenth of a percent or so). Unfortunately, ING Direct hasn’t tried to keep up and Emigrant and HSBC are the current leaders in the clubhouse.

Now, HSBC recently announced that they’d offer a promotional interest rate of 6% for new funds until the end of April, giving you a little less than three months of interest earnings - not enough incentive for folks with existing accounts (you lose yield by moving the funds around because of the lag) but it’s a good reason for people without accounts to open one and put their funds there (assuming it will fall back to the 5.05%).

So, in a nutshell, here are where the major (in my mind) online savings accounts stand in terms of interest yield:

• HSBC: 6% until 4/30, then 5.05% presumably. (if I didn’t have an account, I’d open it here)
• Emigrant Direct: 5.05%
• Citi e-Savings: 4.75% - One plus of this account is that you can link regular Citi accounts to it and transfer money very quickly.
• Virtual Bank: 4.6%
• ING Direct: 4.5%

ING Direct & Virtual Bank Referral Bonuses:
If you know someone who has an existing ING Direct or Virtual Bank account (I have both, please email me if you want a referral or go to the self-serve ING Direct $25 Promotion page), they can send you a new account referral and you can earn money for signing up. For ING, you’ll need to deposit $250 and you can get a quick $25 (the referrer gets $10). For Virtual Bank, I’m not sure what the minimum is but you get $20 for signing up (so does the referrer). Once you have an account, you can refer up to 25 people for ING and 50 for Virtual Bank.

Caveats to Online Savings Accounts:
With the high yields come some inconveniences that are consistent with savings accounts but that you may not be familiar with because of how you use savings accounts. For example, there is an FDIC limit of six transfers to and from any one particular savings account (reasons are in the linked post) and there is generally a nearly one week lag for moving funds. The one week lag is because the savings account generally doesn’t having an associated checking account, like you would normally, and so in order to access the funds you’d need to ACH it to another account - that ACH process can take five business days. A workaround is if you have a Citi e-Savings account because you can link it to a regular checking account and the transfer would be internal to Citi and immediate. So, with the higher rates, you have to suffer some inconveniences - it’s not as bad as a certificate of deposit though!

If you want to stay current, I recommend visiting Bank Deals, they do a great job getting the latest and greatest info out to you and they also do a weekly summary that has this sort of information, but in greater detail, which is linked to from their sidebar under Weekly Bank Deals Summary.

Since I haven’t been home for the last week, I haven’t yet signed into the new Emigrant Direct until today and the process was pretty painless. All you need is that mailer they sent out maybe three weeks ago with your “Secure 10 Digit Access Code” and your memory (birthday, social security, login username). If you never received your secure 10 digit access code, call up Customer Service at 1-800-836-1997, they’re open seven days a week from 8am until 11:30pm ET.

The next part gets a little tricky, you will have to provide answers to some set questions and then create another set of questions and answers that will act as secondary security protections for your account. For example, one of the preset questions is what was the last school you attended and you must supply the answer. Personally, ten questions is a little ridiculous but it’s all in the name of security… Finally, you have to agree to three disclosures (I did and I’ll review them later, hopefully I won’t see something new that I don’t like) and then you’re done!

About the new Emigrant Direct, it looks a lot slicker to be honest… I took a perfunctory look at it and you can download the data into Quicken, MS Money and as a CSV (Excel) which is definitely an improvement I think. I personally don’t use either program so I don’t remember if the old Emigrant had that functionality. Otherwise, there doesn’t appear to have much functionality improvements, just interface ones, but I’ll take the new look over the old look any day!

If there are big things I’ve missed, please do share!