Show Me the Money

I like my bank. I hate my bank. I like my bank. I hate my bank. Raise your hand if you have that same relationship with your bank.

We bank at a locally-owned bank and I feel good about that. Really, I do. I feel good that my money stays in the community and goes to work for others. We have our mortgage, checking and savings at one bank and have been treated well there for years. Lately, my happy feelings have been changing and it's all the fault of the damn Internet.

First, I read this article by Jane Bryant Quinn, the well-respected financial columnist for Newsweek. The article speaks for itself and the bottom line is this; for those of us keeping anything more than a few hundred dollars in a traditional savings account at a bricks-and-mortar bank, we're being taken to the cleaners when it comes to interest rate yields. There are much better deals to be found in the online banking world.

About a week after that article appeared, I received a well-designed (I'm in marketing, you know) direct-mail piece from ING Direct offering me $25 if I opened a savings account with them. More importantly, they were offering a 4.5 percent interest rate on that savings account. ING Direct, is an FDIC-insured online branch of ING, which is a monster financial services company. I'm savvy when it comes to personal finance and always evaluate our options before I make a move. This one, however, took very little time to decide.

All it took was a quick and downright disturbing glance at my latest savings account statement. We were currently earning .30 percent. You read that right; that’s slightly more than one quarter of one percent. Now, I don’t think it’s a stretch to say I could stash our money in our basement and the dust that would accumulate on it would probably be worth more than that after a little time.

I'm fully aware that savings accounts have traditionally yielded very little and were purposely designed that way. They're all about liquidity; I can get my money quickly and with no hassle. What you gain in flexibility and convenience, you lose in interest accumulation. I get it, really. But, this was ridiculous.

You do the math on my new rate. That’s 4.5 percent. $4.50 on $100. $45 on $1,000. $450 on $10,000 and so on. I don't want to even do the math on my old rate, it's too embarrassing. So far, I've earned more on my savings at ING Direct in two months than I would have in more than a year with my local bank.

My account is tied to my current bricks-and-mortar checking account and I can move money easily between the two. Access to the money is quick as well. Local banks, at some point, are really going to feel the heat of the online banking world, if they haven't already. ING Direct also offers checking, CDs, mortgages and home equity loans at far better rates than a lot of regular banks. I believe online banking is one of the last frontiers of the Web where people haven't yet fully become comfortable. That is changing and it will continue to put the pressure on smaller banks with too much overhead to match the rates.

To my local bank, I think I still love you. But this isn't personal, it's just business.