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[P]
Online Savings Accounts

By Delirium in Internet
Wed Jan 11, 2006 at 12:29:01 PM EST
Tags: Internet (all tags)
Internet

In the past few years, there's been quite an increase in direct-to-consumer banking, and in particular online savings accounts: FDIC-insured bank accounts that are accessed entirely online (money is typically moved in and out by electronic bank transfer to and from a traditional bank). Some of these are from online-only banks; others are online initiatives of established brick-and-mortar banks. They often pay higher interest rates than conventional savings accounts, due partly to lower expenses, and partly to the more rate-sensitive nature of the online market.

This article aims to give a short overview of the history and current state of the industry.


Note: This article is very U.S.-centric; sorry to the non-Americans!

1995-2000: The online-banking stone age

It's worth briefly mentioning the rise of online banking in the 1990s as background. As the internet began to become popular amongst the general public, banks began offering online access to their accounts. This led some entrepreneurs to think: Many people are doing much of their banking through a combination of ATMs, checkwriting, and the internet, and you don't need branches for any of that. So, a slew of online-only banks was founded amidst the dot-com euphoria (many, as you might guess, no longer exist; anyone remember CompuBank?). These banks typically offered a similar range of products to traditional banks, and indeed tried to play up their similarity with "real" banks. To hook consumers, they typically offered lower fees and higher interest rates, but only a limited number of consumers were interested.

Fall 2000: ING Direct

In the fall of 2000, Dutch banking giant ING launched a different, and ultimately more successful, take on online-only banking with ING Direct. Rather than an online analog to a brick-and-mortar bank (ING was already a brick-and-mortar bank), ING Direct was (and is) a simple, no-frills savings account paying a high rate of interest, but with no checks, no ATM cards, and basically no other services besides an account in which to park money. Customers are expected to have a local checking account they use for their normal banking, and then transfer money between that account and ING Direct via ACH (automated clearing house, a system of electronic bank-to-bank transfers that typically takes 2-5 days). Somewhat notably, they didn't skimp on customer service--they reportedly have had good email and phone customer service, and now in some parts of the country they have a strange network of brick-and-mortar locations that provide in-person customer service but aren't bank branches, the ING Direct Cafés.

2003-present: More competition

ING Direct was without direct competition for its first three years, but now there are quite a few others offering essentially the same account, including some online-only banks (who arguably should've been the first ones on this bandwagon). I'll mention only a few of the more notable ones.

The next major entrant after ING was in fact an online-only bank, VirtualBank. It had been founded in the late 1990s as the online analog to high-class private banking, aimed at newly-wealthy techies. In mid-2003, they repositioned themselves and offered an account virtually identical to ING Direct's, which they called eMoneyMarket, and which followed the same strategy of no frills and high interest rates (the "money market" here means a money-market deposit account, which is FDIC-insured and basically a savings account; not to be confused with money-market funds, which are a different beast). Being a new entrant, they typically paid a few tenths of a percentage point higher interest than ING Direct, and so gained some customers.

The market expanded rapidly through 2003 and 2004, and a bunch of others began to open similar accounts by 2005. Emigrant Direct, the online initiative of a one-branch local New York City bank (so basically an online-only bank), caused a bit of a stir in January 2005 when they launched a 3.00% APY account at a time when the next-highest rates were 2.25%. HSBC, a global banking giant, entered the online-savings market with HSBC Direct in March 2005. This is an interesting variation, because it adds back in one frill: ATM cards that can be used at HSBC's brick-and-mortar locations worldwide, with very low currency-exchange costs--an interesting attempt to turn their large global network of branches into an asset even in the online-banking world.

Links to more information

BankRate.com seems to have become the canonical site to look up interest rates on. It doesn't have a specific section for online accounts, but you can search for rates on "MMAs" (money-market accounts) in the "checking & savings" section. It's useful to get an idea of what's out there, but beware of simply picking the highest rate that comes back in your search and signing up.

The Fatwallet.com forums are one of the best sources of information, and include some very long threads discussing many of these accounts. As with any forum it takes a huge amount of digging and reading to get the good information, but for raw information it's hard to beat. A good place to start is the Best Current APRs thread, which also links to a bunch of individual threads on specific banks.

I maintain a fairly bare-bones site at pfstuff.com, summarizing the interest rates and pros/cons of accounts that offer good rates but don't have any fees, minimums, or other strange requirements. I've also collected some information on the sign-up bonuses some banks offer, and pieced together enough information to plot historical graphs of various banks' interest rates.

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Poll
I keep my liquid cash:
o At a local credit union 11%
o At a brick-and-mortar bank 38%
o In an online savings account 30%
o Under my mattress 1%
o I don't have any 13%
o Other 3%

Votes: 52
Results | Other Polls

Related Links
o ING Direct
o automated clearing house
o ING Direct Cafés
o VirtualBan k
o Emigrant Direct
o HSBC Direct
o BankRate.c om
o Fatwallet. com forums
o Best Current APRs thread
o pfstuff.co m
o Also by Delirium


Display: Sort:
Online Savings Accounts | 79 comments (67 topical, 12 editorial, 0 hidden)
excellent article (3.00 / 3) (#2)
by zenofchai on Tue Jan 10, 2006 at 09:21:51 PM EST

more people need to take advantage of these rates. i am a happy ING Direct (Orange Savings) customer. it's nice knowing that between investments, my cash grows fairly nicely without me having to think about it.
--
The K5 Interactive Political Compass SVG Graph
second that (none / 0) (#14)
by j1mmy on Wed Jan 11, 2006 at 09:12:58 AM EST

I've been with Ing almost a year and am very happy with the interest I'm earning.

When I closed my old savings account, the manager at my old bank didn't seem to believe me when I said "I can get much better interest rates elsewhere." Haha. Screw them.


[ Parent ]

I use ING Direct (3.00 / 2) (#22)
by Cro Magnon on Wed Jan 11, 2006 at 11:38:09 AM EST

At the time I started, my B&M bank was giving me 0.09% ! One tenth of one percent!! I'd be better off keeping it under my mattress! Since then, the rates have increased, but it's still less than 1 percent compared to ING's nearly 4.
Information wants to be beer.
[ Parent ]
Emigrant Direct currently has better rates (none / 0) (#48)
by flicken on Thu Jan 12, 2006 at 07:30:32 PM EST

I have accounts at both IngDirect and Emigrant. Currently, the majority of my money is in Emigrant due to the higher interest rate.
--
20 mil and I will! Learn Esperanto with 20M others.
[ Parent ]
Absolutely! (3.00 / 2) (#49)
by guidoreichstadter on Thu Jan 12, 2006 at 08:06:14 PM EST

Recieving interest on one's capital is one of the less distasteful parts of capitalism. The nice thing about not having to think about your cash as its growing is being able to avoid realizing the ways that your investments are growing by destroying the social and ecological foundations of life itself. J/K!


you are human:
no masters,
no slaves.
[ Parent ]
hmm? (none / 0) (#50)
by Delirium on Thu Jan 12, 2006 at 08:41:46 PM EST

In ING's particular case, your cash is growing largely as a result of the fact that ING lends it back out to home purchasers financing a mortgage. Or are you against mortgages?

[ Parent ]
Well, I must take a stand somewhere. (none / 1) (#51)
by guidoreichstadter on Thu Jan 12, 2006 at 10:40:29 PM EST

Mortgages are, in my opinion, a red herring. Read:

Our unique approach to banking is backed by ING (NYSE:ING), a global financial institution of Dutch origin offering banking, insurance and asset management to over 60 million private, corporate and institutional clients in more than 50 countries. ING employs over 112,000 people in 50 countries, including more than 10,000 in the US, and has been operating in America for over 100 years. Your money is also FDIC Insured up to $100,000 giving you further peace of mind.

When we talk about ING, let us be clear that we are discussing an institution firmly embedded in the "global capitalist system" (whatever that means to you).

RANTING!

Essential features of this system include the codified subordination of all human values to the goal of profit maximization as well as explicitly anti-democratic methods of control. ING is a facilitating component of this system. ING's shareholders, a non representative minority of the human population with goals antagonistic to many of the fundamental values of the rest of the population, and to zenofchai's values in particular, will use the profit generated by ING's activities to further increase their already disproportionately large control over human societies. They will use their control over the directorship of ING to pursue the maximum profit available regardless of the social costs or conflicts their actions imply. Today ING funds mortgages, tomorrow (and almost certainly already today)it may invest the profits from zenofchai's faithful patronage into the war industries, authoritarian goverments, companies operating without regard for human and environmental "externalities", you get the point. Indeed, ING's operating officers are legally bound to pursue these avenues of advancement if they present a maximal profit alternative- to do otherwise is to violate their fiduciary trust to the shareholders (inc. zenofchai) of this capitalist corporation.

All of this is under the innocent guise of providing "mortgage services" and low cost, easy to use internet banking! Undoubtedly, many families will be well served, thousands of employees provided with financially rewarding jobs and millions of children will enjoy nurturing, stable homes as a result (One of those children may be the Messiah). Lord bless their hearts! ING is indeed performing an economic function with tangible social benefits, to be sure, and, like you and me, is just as certainly playing its own small (or large, as the case may be) part in mundicide while going about "normal daily life", "business as usual," etc. We will conveniently neglect to mention that the associated human process subsequent to the successful arrangement of "mortgage services" involve acceleration of habitat loss, global warming, physical displacement of the less economically vantaged, the funding of a thousand epicycles of capitalist corporate activity with the attendant negative effects outlined above, etc.

So, the question is, is there a better alternative? That is, can we have bread, and roses too? Mortgages without mercury emissions? Internet banking without dissident interrogation? If the answer were no, well, then every machine has its friction, let it go, let it go... But from my point of view, and I am willing to bet from zenofchai's point of view, there is. Should I expound?

Actually, I was just joshing him. He is without a doubt a good man, a bulwark against entropy, and his motives are pure. He's the one who, in his own words, has been known to find some aspects of capitalism "distasteful". I was just reminding him to enjoy the tastier parts!

The guilty parties are those observe an alternative course of action and neglect to create it, myself included. Millions of enlightened leftists wielding a thousand centuries of human cultural advance have yet to create the first online banking service under democratic control, with holdings devoted to financing democratically self managed cooperative enterprises- in other words, economic entities institutionally capable of acting via democratic process on the full range of human motivations, not merely "Profit Über Alles!" In the meantime, the existing cooperative networks could use all the capital they can get.

BTW, thanks for this very interesting article. I have to go- Mom is calling me!


you are human:
no masters,
no slaves.
[ Parent ]

well (none / 0) (#52)
by Delirium on Thu Jan 12, 2006 at 10:46:40 PM EST

I suppose there's not much of a way to respond to that, eh? I don't see anything fundamentally wrong with credit, though. It makes sense that if I lend you money, I'm going to want it back with interest—otherwise there's no reason for me to lend it to you at all. And I don't see anything wrong with capitalism more generally: It's essentially a more efficient version of the barter system (you barter for intermediate tokens), and bartering things I have, things I can produce, and services I can render for the same things I want from others is pretty natural as well. And valuing them at market rates seems like the right thing to do: I get services and/or goods in return for mine in proportion to the demand for each.

Now I'm certainly in favor of safety nets, environmental regulation, and some other such checks, but that's separate from disagreeing with the entire existence of capitalist markets.

[ Parent ]

oh (none / 0) (#58)
by guidoreichstadter on Fri Jan 13, 2006 at 10:38:05 AM EST

Did you mean that it was incomprehensible?

Right- There's nothing "fundamentally" wrong with credit (well, maybe there is...) but there are almost universally things particularly wrong with credit. Just like there's nothing fundamentally wrong with sharing, there can be things particularly wrong with sharing certain things with certain people. You wouldn't lend a gun to a sociopath, would you? When, in the aggregate, we lend money and more generally, control over large parts of the economic system, to "capitalist" businesses, we are doing something much more dangerous. I'm using this meaning for capitalist: a business controlled by external (ie, not actual working members of the business) shareholders exercising voting influence in proportion to shareholding and imposing a command system on its agents and employees that includes the legal obligation to elevate share value maximization above all other goals and values, regardless of external social costs. I maintain that the progressive destruction of the social and biological world in evidence around us is a direct result of these processes. Moreover, by delegating this power to irresponsible hands, we are depriving ourselves of the alternative possibility of using it to create another world based on our own dreams and values.

It should be clear that "capitalism" is qualitatively much more than an "efficient barter system"- at the very least when I barter with an individual I am engaging in a transaction with another human being (potentially) in possesion of the full range of human sympathies, understanding, emotions, cognitive processes, etc.- transacting with a capitalist corporation in transacting with an entity that it constitutionally incapable of valuing anything other than share value maximization. If this operative principle were embodied in a human personality, we would consider that person severly psychologically disturbed. Compound this with the fact that the enourmous size, power, and technology of many contemporary capitalist corporations gives them the capability to inflict severe damage on the world (which is amply historically demostrated- read the news, look out your window, or examine the toxic contents of your own bloodstream), and we see that the matter of how we grow our money is not one that deserves little thought. For the moment, we will conveniently ignore the massive interconnection of these sociopathic organization with the the system of government, an interconnection that ensures the whatever democratic tendencies where imbued in the polity at its conception will suffer the inevitable corrosion to ever more authoritarian modes. How safe are your "environmental regulations" and "social safety nets" when the dominant economic powers (including those performing the function of mass public information distribution) have a constitutional imperative to erase them? Similarly, we will leave for later the social effects that accrue from a major part of the human population spending a majority of their conscious lives within the dynamics of hierarchical command systems.

For the record, I'm not opposed to credit or markets. What I'm trying to suggest is that the capitalist corporations, the dominant orgnizations which operate in the modern context of credit and markets, are eminently unsuited to the role of creating the material and social conditions of human life in accord with goals and desires of most of the human species. I propose in general terms their voluntary replacement with economic organizations controlled democratically by their working members and by the communities which they effect. I don't have time right now to go into the historical and contemporary practice of these kinds of organizations, except to note that they exist in rudimentary form, are growing, and have demonstrated the capacity for unlimited technical and economic sophistication.

Thanks for reading!


you are human:
no masters,
no slaves.
[ Parent ]

misc (none / 0) (#61)
by Delirium on Fri Jan 13, 2006 at 12:44:00 PM EST

Not incoherent, so much as just a gigantic topic. I mean, if you were saying "you shouldn't deposit in bank [x], because they do blah blah", then there's a fairly straightforward discussion to have. But instead you're saying, "you shouldn't deposit in banks, because they're part of the global capitalist system", and the only way to really respond to that is to get into a conversation about the merits of capitalism itself, and that's a conversation that could fill many books.

I don't disagree that the current set up of corporations is less than ideal, but I think on a more fundamental level it's hard to mandate that some sort of global capital market not develop. Once you permit people to barter for intermediate tokens, a lot naturally develops from that: lending and borrowing, international currency flows, hierarchical command systems, and even venture capitalists. I'm not sure how this could be avoided without very restrictive governmental control: Once you let people use currency, let them lend and borrow it, let them start businesses where they hire other people to work for them, and so on, much of the rest follows quite readily, unless you do something drastic like prohibit businesses from growing past [x] employees, or severely restrain capital markets (prohibit people from lending out their money).

I do agree that we can voluntarily replace some large organizations with smaller ones, which may have some beneficial effects. In general, though, large organizations are more efficient, so small organizations will have to do something different to be successful. Ironically, I think globalization is actually one of the biggest driving forces behind promoting niche small entrepreneurs, because they can reach a global audience without huge capital expenditures, just through a website.

[ Parent ]

Clarifying (none / 0) (#67)
by guidoreichstadter on Fri Jan 13, 2006 at 11:23:12 PM EST

No, no- I'm not saying you shouldn't invest in banks, I'm trying to provide the rudiments of an argument why you should, for reasons of self-interest (unless your scope of interests is purely financial), invest in non-capitalist banks, in the sense that I described above- banks under democratic control, rather than ones that are constituted to maximize profit regardless of the social or other effects. Such banks extend credit to non-capitalist, (again, in the above sense) enterprises, that is, democratically controlled worker cooperatives. Maybe its counterproductive to use "capital/ist/ism" in this sense, since it's probably not what most people understand by the term(but what do most people understand by the term?), but it places the focus where I think it belongs by eliciting the role of social organization in filtering/managing human volition and values.

I'm not arguing against the freedom of people to form hierarchical command systems, capital markets, currencies, etc but am arguing for better (based on certain criteria that have wide appeal) alternatives in aspects of these fields, and encouraging people who find these alternatives to be superior for them to integrate with them further and develop them. I'm not arguing for a ban on capitalist businesses, or for a law to prevent people from lending money, or hiring employees. I'm trying to suggest to those who it serves, that there are better options than lending money to people acting against your interests, better options than being an employee, and better options than capitalism (in my sense) when organizing a business. If enough people find self-organization in democratically directed worker cooperatives a superior alternative to employment in traditional capitalist firms, then in the absence of bans on capitalist organization (which I see as wrongheaded for ethical and practical reasons), cooperatives will displace the traditional capitalist forms, mitigate, and repair the damage caused by organizations dedicated to he single minded pursuit of profit. Of course, legislation is already widely deemed necessary to control some of the worst harms caused by the externalities endemic to traditional capitalism.

Your last paragraph suggests some unfamiliarity with the economic scope and size (and potential) of cooperative networks. Existing democratically controlled worker cooperative groups mobilize tens of billions of dollars (US) in financial assets, operate in diverse and technologically sophisticated domains, and display superior productivity versus national averages among millions of cooperative worker members. Democratic worker cooperation, though a nascent (historically about 150 yrs old) development, has proven highly adaptive and is undergoing continuous operational refinement and diversification while demonstrating the organizational ability to execute all aspects of economic activity across the spectrum of advanced industrial society. While constrained by principles of which traditional capitalist corporations are free, worker cooperatives also posses unique strengths arising from the substantively different relationships upon which their organization is based.

In a global economy dominated by democratically controlled worker cooperatives, competition, markets, currencies, and trade would continue, but their character would be significantly changed by the particular purposes to which they are put. Essentially, cooperatives offer the outline of a component of a method by which the majority of the human population can more closely approximate a more decentralized, egaltarian, and responsive co-determination of the trajectory of human cultural development.


you are human:
no masters,
no slaves.
[ Parent ]

thanks for the reminder, guido (none / 1) (#56)
by zenofchai on Fri Jan 13, 2006 at 09:13:12 AM EST

i've been rampant in my distastefulness these past few months. consumerism, etc.

at some point in there (around november?) i made a conscious decision to no longer hate money. not to go so far as to "love money" or anything, but instead of refusing to grow more wealthy out of spite for wealth itself (which i have been doing most of my life), i decided that 2006 will be a year in which i take personal responsibility and grow my own wealth, and take advantage of its benefits, like the greedy, selfish, consumerist, capitalist pig-dog i have become.

(oh yeah, and therefore have more money to do things like build habitat for humanity homes, etc. but after my new macbook is paid for, i guess.)

i'm a bit in a swirling mess of morals and ethics right now. do i take the easy way out, accept being a shallow, potentially happy, american consumer and hope that prosperity outlives me so that i do not have to suffer? or do i suffer now and strive, likely in vain, to change a system so complex and powerful that i will not see a whit of change before i die?

maybe i'll use my "wealth" to buy some "stuff", and with that "stuff" do something "good". could a song about capitalism change the world more than me investing in a "better" bank? perhaps. perhaps not. perhaps i lack the character to make the choice to "suffer now" and just try to use reason to rationalize my way into "choosing" the "shallow" path.
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]

any time (none / 0) (#59)
by guidoreichstadter on Fri Jan 13, 2006 at 10:42:40 AM EST

I hope we can all keep an open mind (and heart) and don't stop looking, and not be so hard on outrselves.

Also, I don't think your potential is as small as you sem to think, or the obstacles as high, or the reward so far. And what is all this talk about "suffering"?


you are human:
no masters,
no slaves.
[ Parent ]

suffering (none / 0) (#60)
by zenofchai on Fri Jan 13, 2006 at 10:48:03 AM EST

global thinking is suffering if you have any empathy at all.
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]
rather than contemplating suffering (none / 0) (#69)
by guidoreichstadter on Fri Jan 13, 2006 at 11:29:08 PM EST

maybe we can work together to actually end it in some instances.


you are human:
no masters,
no slaves.
[ Parent ]
my government (none / 0) (#72)
by zenofchai on Sat Jan 14, 2006 at 07:28:12 PM EST

just killed 17 people, mostly innocent women and children, using an unmanned drone to destroy buildings in a far remote sovereign country.

i think step one is to get bush and cheney out of office as soon as possible.
--
The K5 Interactive Political Compass SVG Graph
[ Parent ]

Indeed (none / 0) (#73)
by guidoreichstadter on Sat Jan 14, 2006 at 09:47:12 PM EST

The US government has been murdering people without interruption regardless of administration for pretty much its entire history. Every administration must be fought. I find it difficult to conceive that any of the probable successor administrations are likely to end the US sponsorship or practice of terrorism. The current US political and economic trajectory also sacrifices an "opportunity cost" measured in the hundreds of thousands or millions of human lives annually that could otherwise be saved.

What are you going to do about it?


you are human:
no masters,
no slaves.
[ Parent ]

the basic reason why interest is paid... (none / 1) (#66)
by anmo on Fri Jan 13, 2006 at 05:04:25 PM EST

... is that most people prefer to hold money today rather than tomorrow. And that is because prefer to consume goods sooner rather than later. That is why those who wait are paid an interest.

If you are willing to lend at zero interest, send me a note, I am willing to take your money.

[ Parent ]

under certain conditions (none / 1) (#68)
by guidoreichstadter on Fri Jan 13, 2006 at 11:26:16 PM EST

I would be likely to lend you money at zero interest or give it to you. Under other conditions, I wouldn't lend you money no matter what interest rate you gave me. I'm not objecting to the utility of interest per se.


you are human:
no masters,
no slaves.
[ Parent ]
This is so boring that my dog exploded. (1.00 / 13) (#3)
by Egil Skallagrimson on Tue Jan 10, 2006 at 11:33:00 PM EST

Please come to my house and clean up the dog entrails.

On the tip, yo: -1000000000000000000000000000000000000000000000000000000000000000000000000000000 000000000000000000000000000000000000000000000000

----------------

Enterobacteria phage T2 is a virulent bacteriophage of the T4-like viruses genus, in the family Myoviridae. It infects E. coli and is the best known of the T-even phages. Its virion contains linear double-stranded DNA, terminally redundant and circularly permuted.

You must be using TNT buttplugs on poor ole Rover (none / 1) (#5)
by NoMoreNicksLeft on Tue Jan 10, 2006 at 11:53:52 PM EST

Cause the Boredomometer only registered this as 3.2... and we all know that it takes at least a 7.5 before canines start detonating spontaneously.

--
Do not look directly into laser with remaining good eye.
[ Parent ]
hmmm (none / 1) (#19)
by khallow on Wed Jan 11, 2006 at 11:21:51 AM EST

It's possible that his dog was a bit touchy and hence set off by something surprisingly far down the scale. But I suspect that there was some synergistic effect from Egil's environment that pushed poor Fido over the threshhold.

Stating the obvious since 1969.
[ Parent ]

It's banking (none / 0) (#23)
by Cro Magnon on Wed Jan 11, 2006 at 11:39:51 AM EST

It's supposed to be boring. I still give it a +1.
Information wants to be beer.
[ Parent ]
All banking related articles should be -100'd (none / 1) (#24)
by Egil Skallagrimson on Wed Jan 11, 2006 at 11:43:19 AM EST

unless they have both sex and violence in them.

----------------

Enterobacteria phage T2 is a virulent bacteriophage of the T4-like viruses genus, in the family Myoviridae. It infects E. coli and is the best known of the T-even phages. Its virion contains linear double-stranded DNA, terminally redundant and circularly permuted.
[ Parent ]

Ing has an office in Halifax (none / 1) (#6)
by MichaelCrawford on Wed Jan 11, 2006 at 12:08:15 AM EST

If you live nearby, they're on the second floor of the Park Lane Mall on Spring Garden Road.

I don't know what sort of services they offer.


--

Live your fucking life. Sue someone on the Internet. Write a fucking music player. Like the great man Michael David Crawford has shown us all: Hard work, a strong will to stalk, and a few fries short of a happy meal goes a long way. -- bride of spidy


Nice. Sometimes we assume too much. (none / 0) (#11)
by fyngyrz on Wed Jan 11, 2006 at 01:51:04 AM EST

Along moderately related financial lines, anyone know of a US-centric investment->loan mechanism similar to Zopa (Zone Of Possible Agreement)? My company is looking for something like this to put some funds into within US borders (for both tax and accountability reasons.) I came up dry with Google; perhaps this isn't legal in the US?

Blog, Photos.

Never heard of it (none / 0) (#70)
by emmons on Sat Jan 14, 2006 at 07:12:00 PM EST

I've never heard of anything like that in the US.. though it looks somwhat similar to a credit union.  I imagine it would fall under the same regulations.

Credit unions are non-profit, customer-owned institutinos.  They used to be somewhat similar to what Zopa looks like but now they offer nearly all the services banks do. They are also generally cheaper and their accounds are insured by the federal government just as bank accounts are.  Membership is usually limited either geographically, by profession, or something similar.  For example, I'm a member of a credit union that serves only stuudents and employees of the public univerisities in my state.

---
In the beginning the universe was created. This has made a lot of people angry and been widely regarded as a bad move.
-Douglas Adams

[ Parent ]

somewhat similar (none / 0) (#71)
by Delirium on Sat Jan 14, 2006 at 07:20:57 PM EST

The general idea of credit unions is similar, but sites like Zopa appear to be a really bare-bones form of it. While a credit union still operates mostly like a financial institution, just a non-profit one, Zopa operates more like a marketplace, matching lenders up directly with borrowers.

[ Parent ]
Right. (none / 1) (#74)
by fyngyrz on Sun Jan 15, 2006 at 03:15:22 AM EST

I've learned of "Circle One" which apparently is a US version of Zopa which is in the process of launching, but have no other useful information. www.circleone.com presents a network login and password dialog, so apparently they're not done cooking as yet.


Blog, Photos.
[ Parent ]

nett better interest (none / 0) (#12)
by dimaq on Wed Jan 11, 2006 at 07:07:20 AM EST

I'm not concerning myself with this matter until banks offer better interest rates... after all bank knows what it's doing so its gain should be over euribor, which means it should offer that much to the customer.

Local banks' interest doesn't even beat inflation.

Sorry, (none / 0) (#16)
by Fon2d2 on Wed Jan 11, 2006 at 10:55:35 AM EST

I can not find a definition for the word euribor. Please explain what it means.

[ Parent ]
found it (none / 0) (#18)
by khallow on Wed Jan 11, 2006 at 11:18:36 AM EST

You need to google for it. The definition is:
Euribor (Euro Interbank Offered Rate) is the rate at which euro interbank term deposits within the euro zone are offered by one prime bank to another prime bank.

Stating the obvious since 1969.
[ Parent ]

well, that's part of the point of this article (none / 0) (#32)
by Delirium on Wed Jan 11, 2006 at 10:26:13 PM EST

To point out that online savings accounts offer better interest than local banks, and therefore it might be smart to keep excess cash there.

[ Parent ]
your online savings accounts are not good enough (none / 0) (#33)
by dimaq on Thu Jan 12, 2006 at 05:11:43 AM EST

not good enough either, that was my point.

[ Parent ]
grandma's life-insurance money... (none / 1) (#26)
by krkrbt on Wed Jan 11, 2006 at 02:22:03 PM EST

is currently wasting away in a bunch of CDs, earning around 4%.  I say it's "wasting away" because current level of price inflation is around 7-8%, and the government has been printing money like mad to pay for everything - iraq, afgahnistan, hurricane reconstructions, corporate wellfare, old-people wellfare, etc.  

So inflation is only going to get worse.  Those of you who were around in the 70's might remember anual inflation rates of >10%.

WIPO:  Under my mattress as Silver and Gold coins. Much more silver than gold, because a 1oz silver eagle is currently ~$10, whereas a 1/10oz gold eagle is somewhere around $60.  It's much easier to trade a $10 coin than a $60 coin, to say nothing of the current powder-keg situation of the silver supply...

I also pay e-gold and e-bullion moderate storage fees on a couple ounces of gold...  Storage fees are, of course, less than desirable, but since I did buy most my digital gold at less than $400/ounce, and considering that gold is now bumping around $550/ounce, I'm not complaining too much.  (That's about 40% in two years.  And if I bought the price retreats instead of the spikes, I would've done even better.  Try getting 20%/year out of your savings account :).  

P.S.  Smart money is currently buying physical gold & silver, the kind that you too can store under your mattress (as long as you're the only one who knows you own it).

Commodities, mututal funds (none / 0) (#27)
by beanloaf on Wed Jan 11, 2006 at 03:04:06 PM EST

So would you also recommend investing in a mutual fund, for example, that is based on gold since its value has been rising lately? Or is it better to physically buy it?

[ Parent ]
I personally prefer the physical metal (none / 0) (#28)
by krkrbt on Wed Jan 11, 2006 at 03:27:49 PM EST

but then again, I'm a bit of a doomsday-proponent.  See my post in the k5 '06 predictions.  :)

I also don't have a lot of financial resources.  So, for my small purchases, physical metal makes the most sense.  If you've got a lot of money, silver/gold stocks & mutual funds might be a good choice.  Of my savings, nearly 100% is placed in gold & silver... My grandmother gave me some matured savings bonds 6 months ago... I cashed out most of them to buy silver coins 4 months ago, and I'm kicking myself (lightly) that I didn't cash out all of them.

But everyone should have some physical gold & silver too, as a sort of "insurance" position.  My dad keeps a stockpile of hundred dollar bills at home.  Those might be good for a while, but the day might come when others won't be willing to trade for a piece of paper.  They'll want to trade for something tangible - food, clothing, etc.  Gold & Silver have been used as money for thousands of years, so I think that if the day comes, I'll probably be able to find someone who will take my silver in trade...

[ Parent ]

I got turned off metals (none / 0) (#29)
by Cro Magnon on Wed Jan 11, 2006 at 04:05:39 PM EST

My mom bought some silver years ago, and the prices dropped like a rock. Also, the people who sold her the silver weren't too honest and wound up in jail.
Information wants to be beer.
[ Parent ]
keep your dollars, then (none / 1) (#30)
by krkrbt on Wed Jan 11, 2006 at 07:32:33 PM EST

... and watch your purchasing power dwindle away.  Silver spiked in the late 70's/1980, and again in 1987 - so yes, those would've been bad times to buy.  

These are different times, monetarily speaking.  The US Federal Government has been inflating the currency supply for over 10 years now.  First we had a "tech bubble", then a housing bubble.  Now the housing bubble (and the rest of the economy) is imploding, and the Fed has turned up the pressure on the money hose - so much so that they won't give out the M3 statistic anymore.

Now the long-term trend on silver & gold is up, and has been since 2001.  It's not that silver has increased in value, but that the dollar is rapidly becoming worthless.

[ Parent ]

that doesn't mean you should buy metals (none / 0) (#31)
by Delirium on Wed Jan 11, 2006 at 07:52:14 PM EST

Unless you think the entire global currency system is going to collapse, if you're wary of dollars, you can just buy Euros.

[ Parent ]
Try Swiss Francs (none / 1) (#41)
by skwang on Thu Jan 12, 2006 at 02:24:00 PM EST

Reading this thread, krkrbt, your concern seems to be that inflationary pressures on the US dollar will devalue your investments. Whether those investments are in cash (dollars), a svaings (bank) account, bonds, stocks, mutual funds, etc.

If you are looking for a "mattress" investment, something that is tangable but is resistant to inflation you could just buy lots of Swiss Francs. As currencies go, it has very little inflation and is very liquid; that is you can exchange it for dollars if you need to buy something.

As others pointed out, if there is some catastrophic event no currency, not even gold or silver, will be worth anything.

[ Parent ]

Gold / Silver are artifically valued. (none / 0) (#34)
by brunes69 on Thu Jan 12, 2006 at 08:56:26 AM EST

Now != 1000 years ago. With modern extraction methods, gold and silver are not really rare. They are artificially overvalued by the jewlery industry. If you really want to invest your money in tangible goods, you should be buying truely *rare* items, like rare earth minerals and collecibles that can not be replaced. Anyone can extract gold from their backyard if they have the equiupment and resources. This is not even taking into account future advances in nanotechnology that will likely allow us to create elements from other elements via subatomic manipulation. But no matter how much resources you have, you can't re-create a Rembrandt. Even nanotechnology would never (at least in our generation) allow one to make a "perfect" copy, Unique collectibles that can not be replaced will always have value.

---There is no Spoon---
[ Parent ]
Who is Babe Ruth? (3.00 / 2) (#35)
by Eight Star on Thu Jan 12, 2006 at 09:55:45 AM EST

All valuation is artificial. The most reliable valuation is that based on utility, ideally basic utility. Invest in capital, preferably timeless capital. Land, tools, food, weapons, vehicles, books.
Invest in people. Don't be afraid to spend assets to build strong friendships, or even just strategic ties. Sometimes it can be very worthwhile to have somewhere to go to in another city.

Oh, and I hate to tell you, but nanites will be pumping out perfect rembrants WAY before they're transmuting elements.

[ Parent ]

Who trades silver when a currency crashes? (none / 1) (#38)
by skim123 on Thu Jan 12, 2006 at 11:57:07 AM EST

My dad keeps a stockpile of hundred dollar bills at home. Those might be good for a while, but the day might come when others won't be willing to trade for a piece of paper. They'll want to trade for something tangible - food, clothing, etc. Gold & Silver have been used as money for thousands of years, so I think that if the day comes, I'll probably be able to find someone who will take my silver in trade...

Really? Someone will give you their food and water for some silver coins? I would think that if there is currency failure, the ensuing economic chaos would make things like non-perishable foods, water, guns, gasoline, clothes, and shelter far, far more valuable than silver or gold.

Let me put it this way: if all of the sudden my net worth went to zero, and all I had to my name was the food, clothes, and tools I had in my house, I wouldn't be quick to part with them, not even for a wheelbarrel full of your silver, mister.

Money is in some respects like fire; it is a very excellent servant but a terrible master.
PT Barnum


[ Parent ]
point taken (none / 0) (#39)
by krkrbt on Thu Jan 12, 2006 at 01:36:47 PM EST

Which is why I'm not putting all my eggs in one basket.  I've got a small stockpile of food (wheat, beans, rice, canned goods) too.

But the thing about metals is that "at least they're not paper".  

Fiat (paper) currencies (such as the U.S. "Federal Reserve Note") are a scam - they always become worthless, given sufficient time.  There used to be "5 & Dime" stores, because a dime was worth something.  Richard Maybury's Whatever Happened to Penny Candy covers how governments always destroy their currency to pay for war & circuses, going back to Roman times.


[ Parent ]

Yeah, I understand (none / 1) (#43)
by skim123 on Thu Jan 12, 2006 at 02:39:40 PM EST

I understand fiat currencies and the continual degredation of a fiat currency's value, but I honestly don't think that precious metals are really worthwhile, as others have noted. Yes, 1,000 years ago gold had perceived value, just like GOOG stock has perceived value today.

I am a bit of a bear when it comes to investing, and agree with Mark Cuban's comments in The Stock Market is For Suckers. He's a bit overzealous in his post, granted, but his basic message of, "You will do better if you take that money and time you spend trying to invest in the stock market and invest in yourself, your own education, your family, etc., you will do much better long term." That is, if there is currency collapse in the US - which I think would be hard to come by seeing as we have the world's majority of guns and butter - I would fathom that one's intelligence, social network, and ability would far surpass the value of some silly alloy. I tell you, if a economic armeggedon ever comes, I'm dragging the wife out of the city and back to the Midwest where my parents still live in a small town of ~2,000 folks. I may be romanticizing a bit, but there seem to be more honest and capable people in the country than in the city, and those would be the kind of people you'd want around you if the shit hit the fan.

Money is in some respects like fire; it is a very excellent servant but a terrible master.
PT Barnum


[ Parent ]
actual value of silver (none / 0) (#64)
by krkrbt on Fri Jan 13, 2006 at 02:02:30 PM EST

Yes, 1,000 years ago gold had perceived value, just like GOOG stock has perceived value today.

Silver has more than perceived value, as it is used for any number of purposes.  Copper, Silver and Gold are all in the same column on the periodic table.  Copper gets used for wiring/etc because it's the most common/cheapest of the three, but all share similar properties.

"The Silver Institute" on uses of silver

Steel bearings electroplated with high purity silver have greater fatigue strength and load carrying capacity than any other type and are hence used in various hi-tech and heavy-duty applications.
...

Silver is the best electrical conductor of all metals and is hence used in many electrical applications, particularly in conductors, switches, contacts and fuses. Contacts, a junction between two conductors that can be separated and through which a current can flow, account for the largest proportion of electrical demand.
...

In electronics, silver is also widely used. Uses include silk-screened circuit paths, membrane switches, electrically heated automobile windows, and conductive adhesives.
...

Silver's unique optical reflectivity, and its property of being virtually 100% reflective after polishing, allows it to be used both in mirrors and in coatings for glass, cellophane or metals.
...

Silver paste is used in 90 percent of all crystalline silicon photovoltaic cells, which are the most common solar cell, according to the Photovoltaic Technology Division of the U.S. Department of Energy. And all silicon cells used in space to power satellites use silver in the form of evaporated metal to make the electrical contact.
...

Gold is used in satellites (as an Infra Red reflector) and electronics, but hasn't really been used industrially because of the cost.  

I've read, from various sources, that there's been a silver shortfall in the last decade.  That is, more silver has been used by industry than has been pulled out of the ground.  Back in the 90's sometime one of the big investors (Warren Buffet?) bought himself 129 million ounces of silver.  The U.S. Treasury used to have a couple billion ounces of silver, but that's all gone now, and they have to buy silver on the open market to produce the $1 Silver Eagle coins.


[ Parent ]

But the point is... (none / 0) (#65)
by skim123 on Fri Jan 13, 2006 at 04:20:50 PM EST

I'm not saying that silver and gold don't have applications in industry, but the whole argument here is that after some economic meltdown, that silver or gold will have value. And I remain steadfast that in such dire times your silver coins will be as worthless as someone's pieces of paper that show their ownership in Google, or little reserve notes from Uncle Sam.

Is silver or gold a good investment? Perhaps, but I think you're fooling yourself if you say that either metal will have any kind of real value in some bleak scenario where the US Federal Reserve defaults. And regarding the investment value of either metal, they are only as worthwhile as others believe them to be, as so goes for GOOG stock, Federal Reserve notes, and so on.

Money is in some respects like fire; it is a very excellent servant but a terrible master.
PT Barnum


[ Parent ]
Ironic, if you think about it (none / 0) (#40)
by Cro Magnon on Thu Jan 12, 2006 at 01:42:02 PM EST

In a worst case situation, lead (bullets) might be more valuable than gold!
Information wants to be beer.
[ Parent ]
Eh? (none / 0) (#44)
by awgsilyari on Thu Jan 12, 2006 at 06:20:16 PM EST

but then again, I'm a bit of a doomsday-proponent.

So, when Doomsday strikes, you believe there will be copious uses for gold and silver?

Do you think you'll be able to trade it for something? Don't bother coming to find me, I'll look at your gold and wonder what the fuck good THAT'S going to do for me. Food, on the other hand...

If you're really preparing for Doomsday (and you believe it is imminent), start stockpiling food and water, get yourself a safe place to live... And blow the rest of your money on cool shit! It'll be worthless soon, but it ain't worthless now, and you can have a bit of fun. Alternatively, you can live like a hermit now, and in the end be left with a ton of soft shiny metal and an urgent need to eat...

Gold & Silver have been used as money for thousands of years, so I think that if the day comes, I'll probably be able to find someone who will take my silver in trade...

Gold and silver were used in times of little natural strife. When ten thousand volcanoes are simultaneously exploding, things get a little different. If the world is falling apart, and I need food, I'm not going to trade for it, I'm going to kill for it.

So you might argue that the chances of worldwide catastrophe are low. You're probably right. Maybe it's only the US that will collapse. So then, isn't the prudent course of action to simply move elsewhere, somewhere you have more confidence in? Stockpiling shiny metal doesn't seem logical.

--------
Please direct SPAM to john@neuralnw.com
[ Parent ]

7-8% price inflation? (none / 0) (#47)
by mikegalley on Thu Jan 12, 2006 at 07:02:57 PM EST

Just curious, where did you find 7-8% "price inflation"?

U.S. inflation rate is commonly determined by taking the Consumer Price Index (CPI) compiled by the Bureau of Labor Statistics. It was around 3.4% at the end of 2005.

[ Parent ]

price inflation (none / 1) (#62)
by krkrbt on Fri Jan 13, 2006 at 12:47:27 PM EST

... lots of things are tied to the CPI - social security payments, wages stipulated in labor contracts, interest rates on federal bonds, etc.  Therefore, there is a tremendous pressure to keep the CPI statistic down.

Several big-ticket items are missing from CPI:  energy, housing, health care, day care, local phone, long distance tax, garbage collection.  

I don't remember where exactly I got the 7-8% figure, just that I did read it somewhere.  It sounds like a reasonable number to me, considering the explosion in the price of housing (in certain parts of the U.S.), health care and energy in the last year or two.  

[ Parent ]

I don't know the inflation stats (none / 1) (#63)
by Cro Magnon on Fri Jan 13, 2006 at 01:54:50 PM EST

But it seems to me that some of the luxuries (computer, TV, DVD player) are going down (skewing the stats), while the neccesities (food, healthcare, housing, gas bills) are shooting up like a rocket!
Information wants to be beer.
[ Parent ]
Why use a savings account? (none / 0) (#36)
by ChaosEmer on Thu Jan 12, 2006 at 11:17:14 AM EST

I used to use a savings account to store excess cash that I don't expect to use. I have since moved over to CDs, which provide a much higher interest rate, with an early withdraw pentalty if I find I need to use the cash now. It seems like its much better to invest in CDs, you get a higher intrest rate for money you probably were not going to spend anyway.

they're more liquid (none / 1) (#37)
by Delirium on Thu Jan 12, 2006 at 11:33:46 AM EST

I do use CDs when I'm sure I won't need the money, but savings accounts allow me to just dump all excess cash there and retrieve it as necessary. Plus, CDs don't pay a "much" higher rate of interest, just a marginally higher. I'm currently getting 4.25% in my savings account, while the highest 1-year CD I have find is around 4.7%.

[ Parent ]
EBanks (none / 0) (#42)
by SpaceMonkeyGrif on Thu Jan 12, 2006 at 02:25:17 PM EST

Or IBanks or whatever are wonderful ways to launder money as well.

But as for me... All my assests are tied up in pork-bellies.

Re: non-Americans (none / 0) (#45)
by Scrymarch on Thu Jan 12, 2006 at 06:22:52 PM EST

That's ok, it's touching to see the US catching up to the developed world in these matters.  Maybe you can stop using cheques soon too.

that's not the case as far as I can tell (none / 0) (#46)
by Delirium on Thu Jan 12, 2006 at 07:02:19 PM EST

The first major European high-interest online savings accounts were introduced after the US's—even European banks like ING introduced their US offerings years before their European ones (although they did introduce their Canadian offering a few months before their US one).

[ Parent ]
You might be right on the initial release (none / 0) (#55)
by Scrymarch on Fri Jan 13, 2006 at 04:58:15 AM EST

... but the takeup seems to have been better outside the US.

ING Direct was without direct competition for its first three years, but now there are quite a few others offering essentially the same account

The UK had competition between existing banks in online accounts in 2001.  Oz also had multiple vendors around that time.  That says to me the market was bigger outside the US.

In general, the US often gets by with lower-grade tech because the size of its market gives it economies of scale in a business sense.  Just look at the NYSE, still with market-makers and paper trading.

[ Parent ]

still a bit of a generalization (none / 1) (#57)
by Delirium on Fri Jan 13, 2006 at 10:04:16 AM EST

As far as I can tell, the UK and Australia are still the only countries outside the US with any sort of major presence of providers of this sort. In Canada, where ING Direct introduced an account in the late 1990s (their first), they are still the only such provider. The online-banking market in continental Europe doesn't look very good either, mainly due to heavy regulation favoring traditional banks.

[ Parent ]
It's interesting from an economic standpoint (none / 0) (#53)
by the77x42 on Fri Jan 13, 2006 at 03:18:27 AM EST

Economists suggest that banks are so huge in their physical structure so people feel they can trust them more since the bank has to recouperate the initial cost of construction. Compare this to a 'bank' on the side of the road operating out of a van with its engine running... who would you give your money to?

The internet in this respect doesn't give much weight to the economic model. You'd think that these online banks with little (comparative) initial cost would be less used because people would find them hard to trust.


"We're not here to educate. We're here to point and laugh." - creature
"You have some pretty stupid ideas." - indubitable ‮

there's a few things that make it matter less (none / 1) (#54)
by Delirium on Fri Jan 13, 2006 at 03:58:48 AM EST

The biggest one is FDIC insurance: Even if the bank goes under tomorrow, the federal government insures your deposits up to $100,000. So the only real disincentive to dealing with flaky banks is that you don't want flaky service—if they go bankrupt, that's not really a problem, but if their website is down every other day, that might suck.

Another one is that many of these online banks are actually direct-to-consumer arms of large established financial companies, like ING.

[ Parent ]

etrade bank (none / 0) (#75)
by mpalczew on Sun Jan 15, 2006 at 08:18:17 PM EST

etrade bank has been around for quite a while now.  Before 2000.  It provides all the services you would expect.  Doesn't really seam like a big deal.  If you have enough money you're going to be getting good rates on cd's anyway.  If you don't have much money it makes little difference with todays low rates.
-- Death to all Fanatics!
just another experience (none / 1) (#76)
by dark ally on Fri Jan 20, 2006 at 03:35:58 PM EST

I use ING Direct both for my house mortgage (great rates, although not the best experience getting the paperwork done) and a line of credit.

My primary checking/debit/ATM account is through President's Choice Financial, which is associated with the local grocery chain.  No charges for normal banking and store points.

However, there is something to be said for having an account at a normal brick & motar bank branch if for no other reason than to handle rolled coins and strange items like traveller's checks and foreign currency money orders.  A bank manager is also sometimes necessary for proof of identity.


President's Choice (none / 0) (#77)
by Comrade Wonderful on Wed Jan 25, 2006 at 02:45:08 PM EST

made the most vile generic foods. I recall their peanut butter with particular distaste.

[ Parent ]
Rates continue to climb ? (none / 0) (#78)
by banking on Sat Feb 10, 2007 at 08:57:53 PM EST

HSBC now has an internet savings account with up to 6% rates. Bankrate.com is still themost comprehensive but savingsaccounts.com has more information on online accounts. The site needs an overhaul though...

Another resource for savings acount info (none / 0) (#79)
by mla on Wed Mar 14, 2007 at 04:51:56 AM EST

Here's another list of online savings accounts. It's sortable by your expected deposit size and has a rate of history for each account.

http://mla.homeunix.com/online-savings-accounts/

Online Savings Accounts | 79 comments (67 topical, 12 editorial, 0 hidden)
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