Should I go with the bank with the higher interest rate or better reputation?

Question

I want to open an interest-earning online checking account. I've heard nothing but good things about ING Direct but Charles Schwab is offering a higher interest rate. I'd like to hear from current customers about what you think of the banks' security, ease in transferring funds to and from your linked "regular" checking account, and customer service. Your advice is greatly appreciated!

ING's interest rate is 3.5% and Charles Schwab is 4.25%.

Answer 1

Consider this..

What's the interest difference between the two online banks?
ING = 3.50% APY
Schwab = 4.25% APY

Now lets say you have $10,000 average daily balance, so with ING you would earn $350, and with Schwab you would earn $425. Assuming you pay taxes at a nominal 28%, you would net $306 from Schwab and $252 from ING. A whopping $54 !

Both are well managed firms with little impact from subprime, and both have stellar reputations.But stil given that all these accounts are FDIC insured, I would not waste a second worrying about their financial stability.

Good Luck
ED


PS. You might want to consider GMAC which has a 4.90%APY, where, after taxes, you would actually earn $353.. I have had accounts with GMAC for several years with absolutely no problems.



Good Luck
ED

Answer 2

Better reputation is better. The problem with internet-only banks is that there's no physical branch to walk into for customer service. Also, all these banks compete with each other. If you go to the one with the higher rate today, they will definitely no longer have the highest rate a few weeks later. Interest rates fluctuate, you don't lock it in unless it's a CD.

Therefore, consider a more reputable bank, and make sure it is convenient for you. You need to be able to walk into a branch for servicing issues, and be able to withdraw $$ from ATM machines conveniently. Also, most of the traditional banks have high-yielding money market accounts you can open. They may not yield as much as some internet-only banks, but you need to compare them based on the total package, not just yield. As I said before...yield will change since you can't lock it in.

Citibank currently offers 5.10% APY on their Ultimate Money Account. You can find that on their website. The great thing is that even though you open the account online...you can still go to the regular branch for servicing issues, or to use the ATMs, etc.

Answer 3

If I were you and with the subprime fiasco that is going on, I'd consider the bank with better reputation and one that is not heavily affected by the subprime market problems that are going on at the moment.

At the moment be wary of banks offering higher interests. They are doing that to enhance business and attract more depositers to make up for the huge losses they are making or have made at the sub prime loans fiasco.

Answer 4

if it's on line you may want to go with the better reputation.