After reading nothing but positive reviews of ING Direct’s online banking products, I finally took the plunge and registered an Orange Savings Account. It was fairly painless, as online banking applications go. The standard questions were asked including name, address, ssn, etc. ING Direct was recently rated as the most secure online institution and it showed. The series of security questions were unique and enough to make identity theft difficult. I was immediately pleased with the straightforward interface. ING Direct has long been competitive with other online banking institutions, and though others may offer a slightly higher yield, I am planning to maintain the bulk of my savings here because of the other benefits.

ING Direct Advantages: Nicknames, Subaccounts & More

ING Direct offers a couple perks over similar online banking institutions. I enjoy the ability to give our savings account a nickname. Having a name for our accounts helps me identify with the savings goal more. For instance, having $1,500 in my “Emergency Fund” account means more to me than $1,500 in “Account #123456789.”

The ability to create “sub-accounts” is a nice feature for consolidating various targeted savings accounts into one bank, and one master control screen. These subaccounts at ING are really just separate savings accounts, but because they are all tied to your customer ID they appear as a list on your ING customer homepage. Over time I plan to add accounts labeled “Christmas Shopping,” “Vacation,” and “New Sofa.” We can then create some automatic contributions into each of these funds based on the targeted savings goal. For instance, my wife and I would like to save about $600 in our Christmas Shopping account so we plan to automatically transfer $50 a month into this account. With our savings on auto-pilot the money is moved automatically without any hassle-factor. When the targeted savings goal is within reach we will schedule an electronic withdrawal back to our linked checking account.

Targeted savings accounts are a great way to pay for things that occur once or twice a year, or for one-time goals such as our “New Sofa” account. Insurance premiums, car tags, and taxes all have a way of sneaking up on us and wrecking a monthly budget. By using a savings account reserved for each specific purpose these events will no longer be budget-busters, rather a simple electronic transfer to your checking account.

As an added bonus, ING Direct is currently offering new customers $25 when they sign up and agree to deposit at least $250 for their initial transaction. That’s a guaranteed 10% return on your money just for signing up! To receive this $25 bonus, you must sign up using a referral from an existing customer (visit my referral page if you are interested). If you don’t have plans for your tax refund, or your tax rebate check, this is a great way to kick-start a savings program. At 3.0% APY (at the time of this article), it sure beats a savings account at a local bank!

A local bank was recently running a promotion where new customers could sign up for an interest-bearing checking account with no fees, free checks and a check card. I decided to open an account and designate it my “debt buster” account. In this account I accumulate any “found” money throughout the month. At the end of the month I write a check to make an extra snowball payment on my debt with the lowest balance.

Some people refer to this method as “snowflaking,” and it is a great way to make small debt payments add up over time. I took this original concept and tweaked it to use the dual checking account system. Here are a few examples of the “snowflakes” I managed to accumulate last month:

• CashCrate - By participating in daily surveys, and taking advantage of CashCrate’s lucrative referral system I was able to add $21.10 to my “Debt Buster” account in February.
• Cash4Books.net - If you are a regular reader here at Frugal Dad you know I am on a pretty aggressive reading schedule (52 books in 2008). To fund this reading hobby I sell back old books from around the house on Cash4Books.net and eBay. Last month this yielded $32.00 in snowflakes.
• Rolled Coins - Back when I used the debit card (or credit card) almost exclusively, I didn’t generate much in the way of coin change. Now that we are using the cash envelope budget system we manage to fill the coin jar with several dollars worth of change over the course of a month. Last month we cashed in about $8.00 in change.
• Donations/eBook Sales - My eBook wasn’t available until the very end of February, but I still managed to make two sales ($3.28, after fees). Someone was also kind enough to “buy me a cup of coffee” which resulted in another $1.64 contribution to PayPal.

The $66.02 I “snowflaked” throughout the month resulted in a healthy extra payment to my credit card with the lowest balance. Holding the money in a second checking account keeps it from getting spent as part of the daily expenditures associated with our primary checking account. It will also help me reconcile income from various sources for tax purposes at the end of the year. If you are interested in “snowflaking” I highly recommend the programs I’ve listed. Other options include picking up some traditional part time work, working overtime at your current job, or having a yard sale to generate some quick cash.

I received a disappointing email tonight from HSBC Direct, where I still maintain a small Christmas Club account, that advised my interest rate was being lowered in response to the recent federal reserve interest rate cut. The new HSBC online savings account rate, 3.80%, is only slightly better than the ING Orange savings account (3.65%). The banks tend to leapfrog each other so I anticipate if the fed lowers rates again ING may keep their savings rate slightly higher than HSBC’s. Either way, the rates are certainly not going to help me reach my early retirement goals!

We are writing to inform you that based on the recent drop by the Federal Reserve, HSBC Direct has adjusted your Online Savings Account rate to 3.80% APY*. At 8x the national savings average**, you are still earning one of America’s highest savings rates.

HSBC Direct will continue to evaluate and respond to market changes so we can provide you with competitive rates. And if your rate changes, whether up or down, we are committed to always letting you know.

You can feel confident knowing your savings are with HSBC Direct. We’re part of HSBC Group, one of the largest financial institutions in the world, and have over 140 years of experience helping customers manage their savings.

We sincerely appreciate you saving with HSBC Direct.

Fortunately, I only keep a small Christmas Club account at HSBC, so the lower interest rate will have little effect on my monthly investment income. I keep my emergency fund at a local bank savings account because at this point I prefer convenience over interest rates. When rates go back up, and they probably will in the next couple years, I’ll move some of my emergency fund savings back an online savings account.

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