Online Bankers Comparison: Ally vs. ING vs. FNBO

[Ed. Note: This post takes into account only checking accounts at the following banks. It gives no opinion on other types of financial accounts.]

We've discussed what to look for in a checking account and, yesterday, what to do when prior to switching to online banking but we haven't examined any banks. What follows is a cursory overview of checking with three popular online banks. Each of these banks has free checking, free debit cards, and checking accounts which earn interest.

Ally

Ally, formerly GMAC, was elevated to its current position in the tumultuous years following the collapse of Lehman Brothers. It started as an offshoot of GMAC, offering only savings accounts. In time, Ally began to diversify - first offering CDs (Certificates of Deposit) and then Checking Accounts.

Ally gained notoriety early on thanks to its high interest rates (2% at a time when other banks were routinely offering less than 1%) and its bold advertising. While time has tempered Ally's interest rates (the current interest rate for checking accounts is 0.50%) Ally's commitment to customer service has endured.

Personally, we have an Ally account and have remained impressed by Ally's service. Phone calls are answered by customer service representatives, not answering machines. Emails are routinely answered within 10 minutes, not 24 hours. Instant messaging, Twitter, Facebook - all are available as means to contact customer service and ask for help. (Ed. Note: We don't recommend you use social media to discuss private financial matters).

The Good:

1. Ally's customer service is amazing. It's definitely the best in the business.
2. It's virtually impossible to get whacked with a charge of any sort (unless you make it a habit to overdraw your account.
3. 100% ATM Fee reimbursement.
4. Free checks.

The Bad:

1. Returns on investment are rapidly retreating. While we haven't tracked returns on Ally's checking accounts returns on Ally's savings accounts are down from 2% to 1.09%.
2. Returns on investment aren't as high as at other banks.

The Verdict:

1. Ally's customer service has proven impossible to beat but the rapid retreat of returns has us considering other options.

ING

ING is best known in Europe but has gained a lot of ground here in the United States. Much of the ground has probably been gained thanks to the various incentives ING offers. Currently, it's offering $50 to new account holders. [Ed. Note: If you'd like to switch to ING and support us at the same time you can shoot us an
email and we'll send you and invite].

ING has been a pretty consistent presence in the online bank game and makes it very easy to open new accounts once you already have an account with them. Instead of having to formally apply for a new account ING allows a checking account holder to open a savings account, for instance, with a couple of quick clicks. Most other online banks, in our experience, require you to fill out more paperwork if you want to open another account. ING seems to do that for you.

The Good:

1. It's super easy to access online services and ING has really built itself around it's online presence.
2. Fairly large ATM network.
3. They'll mail your checks for you.

The Bad:

1. The return on investment is pretty low - 0.25% since March 2010.
2. ING has a customer service plan on par with Bank of America.
3. We don't like the numerical pin sign-in

The Verdict:

1. ING is a mixed bag. It's ATM network is large but limited. Their customer service is awful but, thankfully, there's not much reason to deal with customer service. One of the cooler things about ING is that since they don't give you any checks they'll mail a check for you (for free) if you fill out the information and if you're mailing it to an ING customer they'll instantly transfer the funds.

FNBO (First National Bank of Omaha)

Since launching its online operation in 2006 FNBO has consistently had one of the highest rates of return of any online bank. While we don't have any direct experience with FNBO (yet) it made our list because it's currently offering an astounding 1.10% return on checking accounts. Whatever the country's largest privately held bank is doing it must be doing it right.

The Good:

1. A 1.10% return on investment.
2. 'MyDeals' delivering savings to you directly via debit card.

The Bad:

1. It's not clear whether failing to move money into/out of your account during a month period will result in you being assessed a fee.

The Verdict:

1. We found this gem "Please note: There is a $2.00 standard fee for 3 day ACH delivery or a $10.00 express delivery fee for next day transfers during our investigation of FNBO's "Pop Money" and it's not clear whether there might be some sort of hidden fee structure in place. Previously, FNBO partnered with Mint.com to deliver a better deal. We'd wait on this one.

Disclosure: We have accounts at both Ally and ING. ING offers financial incentives to those who invite new customers.

Online Banking

Online banking scares a lot of people. Why? We have no idea but we guess that it's less comforting to stare at a computer screen than staring at an actual person. (For the record, we've never won a staring contest with a computer. It just won't blink).

On a more serious note, most banks have discovered that charging customers for getting paper statements is a great way to make a little money every month. But, there is a way to prevent them from taking your money from you. Most of the banks which charge their customers for paper statements allow them to sign up for free eStatements, i.e. online banking. We're here to help you transition.

Since you're already transitioning you should check out yesterday's article on Checking Accounts before proceeding. Whether you decide to stick with your bank or if you decide to change to another bank you should know that the first thing you should be concerned with is computer security.

"What?" You ask. "Computer security? Are you nuts?"

Nope. Computer security IS the most important part of online banking no matter where you live or what bank you use. We don't want to get too detailed but there are a few things you should know before you decide to sign up for online banking.

First, don't sign up for online banking on a public computer. Try to avoid shared computers as well. You're going to want to know what websites your computer's visited and whether it's necessary to run security programs before banking online.

Second, if you don't have an anti-virus program you should assume your computer is infected. Many people use paid programs like Kaspersky, McAfee, and Norton
but we prefer free programs like Avast or AVG. (For the record, we favor Avast).

Third, if you don't have a general anti-malware program like Malwarebytes you should assume your computer is infected. Malwarebytes comes as a Paid or free version. (As far as we can tell there's not much difference between the paid and free version).

[Note on second and third points: Those of you with Macs, you're system is more vulnerable than any other system. Sorry.]

Fourth, you should run your anti-virus and anti-malware programs before signing up for online banking and before you sign into your online banking account (if you've been somewhere suspicious online).

Fifth and final point, when you sign up for online banking pick hard to hack passwords. John Pozadzides wrote a great article on Lifehacker Australia on this subject a few months ago. For more information I'd take a look at this Lifehacker (America) page. The password is, in some ways, the most important part of securing your online banking.

"So," you ask. "Is there anything else I need to know before signing up for online banking?"

Well, there are some incentives, like Online Bill Pay, which we'll cover at a later date but, for now, all you really need to know is that your bank is going to require an email address. You're going to want to make sure your email address has a secure password (otherwise a thief could break into your email and have your bank reset your online password via sending a link to your email and gain access to your account(s)). Our advice is to routinely delete any email correspondence the bank sends you to make it harder for thieves to find out where you bank. Other than that, online banking is a pretty secure endeavor so long as you remain security conscious and don't expose yourself to unnecessary risks. And remember to enroll in eStatements so you aren't charged for paper statements.

Checking Accounts

Since this is a blog about personal finance it only makes sense that we start out by examining the core of personal finance - checking accounts. A checking account is key for anyone interested in personal finance. It serves as the root of virtually all other financial transactions. While it's possible to avoid having a checking account (we'll discuss that in a later post) it's a pretty cumbersome thing to do.

Regarding checking accounts, there are a couple questions you should ask yourself right now:

1. Are you paying for your checking account?
2. Does your checking account pay you interest?

If you're paying for your checking account ditch it. We're serious. You're wasting money if you are paying for a checking account. Sure, the bank may claim that you're getting some benefit by paying for your checking account but that's probably a lie. In reality, all you're doing by paying for a checking account is wasting money.

If you're checking account isn't paying you interest you should also ditch it.

"Wait!" You say. "My bank offers interest checking but I have to pay for it. Does that mean I should ignore the previous paragraph?"

"No." We reply. "You should just ditch the whole dang bank."

Seriously, there are a ton of banks which offer interest checking for free. Sure, most of them are online but they're just as functional as your bank (sometimes more so). And, they pay you to hold your money, just like savings accounts, except usually at a slightly lower rate and without the 6 transaction restriction.

"Okay." You say. "But I don't know anything about online banks. What do I need to know before I decide to commit to one?"

There are six things you should look into before you decide to apply to an entirely online bank:

1. Do I get free checks?
2. Do I get a free debit card (also known as a 'check card')?
3. (Is the debit card a Visa, MasterCard, or (shudder) AmEx (American Express)?)
4. Does the bank reimburse ATM fees?
5. How does the ATM I'm going to use process fees?
6. How do I make deposits?

Presumably, you're going to need to write a check at some point. A bank like Ally (our favorite) offers free checks (50 at a time) while a bank like ING will mail checks for you but doesn't actually give you any real checks (mailing is free). Other banks don't offer any check service.

Most banks will offer a debit card for free. Why not? They love it when you spend money. The only problem will be what network your card is on. Most seem to favor Visa but MasterCard has a strong following. The difference between the two (so long as you stay in the USA) is insignificant. You'll want to be wary of banks offering AmEx cards. It's taken in fewer places than either Visa and MasterCard and it'd be embarrassing to be in a checkout line and discover that you can't because they won't take your card.

If the bank is like Ally it'll reimburse all your ATM fees. If the bank is like ING it'll have a certain 'free network.' Other banks don't reimburse any ATM fees.

Some ATMs (or, I should say, ATM networks) process fees strangely. Local banks, such as Lake Sunapee Bank (as we recently discovered to our chagrin), sometimes don't report the fee as separate from the transaction. Therefore, you won't be getting a reimbursement from any bank because your withdrawal will be reported as, say, $63.73 instead of $60.00 + (fee) $3.73. So, you're going to want to know how your local ATM is going to report fees. (Ed. Note: this last bit of advice applies to all banks, not just online only banks).

Finally, if the bank is online only you're going to want to know how to deposit checks you receive. Unfortunately, most have been rather slow to realize that most of us are loath to deposit a $100 check when we have to deduct the cost of a stamp. Thankfully, some banks (USAA and PenFed (Pentagon Federal Credit Union)) have realized that Deposit@Home is the way to go. Unfortunately, that's not common. But, some others (reportedly) offer to mail you pre-addressed pre-stamped envelopes. We're still waiting to confirm that, however.

Disclosure: Of the banks discussed above we have an interest in both Ally and ING. Our interest is limited to having accounts with both. (Note: If you'd like to open an account with ING you can send us an
email and we'll invite you. If ING accepts your application we are given a small financial incentive. Ally does not currently offer a similar offer).

Purpose

This blog is aimed at helping the average person make and save money.  The advice included here won't be sponsored by corporate interests and we'll never post anything because it makes our bottom line look better.  We're simply trying to help those who don't have enough time to sort through the complex financial system.

The premise is pretty simple.  We're going to review and give some advice on financial services and products.  In short, we're going to look at the banks and their offerings.  But, we're not going to leave our readers out in the cold.  We're going to go the extra mile and help them understand some of the more important nuances of personal finance.

You should expect to see commentary on everything from online banking to stock picks and online safety.