Hello all,

Though I have both of these accounts, ING DIrect is offering at total of $207 dollars for opening an Electric Orange Checking and making 5 debit card purchases ($107 dollars) and opening a Sharebuilder account and making two trades.

For Sharebuilder, the trads are 9.95 a piece. So I would make two trades for the same stock (S&P 500 index fund for instance) and then sell them together. You still come out with $70 after the trade fees, minus or plus losses or gains on the stock.

This is a great offer for those that don't have one or the other account.

I have a stupid question about ING, ally, etc all those online banks.

What's the catch? Where does your money go when you open an account with them?

For instance, a brick and mortar bank (the best I can find at the amount I have to open an account), would offer an APY of 0.15 for a savings account. Comparably ally and ING offer 0.89 and 0.90 respectively. Why are they able to offer such higher amounts? Finally, if an emergency were to arise, how would you withdraw / access / track your money? I know they are FDIC insured, etc, but how / why do they offer more attractive deals? Why don't more people have these types of accounts?

There is no catch.

The extra APY comes from one or more of the following reasons:
1) Online banks have lower overhead
2) Customers of brick and mortar banks don't know they are getting lower rates than they could if they switch. That, or they don't care (they prefer the convenience or whatnot of banking locally.)
3) Some banks use high savings account rates as a feature to attract customers. Others compete on different features or for different customer bases.

Evidence of 2 and 3 is that ING was the #1 highest rate for quite a while; now that they're big enough to be a brand name, their rates are not the highest (of course still higher than the average B&M bank).

Stannius mentioned it but you can find high-yield savings accounts at brick and mortar banks with an APY of 0.50 and higher. Of course, high-yield means you have to have more money in it. Some banks will also increase it by 0.05-0.10 if you have a checking account with them. Right now I have my money in a high-yield account at a bank because I need easy access to it.

I think, however, when I am done with the housing stuff I am working on I might switch to Ally. I do think they'll eventually be like ING and lower the APY they offer when they become more popular.

Edit: Sorry did not realize this was such an old thread I thought it was from this year initially!

Sometimes I wonder if it would be worth exploring ways to keep my money at ING Australia, which currently offers an introductory rate of 5% on savings accounts, dropping to 3.5% thereafter. Even with foreign exchange fees you'd still probably come out ahead, although I imagine it's hard/impossible to open an account there if you're not based in Australia. Has anyone looked into this?

is the currency risk worth it?

I guess if I was stepping out into riskier investments, I could find something based here in the States that offers the same or better return for similar risk (and probably less of a headache paperwork wise).

It's not the exchange fees that are the problem, it's the exchange rate.

Inflation in Australia is currently running considerably higher than in the US. Thus, while your money may be earning 3.5% interest in an Australian bank account, the Australian dollar will be becoming simultaneously less valuable against the US dollar.

I know it's tempting to think that it's an apples-to-apples comparison and see the higher interest rates, but if that really were the case, everybody would do it. Currency arbitrage is one of the riskier ways to try and earn a return on your money. It's by no means a free lunch.

I used to be an executive of an American subsidiary of Australian company. AT the time I had a financial account in Australia - not a checking/savings account but rather one holding stock options. The rules might differ a bit but it was basically an Australian brokerage account. There were no real special rules except that I had to confirm that I was complying with all US reporting laws. I was not a resident of Australia. They seemed to have far less of an issue letting me have an account as an American than a European bank does!

Brad, you are in Canada, right? That could make a difference and could make it even less of an issue.

I have looked into having some Australian accounts. I think Asia is going to be where it's at in the next few decades. Australia is well-positioned to benefit from that in many ways and generally has a lot going for it. But since I closed out my former account about 6 years ago I have not looked into the details and rules.

A word of warning though from someone who closely watched AUD/USD exchange rates for nearly 10 years because they were important for our business decisions - the AUD was extremely stable for a long time. But it is highly sensitive to natural resource prices. The strong AUD/USD rate now is probably related to the price of gold being high. I was just reading over the weekend that some big models, including Goldman Sachs' are predicting big declines in the gold price. Basically the consensus explanation for why gold has gone up is fear and declining interest rates. Well, fear in the world is largely subsiding and interest rates aren't going significantly lower. So basically, expect the AUD to weaken over the next few years back to closer to its historical rate, perhaps by 10-20%. That will wipe out any interest rate disparity. The government of Australia could support a decline to support trade as well.

So, while I am bullish on Australia, it's economy, and Australia stocks in general, I would not be in a hurry to hold its currency.

Thanks all -- I wasn't really being serious about this, just drawing attention to that fabulous rate, which according to people I've heard from in Oz does not correlate in the usual way to inflation (I remember when savings accounts in the US were giving 5% interest, but inflation was in the double digits back then).

I'd offer my services as a means of you accessing the ING Australia system (which I use), but I don't think the tax charged on the interest would make it worth my while.

I was an ING customer for several years. You can link your B&M bank and transfer money, takes about 2-3 days. Or you can use their debit card and go to an ATM. I never used this as a primary bank, so I only put money in it that I didn't need right away.