Pros

No monthly maintenance fees

One of the biggest selling points of the Electric Orange Checking account is that there are no monthly maintenance fees – period. There is no minimum balance requirement, direct deposit requirement, or debit card usage requirement.

Interest on checking deposits

Electric Orange pays interest on deposits based on the balance on the account. Deposits up to $50,000 collect 0.20% APY, $50,000 to $100,000 collect 0.85% APY, and over $100,000 gets you an APY of 0.90%. Granted 0.20% APY isn’t much, but is better than almost any other checking account out there, and if you have a good pile of cash this could be the perfect place for it.

Free debit cards and bill pay

Electric Orange offers a free debit card and free bill pay service. When it was introduced Electric Orange was designed to be a nearly paperless checking account, thus the encouragement to make payments electronically. Electronic payments can be made to merchants or to individuals using their Person2Person transfer service. You can also have a paper check sent via postal mail for free for those vendors you can’t pay electronically.

No overdraft fees

Unlike most other banks that love to soak you with overdraft fees, there are no overdraft fees on the Electric Orange checking. I think this fact is grossly oversold by ING on their website (the main page for the Electric Orange account just has a link inviting users to compare their overdraft fees to other banks without specifically stating there is no overdraft fee). The only fee related to overdrafts is an interest charge for accessing an overdraft line of credit based on the amount of the overdraft.

Free ATM access at select locations

For an online bank, ING Direct actually has a pretty good ATM network that you can access for free. You can access any ATM in the Allpoint network (most ATMs in this area are in retail locations of CVS, Walgreens, and Target) and, thanks to the buyout by Capital One, any Capital One ATM.

$50 Bonus for New Customers

As noted above, you can get a $50 bonus for opening an Electric Orange account. Just use one of the links below to sign up and make three card or Person2Person payments to earn your $50 bonus. Please see the fine print below for requirements.  Disclosure: these are referral links for which I will earn $10 for each successful referral.

ING Electric Orange Bonus 1

ING Electric Orange Bonus 2

ING Electric Orange Bonus 3

ING Electric Orange Bonus 4

ING Electric Orange Bonus 5

Bonuses are only paid for accounts that are opened and a total of 3 Card purchases or Person2Person Payments (or any combo of the two) are made within 45 days of account opening. The $50 bonus is available only for new accounts with a new Customer as primary owner. Only one bonus will be provided per household. Your $50 bonus will automatically be deposited into your account on day 50.

Cons

No branch network

Because it is an online bank, there is no branch network for the Electric Orange account, meaning there is no way to directly deposit cash into your account or talk to someone face-to-face it the rare event there is a problem with your account. This also makes depositing of paper checks a pain, as noted below.

Difficulty depositing paper checks

In the era of electronic transfers and direct deposits, everyone still gets paper checks occasionally. Currently the only way to deposit paper checks directly into your Electric Orange account is to mail them in to ING Direct, which means a significant delay in how quickly the funds are credited to your account. ING Direct has announced that customers will be able to upload check images for deposit via computer or smartphone app beginning sometime this spring, but until then this will continue to be a significant drawback of the Electric Orange account.

Limited check writing capability

For most checking accounts you have the option of ordering checks directly through the bank, ordering from a third party (usually at a significant discount to the bank’s charge), or printing your own check on your home computer. For the Electric Orange account, however, you must order checks from ING Direct at a cost of $5.00 per 50 checks. Granted there is an additional layer of security to this arrangement as checks must be activated before use, but many will be annoyed at having to pay more for their printed checks. It is worth pointing out that this does work almost like a service fee for check writing, and that by minimizing the costs of processing paper checks they can offer other benefits without fees.

The ability to write paper checks is an improvement to the Electric Orange account since its introduction, even if the checks must be ordered from ING Direct. Previously customers could not write paper checks at all.

Overall assessment

My overall assessment is that this is a great alternative to the fee happy checking accounts offered by most larger banks these days. Provided you don’t need to make cash deposits to your account, don’t write a lot of paper checks, and do most of your banking electronically you should definitely consider Electric Orange for your checking account needs.

If this doesn’t quite fit your needs you may also consider going to a local credit union or community bank with a truly free checking account. Compared to paying monthly maintenance fees at the big banks, you will still come out ahead.

ING Electric Orange Bonus – $50

Electric Orange is ING’s checking account offering geared towards users that do most of their banking online. The account comes with no monthly maintenance fee, free access to 35,000 ATMs in the Allpoint network, and free bill pay service. Deposits also earn interest, with APY ranging from 0.20% to 0.90% depending on account balance (as of 2/21/2012). ING has also recently added the capability to write paper checks on the account, a previous weak point in their otherwise strong service offering.

Use one of the links below to sign up and earn a $50 bonus. Please see the fine print below for requirements.

ING Electric Orange Bonus 1

ING Electric Orange Bonus 2

ING Electric Orange Bonus 3

ING Electric Orange Bonus 4

ING Electric Orange Bonus 5

Bonuses are only paid for accounts that are opened and a total of 3 Card purchases or Person2Person Payments (or any combo of the two) are made within 45 days of account opening. The $50 bonus is available only for new accounts with a new Customer as primary owner. Only one bonus will be provided per household. Your $50 bonus will automatically be deposited into your account on day 50. Valid through 03/22/2012.

ING Orange Savings Account Bonus – $25

The easy-to-use online savings account so many others tried to emulate over the years, the ING Orange Savings Account is perfect for socking away extra cash. The account has no fees and no minimum balance requirements, and sports an APY of 0.80%.

Use one of the links below to sign up and earn a $25 bonus. Please see the fine print below for requirements.

ING Orange Savings Account Bonus 1

ING Orange Savings Account Bonus 2

ING Orange Savings Account Bonus 3

ING Orange Savings Account Bonus 4

ING Orange Savings Account Bonus 5

Bonuses are only paid for accounts that are opened with an initial deposit of at least $250. Initial deposit does not include bonus. The $25 bonus is available only for new accounts with a new Customer as primary owner. Only one bonus will be provided per household. Bonus starts earning interest upon account opening, but is unavailable for withdrawal for 30 days. Variable 0.80% Annual Percentage Yield, effective 01/06/2012.

29 February 2012 Update: Monthly maintenance fees and bank fees in general by Bank of America and others have only gotten worse since I originally wrote this post. While you may still be able to get the occasional fee waived through customer service as I did in February 2010, it may be worth considering other options to avoid fees. I think the best checking option without a monthly maintenance fee is ING Direct’s Electric Orange, which I recently reviewed. In that post I discuss how the account has no maintenance fees and other features, detail what I see are some of the drawbacks of the account, and also provide a link for a $50 bonus for opening an account. Below is my original post regarding the Bank of America Monthly Maintenance Fee.

By Mark Holloway from Beatty, Nevada, USA (Bank of America) [CC-BY-2.0 (www.creativecommons.org/licenses/by/2.0)

Unfortunately for us, this isn’t foolproof. When we opened our monthly statement for February, we saw that we had been charged the $8.95 monthly maintenance fee. This was partially because we forgot to reset our automated transfer (our system makes us reset the transfer after so many months) and partially because the statement closed four days earlier than it did last month. We had another electronic transfer hit the account, but only after the statement for the month had closed.

Not ready to admit defeat, I call customer service to request a fee waiver. True to their usual level of no-service, the automated system said there was a long wait to speak to a rep and then uncerimoniously disconnected the call. So I then used the online chat to request the credit, and only after requesting a supervisor did I get the fee waived.

While I was waiting for the online customer service rep, I just happened to review what the fee structure was on my account if I were opening the account today. Guess what? If you open online, there is no monthly maintenance fee or direct deposit or minimum balance requirement. Armed with this I asked if I could have these terms applied to my current account I was told that was only for new accounts, and when I asked if I would have to close the old account and open a new account to avoid the monthly fee I was told that is what I would need to do. What a waste!

So here’s my dilemma: do I close this account (I am out of paper checks anyway, but I think 5+ years to use 50 checks is a decent run) and open a new Bank of America account to simply avoid the fee, or do I tell Bank of America to go screw and take my business elsewhere? I’ve been trying to simplify anyway, so I am thinking we should just use our credit union account for this type of stuff, but having so many BofA branches around is very convenient, especially when trying to spread around those dollar coin deposits. What to do?

But if you disagree with a company’s business practices, is a boycott the most effective means of jabbing a stick in their eye? I would submit to you that it isn’t. You may do the most damage to the offending company by being what Best Buy termed several years ago as a “devil customer”. Best Buy determined that some of their customers who bought high-priced items or overpriced accessories without a sale were “angel customers”, but there was a certain percentage that were unprofitable customers that were considered “devil customers”. Included in the behaviors of the devil customer were taking advantage of price-match policies and only buying loss leader items (items sold below cost to get you into the store with the hope you’ll buy other items at regular price). Best Buy CEO Brad Anderson was quoted as saying, “They can wreak enormous economic havoc.”

So how can this be applied to protest companies you don’t like? Simply be a devil! For retail stores don’t boycott the store, but go there and only buy obvious loss leaders. If it is a store like Walmart with a price-match policy, go and price-match other stores’ loss leaders. Buy nothing that will actually make money for the store - save those items for their competitors and let those stores reap the profit.

Taking this concept back to banks, do everything you can to make sure the bank doesn’t make money on you. Move your money elsewhere unless they are paying an extremely high promotional rate that they are likely losing money on. Take advantage of promotional offers to open checking accounts and credit cards for bonus money or other perks, then only use the account enough to qualify for the bonus and avoid services fees and as soon as you are allowed cancel the account. If you do the dollar coin hustle, use an account over there to dump off your coins and make them eat the expense of handling them. Basically do anything that will cost them money but where you won’t incur any fees.

Think of it this way: if you boycott a company, they just don’t make any money off of you. But if you are a devil customer to a company, not only do they not make money off of you but they actually lose money by your having a relationship with them.

According to this article on Bloomberg, Fifth Third Bank has instituted a $19 charge for NOT using your card. Additionally, Citi is starting to charge some customers with low activity levels on their accounts higher interest rates. On top of that many issuers such as Bank of America are starting to experiment with charging annual fees on credit card accounts where there may not have been one before.

For those of us that have built up a pile of unused accounts over the years, this may be a good reminder to cancel many of those accounts we no longer use. It helps reduce the possibility of being blindsided by fees and reduces you risk of fraudulent activity as well. On top of that, it eliminates all those mailings from the credit card company and leaves you with fewer accounts to have to track.

Will there be a credit score hit? Perhaps, although it may be smaller than you would expect, especially if you have several other accounts that are open and active. Just remember that the length of your credit history and the percentage of your credit lines that are utilized are the main factors here, so it is better to keep older and larger accounts.  Two things to consider doing are to request changing your card to a different program instead of closing the account entirely and consolidating existing credit lines with the same issuer.

Since we have no plans to apply for credit in the near future, we made the decision that downsizing to only a handful of accounts is our best course of action. The extra peace and security that comes from having fewer accounts is worth the hit of a few credit score points in my opinion.

In my view the check is an outdated method of payment, only useful for paying the occasional bill, your taxes, and minor things that they don’t take credit cards for (lawn service, paying family members/friends, etc.). There is no advantage to using checks in a retail environment. How do I come to this conclusion? Glad you asked…

• Value: You are paying the same amount at the register regardless of payment method, so there is certainly no advantage to writing checks.
• Speed: Credit and debit cards are way quicker than checks, even if the cashier checks your ID to the cardholder name. Even cash transactions where change has to be made are quicker than the typical check transaction.
• Record keeping: Now matter how you pay, you should be able to get a receipt, which provides evidence of the transaction if you need it for taxes, expense reimbursement, etc. Debit and credit cards are even better since you also get the listing of transactions on your account statement.
• Privacy: Do you really want the kid down at the Wal-Mart having access to your personal information including account number? You do realize that is all the information they need to access the funds in your account, right?
• Liability: Related to the point above, what happens if someone gets your account information? If you used a credit card, you are technically only responsible for the first $50, and in most cases the credit card issuer won’t even make you pay that. You also have the luxury of not being out the money while the issue is being resolved. Debit cards and checks are a different story, where the bank can hold the funds in question while it completes its investigation, meaning you don’t have access to your money. And it is a lot harder to prove a transfer was unauthorized if they used you account number to access the funds directly.

For the record, it annoys me even more when people wait until the cashier has completely finished ringing the transaction to search for the checkbook and beginning writing the check, as if it is a surprise that you actually have to pay for your purchases! But of course my ire in this instance isn’t limited to check writers, but any idiot who waits that long to begin fumbling through their purse/wallet/pockets for their method of payment. All of them should be taken into the parking lot and beaten with their purchases.  

So am I missing something here about the virtues of checks? Do I just need to be more patient with the old people and the stupid when they whip out the checkbook?

“We live in a free-market economy” – Do we really? The role of government keeps expanding, and the taxes to pay for that expansion are almost inevitable.

“Stocks may be volitale in the short-term, but in the long-term the market always goes up” – This “wisdom” is built on the assumption that we are basically a free-market economy and that the private sector will be relatively unencumbered to operate and create wealth. If the events that are unfolding in the political realm are indeed a fundamental shift in the role of government in our economy, I’m not sure we can consider this to be a certainty.

“It is best to put aside some money for a rainy day” – While I don’t think we should live paycheck-to-paycheck, I am beginning to question whether having excess cash in the bank is a good idea. As our official national debt is already over $10 trillion (and under GAAP would be $65 trillion), it is a very real possibility that the government could “monetize the debt” in an attempt to cover its debt obligations. That basically means that they will just print more money to pay off the debt, which would increase the supply of dollars in the economy leading to runaway inflation, eroding the purchasing power of your savings.

“If you’re money is FDIC insured, you have nothing to worry about” – Considering the recent news that the FDIC is funded at the lowest level in nearly a quarter-century, I don’t think we can take FDIC coverage as a certainty. Especially when they say that they have set aside $22bn to cover expected 2009 bank failures and have an additional $19bn left over. So at this point the FDIC holds $41bn to cover all of the insured deposits in the US? That’s a drop in the bucket! Considering that Bank of America alone had nearly $883 billion in deposits as of year-end and you can see how insignificant the insurance fund amount really is.

“If I invest in a Roth IRA or 401(k), I won’t have to pay taxes on the earnings since I put in after-tax dollars” – OK, I’ve actually questioned this one for a while (see my original post on this subject from July 2007), and my point is still the same: why are we so certain that just because the government currently allows tax-free withdrawals from these accounts in retirement that this will continue to be the case in the future? As the government grows more hungry for tax dollars, the money in Roth accounts represents an easy and ample target.

There are many other pieces of “convention wisdom” that are now called into question, but these are the biggest in my mind. This doesn’t mean that I am cutting myself off from the financial system and buying gold with all my excess cash, but I am looking to hedge my bets. My thought process is that whether my gut is completely right or completely wrong, I want my family to be in as good of shape as possible.

So going forward you will see fewer posts on investing and financial planning topics on this blog, as most of those post would be based on this same conventional wisdom that I am now questioning. Likewise, I would encourage anyone reading this blog and prior posts on these topics to read with a critical and slightly distrustful eye. Future posts will likely focus more on making your money go farther and things that can help you in the short-term.

This idea of counterparty risk should be a concern to you as an individual as well. Why? Well, besides the worry about your bank deposits being at risk (which is a lot smaller issue than many think due to FDIC insurance coverage), you have to worry about the rewards points you’ve earned on your credit cards. Rewards programs have always had the risk of program changes and points devaluation, however now you have the risks of the bank that issued your card either ceasing to exist or being nationalized. If your bank ceases to exist and the account is assumed by another bank, it is almost certain that your rewards program will be converted to one offered by the assuming bank, which could be very different than what you currently have. A bank being nationalized is more of a wild card, as theoritically the bank will be under the same management, but with added pressure from the government to pursue policy objectives rather than profit objectives. It is anyone’s guess what that would mean for credit card rewards programs, but it is very possible high cost rewards programs could be scrapped to free up more funds for programs deemed to be in the “public interest”.

It is for this reason I have all but completely cashed out my rewards on my Citibank accounts. I had about $85 in rewards on my Citi Dividend card I withdrew last week, and I called today to cash out most of my Thank You points for a mortgage payment reward. That brought my Thank You point balance down from around 96,000 to about 2,000, which is a tolerable risk for me.

On a related note, you should also consider gift cards in the idea of counterparty risk as well. If the retailer you have a gift card for goes out of business (i.e., Circuit City, Linens-N-Things, Sharper Image), your gift card becomes worthless. That is the reason I used the Thank You points for the mortgage payment reward instead of for gift cards: of the retailers offering gift cards with a traditional 1 point=$0.01 redemption rate, none of them were stores I felt comfortable that I could spend the full amount in a reasonable period of time with my normal shopping habits (mostly department stores like Macy’s and Dillard’s). The stores I would actually use (Walmart, Target, Home Depot) only offered cards at the $50 level at a rate of 1 point=$0.00833, which isn’t that much better than the mortgage payment reward (1 point=$0.007987 at the $750 level), and considering the additional credit card rewards I would earn using my credit card instead of a gift card the two are nearly identical. Additional pluses for the mortgage payment reward are the elimination of counterparty risk (no chance of a retailer going out of business as I spend the balance of the gift cards) and fewer gift cards to keep up with.