Wednesday, September 30, 2009

My online banking experience

There was a big push back in the early 2004 for banks to go online.  These online only banks offered higher interest rates to attract customers in return for limited branch access and customer service.  Some of these "online only" banks offered rates for their money market and savings account that rivaled the CD rates more traditional banks offered.  Attracted by these high rates, I decided to try out their services.

ING Direct was the first bank I tried, and what to me is still the benchmark that other online only banks are measured against.  The sign up is a very simple process, and they have based on my own experience the fastest bank-to-bank transfers.  Funds transferred usually arrive in 3 days.  There isn't this limbo period where I'm sure the banks are earning interest on my hard earned money.  What made them successful is that they left most of the paperwork traditional banks required behind.  Everything can be done online -- including getting your 1040 tax forms as well as your online statements.  The log in process is very simple and straight forward, and overall I have had great experience with them.

Emigrant Direct was compared to ING Direct probably one of the worst online only banks I have used.  Back in 2004-5, they were one of the few banks offering 5% APR for their savings account.  Because of this, I was willing to try them out.  Although their initial sign up was electronic, I had to fill out quite a bit of paperwork before they opened my account.  In addition, during this period, the funds I initially transferred was "lost".  In more detail, the funds were already withdrawn from my checking account, but it did not show up on the Emigrant Direct account for weeks.  This to me was an example of a traditional bank who tried to play in the online market before they really understood it.  Many of their process and methods were just very arcane, I felt like I was trying to bank remotely with a branch in New York.  I very quickly canceled my account and had my funds returned. I did get a free hat in the process from their "welcome pack".

HSBC Direct is a pretty decent online bank that offers a variety of services.  They were the only online bank that offered me an ATM card.  In addition, they have very secure security features.  The log in requires both an user name, a log in password, as well as a click in password on a keypad.  There were some rough edges in the beginning but they very quickly worked out the bugs.  Lastly, they have physical branches in Asia as well as Canada (so in theory I can withdrawal money internationally).  So why did I recently close my account with them?  Due to my recent home purchase, I no longer needed to allocate my investments across various banks to meet the FDIC requirements.  Because of this, I decided to consolidate.  A couple marks went against HSBC Direct that led me to choose ING Direct over them.  The first is they take a very long time to transfer any funds to and from my main bank, compared to ING Direct, HSBC Direct usually takes up to a week to transfer my funds.  This is a lot of time where I don't earn interest.  In addition, their site is somewhat hard to navigate.  I usually like to do my taxes early, and HSBC Direct is one of the few accounts I have where for the life of me I can't find a way to get a copy of my 1040 electronically.  The bank itself likes to mail the hard copy to me in April.  I end up having to guess the interest and for my last few tax returns ended up getting dinged because I miscalculated.  

E*trade is probably the company that started it all with their online stock brokerage back in the dot com boom.  I used them in the past back in 2001 for my IRA but ended up canceling the account.  I did not understand investments at the time and would freak out every time my investments would decline.  Long story short, I never quite gotten past that trauma to really make full use of their banking features.  The setup from what I remember was fairly user friendly and easy to use. 

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