The Amateur Financier

Recently, I needed to send money to a friend of mine.  Unfortunately, the easiest way I know to transfer money from one person to another, via Paypal, was not an option in this case; my intended recipient didn’t have a Paypal account.  I could have written out a paper check and sent it through the mail, or even gotten a money order from the post office, but both of those are rather inconvenient and will cost money (if only for the stamp to send them).  What do you do when you want the convenience of online money transfers with the ability to send money to someone who will not (or cannot) set up an online account to receive it?

My chosen solution: to use my ING checking account to send him a paper check!  It was surprisingly easy and quick, plus I was able to save money on the check/money order, envelope, and stamp.  It’s not a completely perfect solution; the check will take several business days to arrive, versus the one to two business days with a regularly mailed check.

Even with that caveat, it’s still helpful to know how your online accounts can be used to generate paper checks.  So, how do you do it?  Follow these simple steps:

1) Open an ING Electric Orange Checking account: Start by going to www.ingdirect.com, and clicking the ‘Open an Account’ button on the left-hand side:

Then, you’ll need to click on the link for an Electric Orange account:

This will bring up a pop-up window (you might have to temporarily disable your pop-up blocker or allow this particular pop-up in order to make it appear).  The rest of the application process will pretty easy; just be sure you have an offline checking account (with enough money to fund your new ING account) and that you have the account information handy.  It’s really a pretty easy site to navigate and create new accounts.

2) Enter your ING Direct checking account – Just click on the words ‘Electric Orange’ to access your checking account.  (I have a savings account with ING, as well as a linked Sharebuilder investment account; if you are opening your first ING account as you follow these instructions, that will be the only option available to you.):

3) Click on ‘Make a Payment’ – The large icon furthest to the left on the top of your account page will allow you to use your Electric Orange account to make various types of payments:

4) Select the Address Book option to add your intended recipient:

At this point, you will have to choose whether you are sending checks to a business or a person.  If you opt for adding a person to your address book, you can choose whether you want to be able to send paper checks, electronic checks, or both.  Depending on what information you have available, you might add one or both methods for the person in question:

Assuming you have the information needed to send them a paper check, we can proceed to the last step.

5) Click on ‘Send a Paper Check’ and fill in the needed information – Back under the ‘Make a Payment’ menu, select the ‘Send Paper Checks’ option:

From there, you will be presented with a virtual image of a check; simply fill in the needed details (the recipient, the amount, and any memo details):

After you click continue, all you will need to do is verify that the address to which you are sending the check is correct, and ta da, in only five short steps, you’ve used the internet to send an actual, paper check to someone.  Now the next time you want to send a birthday check to your Aunt Ida who thinks that computers are the tool of the devil, you have another weapon at your disposal!

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This is the third and final part of my series of online banking reviews. The first installment covered ING, and the second reviewed HSBC.

This post has been edited to provide the current interest rates for the listed companies. They are correct as of 6-2-2009.

My most recent online savings account is with SmartyPig. I came across an ad for the site, and was impressed by its high interest rate and friendly appearance. I joined, and have been using various savings goals to save up my money.

Which brings me to the main issue to consider with SmartyPig: It’s not an ordinary online savings account. Rather, it functions more like a piggy bank; you set up a savings goal with an amount and the time you need to meet the goal, provide the initial deposit, and it calculates how much money needs to be added each month to reach the target fund level. That amount is pulled from a linked account every month, making the savings automatic. The only way to withdraw funds is to close a savings goal, making a SmartyPig savings goal more akin to an online CD (with no early withdraw fees) than a regular savings account.

How does this unique system fare when compared with my other online accounts? Let’s find out…

Ease of Use: SmartyPig is a very intuitive, easy to follow system, which I picked up without any serious problems. It’s a simple matter to open up a new savings goal and to deposit extra money. The automatic withdraws can be adjusted by shifting the desired closing date and total desired funds, but it can be a bit tough to get exactly the amount you want to deposit each month. (Although, I understand the management is trying to change that, to allow users to set a desired deposit amount directly, say $100 per month). Withdrawing money is tough, as well, requiring you to close one of your savings goals in order to get your money (with the interest earned to that point) returned to you.

Transfer Speed: SmartyPig has a fairly slow transfer speed, requiring at least three business days from the time the transfer is initiated until the funds are deposited. Given that the process is initiated automatically (for the monthly transfers, at least), this usually isn’t an issue, but the slow speed, and the fact that the funds aren’t credited to your account until the transfer is complete, do lead to a loss of some potential interest when using a fund transfer.

Interest Rates: This is where SmartyPig shines; the interest rate they offer is usually well above and beyond what is offered at other online banks (even including many long-term CDs). The current rate of 3.05% is higher than that offered by its rivals (more than 1.5% higher than ING, for example). Once you’ve deposited your money, it’ll definitely be working harder for you here than at just about any other online bank.

Extras: SmartyPig is fairly unique among online savings sites, and offers numerous features:
-It’s a social site as well as a savings account. You can post your goal on your website or elsewhere, encourage friends and family to donate, and allow them to see the progress you’re making towards your goal. It could definitely provide an interesting way to fund a wedding, for example. (I haven’t tried to post any of my savings goals, so I can’t critique how well the process would work.)
-They offer affiliations with a number of online retailers (see them here), and if you choose to cash out your savings goal in the form of a gift card, you can end up with a boost of up to 6% in extra funds. If you’re saving up in order to a large purchase, it’s an added bonus for your savings.
-They offer numerous features to track your progress. (I’m somewhat addicted to using their interest tracker to monitor my earnings.)

Overall: 4/5 The high interest rate and social features make SmartyPig more interesting (and profitable) than the average financial site, but difficulty in getting your money out and slow transfer speed decrease its versatility. As an alternative to a CD, it offers a very attractive rate and more flexibility, but it’s never going to be your primary banking web site. If you understand its limitations, though, SmartyPig is an excellent choice for your online savings.

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This is the second in a three part series comparing the online banks I’ve used. The first part was on ING and the third review, of SmartyPig, is coming on Thursday.

This post has been edited to provide the current interest rates for the listed companies. They are correct as of 6-2-2009.

The second bank account I opened was with HSBC. I had been using ING for a few months, but hoped to get a better rate of interest on my deposits. I looked around for other online banks, and came across HSBC as a possibility. I opened an account, and have been using it primarily as an emergency fund (although, as of late, I’ve had to take out most of the money to cover my regular expenses).

What’s the overall view of HSBC? Well, let’s see…

Ease of Use: HSBC is a bit less user -friendly than ING, requiring more time to learn how to transfer funds and use the other features of the account. It isn’t extremely complicated, but the learning curve is steeper, expecially if you’re not used to online banking.

Transfer Speed: HSBC is somewhat slower than ING, taking about three business days for deposits or withdraws to clear. While not a huge problem, this does make it more difficult to use, especially if you need to make frequent or quick money transfers.

Interest Rates: HSBC does tend to offer higher rates than ING, usually by about 0.25% to 0.50% during the time that I’ve been using it. although within the past few . (Currently, the HSBC rate is 1.55% vs. 1.50% for ING.) It’s the not the highest rate possible (SmartyPig, for one, typically offers much higher interest rates (3.05% currently)), but does tend to be fairly solid.

Extras: HSBC does seem to have slighly more security than ING or SmartyPig, requiring an extra security key (entered using the mouse) on top of the password. The effort may be enough to make you feel more comfortable about putting your money into their online account.

Overall: 3/5 The extra interest boost is nice, but the added difficulty of using the site and the time needed to transfer money decrease its utility. It’s probably best to leave it as a secondary account, and use another account for most of your online banking services.

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This is the first in a series of three blogs comparing the online banks I use regularly. The second post (about HSBC) will be up Wednesday and the third (covering SmartyPig) will appear on Thursday.

This post has been edited to provide the current interest rates for the listed companies. They are correct as of 6-2-2009.

My first foray into online banking was with ING Direct. This isn’t surprising; Trent of The Simple Dollar swears by it, and he’s not alone. In fact, my sister actually started using it before I did, and invited me to join her. (She wasn’t being entirely altruistic; ING was running a promotion where they offered her $25 for each new user she signed up. Alas, she got to me too late, as I had joined ING earlier that week.) In short, it’s one of the most popular, and widely used, online banks out there.

But, just how good is it? Let’s take a look at some of ING’s features, and see how they compare:

Ease of Use: ING is one of the easiest sites I’ve ever used, financial or otherwise. After a quick and easy registration process (it takes about ten minutes, assuming you have the information about your checking account at a brick and mortar bank available), you can easily open a checking account, savings account, or CDs as necessary. The guides and FAQs are clear and complete, making it easy for beginners to learn all they need about the accounts with ING.

Transfer Speed: ING moves the fastest of the three sites I regularly use, transferring funds into other banks within two days (as opposed to three for my other two accounts). It’s a relatively small difference, but it does make it easier to organize my funds, as well as cutting down on the time I need in order to pay my bills or do other money transfers.

Interest Rates: The only downside of ING is the lackluster interest rate offered for its savings account. At 1.50%, (as of 6-2-2009), it’s significantly less than either HSBC (1.55%) or SmartyPig (3.05%). This is pretty consistent; expect a bit more interest with HSBC and a full percentage point or more from SmartyPig. If you’re only looking for a high interest rate (for say, an emergency fund or other money you intend to deposit and not touch for a while), you can do better than ING.

Extras: Two nice perks that ING offers-
-The ability to link to a Sharebuilder account; if you, like me, consider Sharebuilder a high quality investment site, it’s nice to have access to both accounts in one window (as well as the ease of using funds in the ING account to buy stocks and ETFs via Sharebuilder).
-As alluded to above, ING offers occasional bonuses for signing up friends and family. In the case I mentioned, my sister would have received $25 for referring me, and I would have received $10 for opening an account.

Overall: 4.5/5 – ING is a high quality, very accessible online bank. The only real downside is the low interest rate, but if you are like me, that’s enough to ding the overall score. Still, ING remains one of the most useful and easy to use online banks.

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