Best Interest Rate Banks

One of the first things you do when you open a new online bank account is to establish an external transfer link between your new account and an existing account. When I opened my FNBO Direct account, I immediately linked it to my daily checking account so that I could pull some money in and get that hot 3.50% APY. For most, the process stops there. If you ever need money to go into FNBO Direct or to go back to the checking account, you can simply log into FNBO and initiate the transfer.

99.999% of the time, that’s perfectly fine. But for that 0.001%, if the FNBO website is down, you will have no access to those funds via the Internet. If you can’t log in, you can’t transfer your funds. You could always call and initiate the fund transfer that way, but oftentimes the site itself is down and you’ll have to scrounge up the number some other way. You’ll also have to get your account number somehow too.

Here’s a better way, establish the link from the other side as well. So if you have a link between FNBO Direct and ING Direct but it’s only created on the FNBO Direct side, just create it again on the ING Direct side if you can. ING Direct is picky about their links but other banks won’t be, so establish a link out that way you can still get access if you need it.

99.999% of the time, the sites will be fine. But you never know when a little hiccup can put you in a bad spot.

I put together an FNBO Direct Squidoo Lens that contains some brief FNBO Direct and high yield savings account information that you may find useful.

It’s a work in progress type of project but it’s something that I hope to expand on in the future!

One of the nice things about a brick and mortar bank is that you can always go to a brick and mortar bank no matter what. When IndyMac bank failed and was taken over by the FDIC, you could at least go to an IndyMac branch. Sure the lines were long, the people were miserable, but your money was inside and you could get to it.

Actually, your money was not inside. Your money was in the ether, a series of 1’s and 0’s, and you couldn’t actually touch it unless it was locked inside a safe deposit box. Your money was with all the other money, a line item in an electronic register on the bank’s mainframe computers. It was just as safe as having it on an online savings account.

Your money is no safer at a “regular” bank than an entirely online bank.

The only thing that protects your assets at a bank is FDIC insurance. If the Federal Deposit Insurance Corporation is insuring the funds at your bank, and you can confirm this with the FDIC Bank Find tool, then your assets are protected up to $100,000 no matter what.

This means that you’re making a mistake if you don’t open an account at a bank like FNBO Direct or HSBC Direct because they’re just as safe and they offer much higher interest rates.

If you have multiple online accounts, one good trick is to electronically link the two accounts together to facilitate the transfer of funds between them. All you need to do this is each bank’s ABA routing number and your account number to set up the link.

Some banks, like ING Direct, will require that you provide a paper check in order to create the link whereas others, like FNBO Direct and HSBC Direct, don’t require a paper check. So, if you want to link ING Direct to FNBO or HSBC, simply create the link on the FNBO/HSBC side and initiate transfers that way.

Here are the ABA routing numbers for the major online banks:

• FNBO Direct: 104000016
• HSBC Direct: 022000020
• ING Direct: 031176110
• Emigrant Direct: 226070319
• Virtual Bank: 067092200
• E*Trade Bank: 256072691
• WaMu: 322271627

By establishing the links, you give yourself the opportunity to transfer funds easily between accounts as you need them.

“Rate chasing” is when you shift your funds between high yield online savings banks in an attempt to get the highest possible interest rate for your savings. The question on the table is whether rate chasing is “bad” for you, either from a savings or a credit perspective.

The answer is no. The act of opening a new bank account isn’t a negative event on your credit history. Some banks will do a hard inquiry, some will do a soft inquiry, but in general it is not seen as a negative event on your report. If you were to open a line of credit, that would be seen as a more negative event than opening a bank account.

As for whether it’s bad for your savings, it’s a little bad. You lose interest on the funds as they are being transferred so it takes a pretty big interest rate difference to make it worth it. However, it’s good to have a couple of them available for when you are moving new funds into the “high yield savings account” group. That way you can push it to the largest yielding account.

Who are the leaders now (As of August 1st, 2008)?

• Washington Mutual - 3.75% APY
• FNBO Direct - 3.50% APY
• HSBC Direct - 3.50% APY