Where To Invest Outside the Stock Market

Stock Market TickerI quit investing in the stock market.

OK, just kidding, I didn’t really quit. I haven’t changed my retirement contributions in anyway (though I feel foolish every time I see a contribution go through, followed by the stock market falling even further). I left my retirement contributions alone because my time horizon gives me the the benefit of time, the one certain cure for this economic malaise.

However, we have stopped contributing to our taxable brokerage accounts simply because of how violent the market has become. Check out the CBOE volatility indices:

  • VIX - S&P 500 Volatility Index
  • VXN - Nasdaq 100 Volatility Index
  • VXD - DJIA Volatility Index

The volatility indices show the market’s expectation for volatility over the next thirty days and as you can see on their charts, they’re at all time highs. That’s why we’re not putting in any more money, we are going to wait until things calm down before we add back in. (That account was for savings on items we need beyond the next five years)

So, without the stock market, the next question is where should we go with our savings?

Bolster The Emergency Fund

This is never a bad decision. With the economy the way it is, we should use any abundance we have left to start saving for potentially leaner months (or years) to come. If you listen to any experts, you might notice more and more are bolstering up their cash positions. As regular people, emergency funds (and CDs/High Yield Savings) are our cash positions and it’s never a bad idea to squirrel away a few nuts for the winter.

Pay Down Debt

If you have any debt, whether it’s a 6% mortgage or a 20% credit card, paying it down is a smart move. Some would say that you should invest your money and take advantage of the leverage, but I think that’s a little too risky given the volatility of the market. The rewards you will reap by getting rid of your debt will far outweigh the potential gains you’ll earn in our current market. I’m not saying that the money you put into the market will be lost, maybe we have hit the bottom and its on its way up, but by paying down debt you free yourself in a way a few extra dollars in stock gains simply won’t. Also, when you pay down a debt, that rate of return is guaranteed.

CDs & High Yield Savings Accounts

There’s nothing wrong with taking the 3-5% APY of a certificate of deposit (the best cd rates are hitting 5% APY) or a high yield savings account (the best high yield savings account rates are near 4% APY). I think there is a stigma against taking these “safe” gains because we have it in our heads that the stock market can yield returns of 10%. The reality is that the 10% metric is one that’s been overplayed and so ingrained that people are looking at the volatility in the market today and wondering how that figure could possible be correct. It’s not. The market may have yielded gains of 10% since the beginning of time but as all mutual funds state - “past returns are not indicative of future performance.”

One thing is certain though - a certificate of deposit or high yield savings account will get you that yield. The worst case is that you get your money back (bank failure). Unlike money market accounts, CDs and savings accounts are FDIC insured and you’re protected from loss.

Take the safe bet, it’s OK!

Invest In Yourself

Now is the perfect time to invest in yourself by taking some classes, buying some books, and otherwise augmenting your skills to make yourself a more attractive employee or prospective employee. Investing in yourself is one of the best things you can do with your money as knowledge is something that can stay with you for a very long time and there’s always something you can learn.

You don’t have to go as far as taking a class but if you’re in an industry where certifications, and the knowledge those certifications confirm, are important, go out and test for them. In certification heavy fields, many requisitions are filled by those certificates.

Invest In Money-Savers

It’s often said that replacing a ten year old refrigerator can yield significant cost savings (some figures claim $100-$200 of savings [1] [2]). If you have a ten year old refrigerator, consider taking your investment money and replacing it. Let’s say you buy a $2000 fridge and it saves you $100 a year in energy costs - that’s a 5% return on your investment. Since that 5% isn’t taxed, that’s the same as a 6.67% return in the stock market if you’re in the 25% marginal tax bracket. 6.67% return, a new fridge, and being nicer to the environment isn’t too shabby, is it?

There are plenty of other money-savers you can find both in and outside of your home.

Do you have any suggestions on where people can invest nowadays?

(Photo: cishore)

MoneyAisle: Banks Bidding On Your Money?

The New York Times had an article about MoneyAisle.com, a new website in which “banks bid in live auctions for your business.” The site offers to find you the best rates on Certificate of Deposits (CDs) and high yield savings accounts based on the amount you can deposit and your geographic area (state, zip), and the duration in the case of CDs.

Certificates of Deposit

For CDs, you enter in your deposit amount, CD duration, state of residence, and zip code (optional). Oddly enough, they can’t offer CDs in the District of Columbia, Georgia, Hawaii, Idaho, Maine, Mississippi, North Carolina, Ohio, Vermont, West Virginia, or Wyoming. Everyone else is available. There are also advanced options to remove or add excluded banks.

I entered a deposit amount of $1,000 for 12 months in the Great State of Maryland and watched as the screen showed 89 banks bidding in round one drop all the way down to 4 in round 2. By round 6 only 3 remained and by the 8th round only 2 were left. Those two clawed and fought until the 12st round when one bowed out. In total, 109 bids were submitted from 89 banks and the winner was…

UmbrellaBank.com! (They offered a 4.10% APY 12-month CD, which is worse than seven other banks on my list of best CD rates)

Never heard of you! :) But that’s OK, after the bidding screen the site shows you a wealth of information.This information includes their address, website, year founded, FDIC number (all banks are Member FDIC), total assets, number of branches, customer service contact information, and a brief description of the bank. UmbrellaBank is the internet banking division of New South Federal Savings Bank, a bank with one branch in Birmingham, AL.

I now have 29 minutes before the offer expires, but I’ll politely decline because ING Direct offers a 12-month 4.25% APY CD and I already have an account open there.

Increasing the deposit amount changes the offers? As you might expect, the more you offer to deposit, the better the rates. When I upped the deposit amount to $10,000, I was offered an E-LOAN CD at 4.35% APY but that’s in part because E-LOAN CD’s have a minimum deposit amount of $10,000. Increasing the deposit amount to $50,000 had no effect but I expected pumping it up to $100,000, which is Jumbo CD territory, would have an effect. It didn’t, E-LOAN still was the top offcer at 4.35% APY.

High Yield Savings Accounts

The high yield savings account bidding was more subdued with fewer banks (66) vying for your business with less fanfare. All you provided was how much you could deposit and your state of residence (zip optional) and the banked duked it out in the very same manner as with CDs. Remember one important distinction between savings accounts and CDs - savings account rates are variable, CDs are fixed. You could sign up for an awesome rate today and the bank could lower it tomorrow.

Results of the auction for a $10,000 deposit amount for the Great State of Maryland was a 3.63% APY rate from Community National Bank, a bank located in Morristown, TN. Much like the CD screen, all of the bank’s information from founding year to customer service contact information is made available. The offer is pretty good though as it tops many of the best online banks (current leader is FNBO Direct with a 3.50% APY high yield savings account now that WaMu is kaput).

Increasing the deposit amount changes the offers? I increased my deposit amount to $100,000 and Community National Bank’s rate increased to 3.80% APY (they still won though). I looked on their website to see why and it appears that their savings account offers tiered rates based on the account balance.

Live Auctions? Really?

You might be thinking that there’s a bank person happily bidding away behind the scenes but there isn’t, it’s probably a computer setup with auction rules and bidding rules marrying up the bids to give you the highest rate it can. All the site asks for is deposit amount, deposit duration, and your geographic location - there’s no need for human intervention. Of course, whether a person is involved is entirely irrelevant but it does play into the “suspense” aspect as the number of banks left to bid ticks down. Save me some time MoneyAisle and just give me the rates.

Closing Thoughts

The live auction bit is a little gimmicky but it is in the spirit of LendingTree (though far faster and without as many phone calls and emails!) and it does a fairly good job of identifying deals for the average consumer. I think the savvier saver who is up to date on rates can find a better deal on their own but this isn’t a bad place to start.

Best CD (Certificate of Deposit) Rates

Here is a list of the nationally available best CD rates, updated regularly. I looked at the best rates available for CDs of less than 18 months and listed the one with the highest rate. Typically the longer the term, the higher the rate, but for many online banks the best rates were for periods of shorter than 18 months. For simplicity’s sake, I put the cutoff at 18 months.

This list will be updated as rates change, I will try to keep it as up to date as possible.

Best CD Rates

Bank Effective Date CD Rate (APY) CD Term (Months) Minimum Deposit
Dime Direct 9/20/08 5.00% 6 $500
Corus Bank 10/2/08 4.65% 12 $10,000
Capital One Direct Banking 10/1/08 4.51% 18 $5,000
Virtual Bank 9/24/08 4.45% 12, 18 $10,000
E-LOAN 10/2/08 4.45% 18 $10,000
GMAC Bank 9/19/08 4.35% 12 $500
ING Direct
(2.75% online savings acct)
9/30/08 4.25% 12,18 $1
Wachovia (Wells Fargo) 9/24/08 4.15% 12 $1,000
HSBC Direct
(3.51% online savings acct)
10/3/08 4.05% 12, 18 $1,500
Citibank 9/30/08 4.00% 6 $500
HSBC Direct
(3.25% online savings acct)
10/3/08 4.00% 6 $1
National City 9/28/08 4.00% 18 $10,000
Countrywide Bank 10/3/08 3.90% 7, 12 $10,000
Bank of Internet
(3.40% online savings acct)
9/24/08 3.82% 12 $1,000
E*Trade Bank
(3.30% online savings acct)
10/7/08 3.55% 12 $1,000
FNBO Direct
(3.50% online savings acct)
9/25/08 3.35% 18 $500
WaMu (JPMorgan Chase) 10/7/08 3.00% 8, 12, 13 $1,000

FDIC Insurance: Each bank is FDIC insured up to $250,000 through the end of the year. You can confirm this by checking the FDIC’s Bank Find tool. The only bank on the list I hadn’t heard of was Dime Direct, they are owned by The Dime Svgs. Bank Of Williamsburgh (Cert #16012). Oh, and Bank of Internet is an FDIC insured bank in San Diego, CA - Cert #35546.

As a reference, the current Federal Funds target rate is 2.00% (New York Fed).

WaMu CD Rate Update: 5.00% APY, 12-Month CD

WaMu ATMUpdate: The 5.0% APY Online CD is no longer available.

A month or so ago, Washington Mutual (WaMu) offered a 5.00% APY 12-month CD, one of the best interest rates on a 12-month CD available (I wrote a post listing the best CD rates available, updated weekly). ING Direct’s 12-month CD is 4.00% APY and HSBC Direct’s 12-month CD is 3.70% APY, WaMu is offering a rate that’s a full point higher for the same term. (If you check Bankrate’s list of CDs, the national overnight average is 3.69% APY, WaMu’s CD isn’t even listed)

Right now I have some CDs at ING Direct because I laddered our emergency fund, but the rates are all in the 3%’s only recently have they gone up. The rates these days are far more competitive and I’ll be opening a WaMu account so I can take advantage of the one-two punch of a high yield checking/savings account combo and this 5.00% APY CD.

While I’m pretty sure you don’t need a checking/savings account to open a CD, I think it’d be easier to use their 3.75% APY checking account as a holding account. It certainly trumps my piddly 0.00% APY checking account for sure. Plus, having a checking account there costs nothing (except time) and it makes it easier for me to move things around if WaMu keeps things competitive.

Details of the offer:

  • 12-month and 13-month terms offer 5.00% APY.
  • Here is a detailed listing of their fees, though I don’t see anything about CDs.
  • The minimum to open a CD is $1,000.
  • An early withdrawal penalty applies, though I couldn’t find it. I’d bet it’s the standard 90-day interest lost.
  • The account is managed entirely online, you won’t be able to visit a branch to open one.

(Photo: thetruthabout)

WaMu Review: Free Checking & Online Savings Account

Washington MutualAt the request of a reader, and because I enjoy wrecking my attempts to simplify my personal finances, I just opened a Wamu Free Checking and Online Savings account, the only bank I didn’t have an account at on my list of high yield savings accounts. (I also did it because Nickel said it might be interesting to see an FDIC takeover from the inside, should that ever happen with WaMu (the media reports aren’t looking good though)).

Opening An Account

Why both the Free Checking and the Online Savings? You have to if you want to get the 3.75% APY rate, so I did. Both require only $1 to open. but the online savings account has a monthly maintenance fee if your daily balance falls under $300 (at any time). So if you can’t keep $300 in your online savings account, don’t open one because the $5 fee will eat away your savings (the online savings account is the one giving 3.75% APY). I take it back! Thanks to everyone who read the terms more closely than I did, it turns out the fee is waived when you open both accounts.

The process for opening is really quick and took about five minutes tops. One little gotcha (depending on what you consider a gotcha) is a checkbox on the personal information screen at the bottom where you can elect to buy checks or defer until later. I don’t plan on using the checks and I don’t know how much they cost, but by default that box is checked. (turns out the checks are free)

Opening Deposits, Confirming Account links: The whole confirming an account link and opening deposits was a little confusing. First, you need to wait for WaMu to make two small deposits to your linked account - that takes a couple days. Then, after you log in and enter in the small amounts, they send you an email confirming the account link up. Ok, so far so good, but then you need to wait a few more days as they transfer the opening deposit amounts. That takes a few more days. It isn’t until after that opening deposit can you transfer in more funds. If you try, the system will tell you that the link hasn’t been established yet (rather than a more accurate statement, such as the opening deposit hasn’t been processed yet). The process took about two weeks to complete (including my own lag in entering the trial deposit information).

Account Summary

WaMu Account Summary SnapshotThe account summary screen is pretty standard stuff though it is more functional than many other online banks. The account summary screens of FNBO Direct and HSBC Direct, the two other banks with similar interest rates, were bare bones by comparison. The bank with a similar amount of functionality on their account summary screen is probably ING Direct, but their rates are a little farther back.

Account Security

WaMu doesn’t use security images, special image keyboards, or any of the other newer security related technologies. They rely on three security questions and an automated calling system to verify identity for certain transactions. I personally thought security images were useless, you do better by practicing safe banking (don’t click a link in an email, don’t log in to an untrusted computer, etc). Special keyboards were more hassle than they are worth (HSBC Direct has you enter a password and use their special keyboard). Three security questions is good enough (emigrant has twelve!). For some, all those security options offer a sense of safety, I personally think they’re annoying (however, I haven’t had an incident so maybe my tune will change if/when that ever happens).

Applying for the 5% APY CD

At the moment I’m still waiting for my deposits but I rolled through the CD opening process, it’s almost as easy as ING Direct (but with a much higher rate!). Simply click on the “Apply for a new account…” link in the sidebar on your Account Summary page and you’ll be taken to a list of accounts you can open. Click on Online CD and you should see the 5% APY offer for 12-month and 13-month CDs. You then go through the same application process as before, which was a bit of a hassle considering they have all this information already (they do verify your DOB and SSN with the information you’ve already provided, which seems like an unnecessary step). It’s no big deal though, once you get through you hit funding options and can open your CD.

Summary

The biggest draw about WaMu, besides their high interest rate, is that there are brick and mortar banks you can visit if you need to. They call them WaMu Financial Centers and you can use a store locator to find out if they have a branch near you. Unfortunately the closest financial center for me is all the way in New Jersey. You might have closer! :)

As for the rate, you can’t beat a 3.75% APY from a brand name bank. Their 5.00% APY CD is also a compelling offer but the whole liquidity and FDIC issue still sits in the back of my mind. I only have a few hundred bucks in there right now, easily under the FDIC limits, and you can’t let fear of the unknown affect your decisions. It’s 100% safe so take the interest while you can (which could be for a long time), right?

How To Prepare for Online Bank Access Failures

One of the biggest concerns people have about online banks is that, for many of them, you can only access them through the web. With these simple techniques, you can mitigate the severity of that risk and take advantage of their high yields without putting yourself in a bad situation.

Recent Online Bank Access Problems

First, is this even a valid concern? I think so.

HSBC’s high yield online bank system has run into a couple problems recently. First, in March, they forgot to renew their SSL certificate on their UK bank website. Then just this past August, HSBC had site outage issues again for HSBC Direct customers. I received two emails explaining that everything was OK, they were sorry things got all fouled up, and that they’d take responsibility for any fees or penalties that resulted from being unable to access my account. (Oh, and Nickel just told me about how they had catastrophic computer failures in 2005 too!)

Does that mean you should avoid HSBC? Not necessarily, their problems aren’t uniquely there’s. It could happen to any bank. Emigrant Direct had problems after a site redesign that left people unable to access their account for three or four days. That’s a long time if you need to withdraw money and it underscores one of the dangers of having all your money in a high yield savings account whose only access is through the web.

Here’s what you should do to bulletproof your high yield savings account strategy, so that if you lose access to an account, your entire financial network doesn’t come to a screeching (expensive) halt.

Use A Brick & Mortar Bank

Washington Mutual has a great rate, 3.75% APY, and physical locations you can go to. If all else fails and the internet implodes, you can visit a branch and still have access to your money. The fact that it’s a B&M bank doesn’t mean it’s any safer or that it’s any better than one without branches, but the mere fact is you can get to it in a pinch makes it more accessible. Physically going is your backup to online access in the event it fails.

Use One With Debit or ATM Access

E*Trade Bank gives you a debit card and it’s not the only one. The debit card gives you access to your funds without the need for the web. I’m not a fan of debit cards but they make sense as a backup plan if you really need to get to funds locked up in an online savings account. You can also use the debit cards at an ATM if you need to get a big chunk of it, though you probably will face ATM fees. Again, this is a backup to online access and I wouldn’t make it your primary means of fund access.

Link External Accounts Both Ways

Just because the bank’s website is down doesn’t mean the bank itself is down, so you can still initiate transfers out of the account from your own banks. When I open a new account, as I did recently with FNBO Direct, I always add external transfer links to a couple other banks. One thing I will always try to do is make sure the links are two-way, meaning I go to the other bank and create the same link.

This way I can transfer money between the accounts from either bank’s transfer system (when possible, some places won’t let you link out to non-checking accounts). If I needed my funds in HSBC Direct when the site was down, I could have gone to my ING Direct account and withdrawn the HSBC Direct funds that way.

Spread Assets Across Multiple Banks

The chances of a bank’s online system going down is pretty small, the chances of the online systems of two banks going down is microscopic. That’s why I’ve advocated spreading your savings across multiple online banks. Right now you have so many options (WaMu offers 3.75% APY, FNBO Direct and HSBC Direct offer 3.50% APY, etc.) that you don’t have to give up much interest to spread your funds around.

With one, or more, of those techniques, you drastically reduce the impact of any one bank’s website going down. You can’t personally do anything to prevent it from happening, but you can easily mitigate the severity.

Dollar Savings Direct: 3.75% APY Emigrant Clone

Dollar Savings Direct LogoSometime in the last month or so, (or longer, I have no idea honestly) a new high yield savings bank appeared with little fanfare or press: Dollar Savings Direct. It’s a division of Emigrant Bank, FDIC Certificate #12054, which is the same parent company of Emigrant Direct. On the face of it, it appears there’s little difference besides interest rate and minimums. Dollar Savings Direct has a higher APY at 3.75% but has a minimum balance of $1,000 but no fees (if your balance falls under the minimum, you earn only 1%). If you go to their respective homepages, they’re designed with nearly the same elements (layout is the same except on Dollar Savings you have a picture of Benjamin Franklin versus a patriotic top hat, the buttons are basically the same, color-schemes, etc).

What’s the deal? Well, I called Dollar Savings Direct and chatted with a very nice CSR who explained the whole story. She confirmed that there was no difference other than APY and minimums, that was interesting. She also explained that Dollar Savings Direct was merely Banco Fortuna, Emigrant Bank’s foray into the Spanish-speaking banking market, rebranded in English. I suppose Emigrant’s foray wasn’t as productive as they had hoped. If you visit the Banco Fortuna homepage, it redirects you to Dollar Savings Direct, confirming the CSR’s explanation.

So, from someone who didn’t know about Banco Fortuna (or that it was going away), it appeared as though Emigrant Bank was trying to get more deposits without having to pay their existing Emigrant Direct customers. It now appears that isn’t the case.

The last question I had for the CSR was whether I could transfer between the two accounts and she said no. They were two separate banks, despite having the same FDIC certificate, so to transfer funds you’d need a checking account intermediary.

FNBO DirectIf you need a high yield savings account, I’d go with FNBO Direct (3.50% APY w/o the fears of failure). WaMu was one recommendation but they were recently acquired by JPMorgan Chase after they failed.

I don’t see how Emigrant Bank can offer two different rates on essentially the same product for much longer.

7 Deadly Sins of Personal Finance: Skipping Emergency Funds

7 Deadly Sins of Personal FinanceThis is the first of a series of seven posts titled the 7 Deadly Sins of Personal Finance. In the next week, I’ll discuss seven mistakes I think we must avoid if we’re going to be successful managing our money. They’re things I’ve learned the last few years as both a personal finance blogger and manager of my own money in our ever changing world. Hopefully you can both take something away from these and give me your own take on the points I bring up.

Without further ado, the first deadly sin of personal finance is…

Not Having An Emergency Fund

An emergency fund is a fund that you set aside specifically to handle the unforeseen emergencies in your life. Some save as little as three months of expenses, others save as many as a year’s worth of expenses, we are going with six months plus adjustments for extenuating or mitigating circumstances. Currently our emergency fund is at six months with no adjustments because we have two incomes and that mitigates the risks brought on by a slowing economy. If we were single income, I might adjust that upward to seven or eight months. If we had kids, I’d adjust it to a full twelve. It’s better to be safe than sorry, you won’t lose much, especially in this economy, by having too much in your emergency fund.

Why is an emergency fund important? When you have a pot of money set aside for emergencies, you don’t need to rely on loans or credits to pay for the emergency. A prime example is a simple flat tire in your car. A flat tire can happen any day and, while not catastrophic, can cost you anywhere from a hundred to two hundred dollars. If you have an emergency fund, you can pay for the service without worrying about adding to your existing debt. With an emergency fund backing you up, you don’t have ride on your donut spare tire (very dangerous!) until your next paycheck.

A flat tire is easy, what about something bigger? Sticking with the car theme, let’s say a rock cracks your windshield when you’re driving to work. Windshield replacement is a little more expensive. With an emergency fund, you can quickly pay for a repair or replacement that can prevent further emergencies down the road. Driving with a cracked windshield is extremely dangerous and with an emergency fund you can take care of those problems quickly and before they develop into bigger problems.

How should you save? This is the easy part. The first step is to budget and figure out how much your monthly expenses are. If you don’t have any empirical data, here’s what I’d do. First, get a ballpark estimate of expenses by calculating what 75% of your pre-tax income is. Use that as your expenses numbers for the first month while you collect data, then replace it with the actuals once you have them.

The best place to save is to open a high yield savings account at an online bank and set up an automatic transfers each month from your checking account. Don’t put it in the stock market, don’t put it in any other investments, and don’t leave it in your checking account where it won’t accrue interest.

That’s it! And like that, you have an emergency fund. If you didn’t have one before and you’re now worried your fund is small, don’t worry. You have a plan in place now and it’s just a matter of time before the savings accumulate. In the event that you do experience an emergency before the fund can handle it, you’re no worse off now than you were before you started the fund. Handle it as you would’ve but keep following the plan.

One last bit of advice: Don’t spend that fund unless it’s on a true emergency. I’ve heard of stories where people have stumbled on a “great investment tip” and raid that fund (you should set up an opportunity fund for that). Don’t. The purpose of that fund is to make sure you don’t fall down a deep deep hole because of one simple financially focused event.

Thoughts?

ING Direct Review

Click here to start saving with ING DIRECT!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.

2007 J.D. Power Satisfaction Ratings in Finance

J.D. Power & Associates puts out annual customer satisfaction surveys in all types of industries from automobiles to finance to insurance to travel (and many more in between). When they published their annual scores for finance companies late last year, I wanted to write about it to see how some of the companies I work with performed against their peers.

Author’s Aside/Note: I know it’s a little late but this one had been sitting in the hopper and I felt that I should post it anyway.

The Finance category itself is broken up into retail banking, mortgage related, and credit card groups. At the time I first wrote this, I didn’t think the mortgage ratings were that interesting so I skipped over it. I chose to focus on the two services I used more - retail banking and credit cards. While I don’t discuss the mortgage ratings, go check out how well Countrywide Home Loans did (hint: not well). :)

Retail Banking

The Retail Banking scores were rated based on geographic region:

  • Mid Atlantic: Commerce Bank (Bancorp)
  • Midwest: Commerce Bank (Bancshares)
  • Southeast: Bancorpsouth Bank
  • Southwest: Wachovia Bank
  • West: Bank Of The West

If you happen to have a Commerce Bank nearby and are a current customer (and you have kids), they’re running a summer reading program where kids can earn $10 for reading ten books.

Online savings account darlings WaMu and HSBC made appearances on the list as well (I looked primarily at the Mid Atlantic listing because that’s where I live, I suspect the scores are similar for the same banks). WaMu scored four points in overall satisfaction (with the highest score of 5 points under the Fees category) and HSBC scored three points. This past weekend we went to a wedding in Williamsport, PA, home of the Little League World Series, and saw scores of Sovereign Bank branches. Sovereign Bank scored a mere two points overall (and across the board). It was also funny to see M&T Bank’s whole name written out, Manufacturers & Traders Bank; I use them for my business banking and they’ve kept me very “satisfied.”

Credit Cards

In the Credit Card Satisfaction category, American Express edged out Discover for the highest rating in overall satisfaction and received the JD Power & Associates award. I personally use the American Express Costco TrueEarnings card because because I shop often at Costco and because it gives me 3% cash back on gasoline purchases (we also use a Discover Open Road card but that card caps rewards). My wife used to like their AMEX Blue card but it was recently replaced with the Citi CashReturns card because of the unlimited 1% cashback (and it once offered a 5% cashback on everything for the first three months).

The three companies that led up the rear with two points (out of five) were Capital One, Bank of America, and HSBC. I’ve never had a credit card from any of those companies. It’s interesting that when you arrange them by Overall Satisfaction (by clicking the sort arrows), HSBC appears below Bank of America. Bank of America has 2 points in all five categories while HSBC has three points for Rewards Program yet still appears below BoA. There must be some granularity within those points not captured somewhere.

Brokers

Finally, the investment broker category was the last of the categories I was interested in and it was broken into Full Service Investment Firm Ratings and Online Investment Firm Ratings. Raymond James took home the award in the Full Service Category and Scottrade (barely edging out Vanguard) took top honors in the Online Investment Firm Ratings.

I thought it was interesting that the only other “discount” online broker that made the list (TradeKing, Zecco, and many others didn’t make the list) was E*Trade Financial and they scored only two points.

With it being August, the 2008 ratings should be coming out soon in a few months. It’ll be interesting to see how much shifting around occurs with some of these scores.

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