The news broke yesterday that Capital One would be the happy recipient of the keys to a brand new ING Direct. Everyone knew that ING Direct was up for sale, the ING Groep was required to sell it, but no one was sure who would be the happy new owner. The acquisition puts Capital One in the lead as the largest online bank, mostly because ING Direct was absolutely enormous. The final price? Around $9 billion, in a mix of $6.2 billion cash and $2.8 billion stock.

We speculated as to what would happen when someone purchased ING Direct, though we were using Ally Bank as the acquirer (those were the rumors at the time). Since it was a friendly acquisition, rather than an FDIC chaperoned affair, mostly nothing would happen.

I’m eager to see what happens because I have an online account with both banks.

ING Direct has started offering Orange4Kids, a kid’s version of their online savings account. It’s pretty much everything you like about the Orange Savings Account except with training wheels. For example, it’s FDIC insured, has no fees, no minimum balance requirements, earns 1.00% APY interest (at the moment), and you can login with a customer number and PIN.

Where are the training wheels? Well, kids can only check balances. They can’t move money around on their own, an adult has to sign in with a separate customer number in order to make transfers. The training wheels don’t come off until the kid turns 18, at which point it converts to a regular Orange Savings Account.

My reaction to this is like my reaction to when I heard about playing Monopoly using debit cards instead of the funny money. It’s a little too much “adult” interjected into a child’s life. It’s hard enough managing your money as an adult after it’s been abstracted away into numbers on a screen, imagine how hard it is to properly teach kids about it. That said, I don’t have any kids so I’m not really too wise about that stuff.

I think it’s great to instill the importance of savings, I’m just not sure a kid’s savings account is the best way to do it. Now, if they went to route of Affinity Bank’s Kids Only Savings account (minus the bank failure), that might get me interested.

I’ve long been a customer and fan of ING Direct. They were one of the first online banks that offered a high yield savings rate worth worth talking about and they coupled it with the most functional website I’d ever seen. They set the standard for online banking. They were offering you the capability to open up CDs with just a few clicks back when every other bank required you to go into the branch and put pen to paper.

They also started offering something that I think will also become standard – the ability to create a special password that only gives read access to your account. One of the knocks against using a personal finance tools, like Mint.com, is that you have to give them completely access to your account. Those services all have top notch security that has yet to be breached, you’re more likely to get your data stolen when you shop at your local store, but it’s still a concern that stops many people from using those services.

Creating a read only password is easy, just log in and click on My Info in the top navigation bar. There is a special Personal Finance Access Code that has a “Create Code” link, click that. ING Direct will generate a string of numbers and letters that you can use as your password on tools like Mint.com. This means that even if someone were to steal your information off Mint, they wouldn’t be able to do any damage through your ING account (they’d be able to peek inside, but they couldn’t do anything).

I expect this to be standard very soon.

Last week, there was news about Ally Bank in talks to buy ING Direct. It would be a marriage of my two favorite online banks*.

The biggest question I had, as a customer of both, is what should I expect after an acquisition. I know it’s still early but I’m curious to know, so I called Greg McBride of Bankrate, one of the most knowledgeable people I know, and he gave me a good idea of what to expect (if anything, many times these “talks” become nothing).

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While I was on the Amtrak train to New York for a business meeting yesterday, I tweeted news that Ally Financial was in talks to buy ING Direct. It’s still very early in the process but the news came from The NY Post and there isn’t much additional news other than they’re “in talks.” The article cited sources that ING Direct could go for as much as $10 billion, which ING would be use to repay $13B in loans from the Dutch government.

It makes for some good chatter, so let’s chatter! What do you think about these two guys potentially combining into one? How do you like my “Paintshop” skills?

I think it’s always dangerous when you start assigning “feelings” to financial institutions. While I realize that CNN Money just wanted to throw “evil” out there to sensationalize a bit, I think it’s a little irresponsible to say that a bank is evil. A bank is a create of our financial environment and, ultimately, it’s a business. It’s trying to make as much profit as it can and whether that comes from fees it charges you or the interest it doesn’t pay you, the market needs to demand better in order for them to change.

That’s also why I think this list by CNN Money is great, they’ve scoured the banking ecosystem to find eight banks with zero ATM fees, free checking, and higher yield accounts.

Ally Bank

I wasn’t surprised to see Ally Bank at the head of the class, I personally love their 60 day penalty on closing CDs early (most banks have you pay far more). They were lauded for their ATM reimbursement, higher interest rates, and lack of maintenance fees or minimum balance requirements.

ING Direct

Again, not surprised that we have another online bank as one of the least evil. ING Direct’s free checking and no ATMs were the first two reasons CNN Money mentioned, though you’ll have to use an Allpoint network ATM to avoid fees. If you don’t have an account, take advantage of ING Direct’s referral system to get a deposit bonus ($25 if you deposit $250).

The six other banks were, in order they were listed, USAA, Capital One, Alliant Credit Union, PNC, The Incredible Bank (internet only, I’d never heard of them), and Charles Schwab Bank. I don’t think it’s any indication of their evilness, so don’t see Charles Schwab as a little “eviler” than PNC.

ING Direct is offering a 1% cashback promotion on their Electric Orange debit card for purchases under $50 from now until November 30th. This applies to the card even if you use it as a credit card (signature based purchase). It’s not often that a debit card offers 1% cashback.

If you already have the card, you don’t have to do anything because the promotion is activated automatically. You’ll get the cashback rebate posted on the 15th of the following month. The promotion ends on November 30th but hopefully they’ll extend it if there’s enough demand.

What isn’t eligible? Purchases over $50, any transaction where you request cash back or get a cash advance, anything related to gambling, unauthorized transactions, ATM withdrawals, wire transfers or money orders, and finance charges. Outside of those, you’ll get 1% cashback with no limit.

ING Direct has been working hard to promote their checking accounts and their sweet $50 checking account bonus has returned once again.

The promotion is very simple, just go to the Electric Orange information page and click the orange “Apply Now” button. On the next page, click on “Continue” and put in E7NSTND into the reference code box. Complete the rest of the application.

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Not all CD early withdrawal penalties are created equal. I’ve long assumed that the standard penalty schedule of 3-months and 6-months was ubiquitous but with recent news that Ally Bank charges a mere 60 days has thrown by world view into disarray! Fortunately, early withdrawal penalties are disclosed in the Truth in Savings document a bank must publish about its bank products. Understanding them is crucial in our economic times and they often take a back seat to the headline interest rate.

I like to draw this analogy – The interest rate is the flash, it’s like the horsepower of the engine in a car, but knowing the early withdrawal penalty is like knowing the state of your spare tire. Tou don’t want to be surprised at a time of crisis.

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Last week, I wrote about how ING Direct and Everbank offered overdraft protection by way of a line of credit, rather than socking you with overdraft fees. I commented, off the cuff and without doing much research, about how online banks are better than traditional brick and mortar banks about overdraft fees because they aren’t as much a slave to meeting their revenue expectations. I figured it’d be a little unfair if I just left it at that, so I took a look at how online banks deal with overdrafts on their checking accounts.

In general, online banks are cheaper than traditional banks. Some use the same system of fees while some use overdraft protection, charging an interest rate. Some charge one fee regardless of the number of overdrafts in a single day while others hit you for each one. On the whole, online banks are cheaper probably because they can afford to be.

Let’s take a look at some popular online banks and their checking account fees:

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