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From the Wall Street Journal On-Line, April 11, 2006
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ING Direct Plans
Checking Account
With High Yield

By JANE J. KIM
April 11, 2006; Page D2

In the latest move by an online bank to expand its offerings, ING Direct, a unit of ING Groep NV, is getting ready to launch a high-yielding checking account.

The new account, dubbed "Electric Orange," is expected to offer an initial annual percentage yield of 3%, although that may change depending on the actual launch date. The account will have no minimum-balance requirements or fees. ING Direct -- which until now has offered only savings accounts, certificates of deposit, home loans and mutual funds -- plans to roll it out to customers this summer.

Customers who sign up for the account will get a debit card instead of an actual checkbook. Instead, the bank will issue "virtual checks" by transferring funds between bank accounts. Customers can also request that the bank issue paper checks for payment purposes.

ING Direct won't charge a fee for using other banks' automated teller machines, though it will pass along any fees charged by other banks for using their ATMs, says Arkadi Kuhlmann, the bank's president and chief executive. ING Direct has four million customers with $60 billion in assets in the U.S. Customers have an average savings-account balance of $12,000, Mr. Kuhlmann says.

ING Direct's move into checking accounts comes at a time when banks are aggressively courting new customer deposits to bolster profits. Competition among online banks is especially fierce. ING Direct offers a 4% rate on its savings account. Last month, Citigroup Inc.'s Citibank unit launched its own Internet bank, Citibank Direct, which is offering a 4.5% rate on a savings account to customers who open a linked Citibank Direct checking account.

HSBC Holdings PLC's HSBCDirect is paying 4.8% on its savings account until April 30, while EmigrantDirect.com, a unit of New York's Emigrant Savings Bank, is paying 4.5% on its savings account. By contrast, the average rates on statement savings accounts and interest-bearing checking accounts are 0.53% and 0.29%, respectively, according to Bankrate.com.

Online banks have typically focused on offering high-yielding savings vehicles, such as savings accounts, money-market accounts and CDs, often requiring customers to link those accounts to checking accounts held at brick-and-mortar banks. Still, there are some online banks that offer checking accounts.

EverBank Direct, a unit of EverBank Financial Corp., is offering new customers an introductory rate of 5.51% for three months on its online interest checking account; after the introductory period, the rate drops to 3.01% to 4.01%, depending on the balance. The bank reimburses up to $6 a month in ATM fees. Presidential Bank FSB of Bethesda, Md., is offering a checking account paying an annual yield of 4.37% to customers who open the account online or through one of its branches; a minimum of $1,500 is required to open the account, and customers must maintain a minimum balance of $1,000 to avoid monthly fees.
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This is an interesting development, for sure, but the ATM fees kill it for me.

I used to have a checking account with Wingspanbank.com years ago. They offered a similar deal to what ING appears to be preparing for, with a few exceptions. First of all, I could use any and all BankOne ATMs for free, due to an agreement between them and wingspan. Aside from that, I was reimbursed 3rd party ATM fees up to something like $10 a month. Now *THAT* was an awesome deal. Too bad it's gone :(

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USAA offers an asset management account with a $2,000 minimum that pays 4.26%, unlimited check writing, free checks, free online bill pay, $15 reimbursement toward another bank's ATM fees, and stock trades as low as $8. I can view my account along with my IRA, insurance and credit card all on one web page. This is a great package if you qualify.
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This is an interesting development, for sure, but the ATM fees kill it for me.

Not me. Given my average checking balance at a 3% interest rate, I would still come out ahead even with ATM fees. Especially since I KNOW each cash withdrawal will have a fee and I can better plan my ATM visits.

This is something I would consider. I wonder how one would make deposits. I guess you can always mail them the check. What about cash deposits? Hmm...Something to think about.

FFL

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Regarding USAA's banking operations, do they have live customer service representatives available 24/7? To me, that's the hallmark of a modern financial institution.
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They're not 24 hours for basic banking, but don't cut short their quality of service for that. I've used them for home, auto and life insurance, brokerage and credit cards for years, and their service has always been outstanding.

Banking hours are:

Monday - Friday, 7:30 a.m. - 10 p.m. CT
Saturday, 8 a.m. - 6 p.m. CT
Sunday, 1 p.m. - 6 p.m. CT

Credit cards are 24 hours.
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Those Sat./Sun. hours are the next best thing to 24/7. It's quite unusual for a non-24/7 operation to make some employees available on weekends like that!
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USAA offers an asset management account

Is this FDIC insured?
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USAA is paying 4.25% on it's money market account as well, for balances of $10k or more.

$0 - $9,999 2.22%
$10,000 - $24,999 4.25%
$25,000 - $49,999 4.51%
>$50,000 4.61%

Savings paying pretty well also:

$0 - $999 2.50%
$1,000 - $4,999 3.30%
$5,000 - $9,999 3.35%
$10,000 - $24,999 3.45%
>$25,000 3.61%
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No, and most brokerage accounts are not FDIC insured. However, USAA Federal Savings Bank does have FDIC insured accounts that you can tie into the Asset Management Account and easily transfer money between the accounts.
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asset management account with a $2,000 minimum

I need to correct this...it's a $5,000 minimum.
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USAA also offers checking with no fees at all. No minimum balance, free online bill pay, no monthly fee, unlimited check writing. They don't charge for ATM withdrawals and they refund any ATM surcharges charged by other banks, up to $15 a month. I don't think they have ever charged me a fee for anything, ever.

They also have a free overdraft program that can be tied to one of their credit cards (I don't know if its free if not tied to a CC but mine is). I don't think I even signed up for it, I just noticed it when I forgot to cancel an auto debit and they charged the overdraft to my CC (which has competitive rates by the way)

USAA totally rocks, I will never use another bank for my primary checking.
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They also have a free overdraft program that can be tied to one of their credit cards

The USAA Asset Management account will use your margin account as overdraft protection as well.

I do keep another local checking acocunt for depositing any checks I may get, but then I'll usually transfer the money over to USAA.
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This is very exciting indeed!

Customers who sign up for the account will get a debit card instead of an actual checkbook. Instead, the bank will issue "virtual checks" by transferring funds between bank accounts. Customers can also request that the bank issue paper checks for payment purposes.

Given this, the ATM fees won't be an issue for me anyway, since if you still need another bank anyway, I'll keep my local bank -- or does "by transferring funds between bank accounts" refer to ING and the bank of your payee/creditor?

Also, I wonder if ING will improve Quicken integration with OFX support like other banks (NetBank is especially good at this with bill pay, etc.). Manually downloading ING transactions is a pain.

If ING offers OFX support in Quicken and free bill pay, they just may get my business! I love ING and have had an ING Direct savings account with them for more than a year now.

-LF
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