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Relatively recently, ING started offering an all electronic checking account, Electric Orange. Intrigued, I decided to try it out. While Electric Orange has some uses, it is probably not worth the trouble of moving your money there.
Online-only banking is becoming popular with people looking to maximize the interest their bank deposits earn. HSBC Direct, ING, Emigrant Bank Direct, and a few others have had online only savings accounts for a while now. As these involve less costs for banks, they tend to offer interest rates well above ordinary brick and mortar deposits. For example, at a time when regular HSBC savings accounts yield almost 0%, HSBC direct offers 3%. A couple of disadvantages that come from this low cost structure often include a limited number of transfers per month (as far as I know it's six) before an online-only savings account starts incurring fees and may be closed, and the way you make deposits.
With this in mind, here's what's good, not so good, and bad about ING's Electric Orange.
1. ING's Electric Orange, being a checking account, gets around the transaction limit issue. If you make a lot of electronic deposits and withdrawals (e.g., you sell things online and transfer funds back and forth through Paypal), this account might be worth considering.
2. The account earns interest.
3. Unlike other similar accounts, like HSBC's online payments account, you can send paper checks. You write the amount, what it's for, and the payee's name and address. ING sends out a paper check the next day. You incur no postage fees. If the check needs to get somewhere the next day, ING offers this option, but you have to pay extra. If you don't want to send a paper check but have the payees account information, you can send money electronically.
4. What's convenient about writing checks online is that you know exactly what your balance is. It's hard to bounce a check by accident.
5. Like some other banks, ING offers a line of credit (should you want it). Instead of insufficient funds charges, when you draft a check for more than is in your account, you take out a loan from ING. The last time I checked, it was around 7% interest, and the maximum you could borrow was $1,000.
6. The layout is very easy to use. You also have fast access to ING's other products, like the savings account, certificates of deposit, and Sharebuilder.
7. Signing up is quick and easy. ING requires less documentation than other banks (this may have identity theft risks, but I prefer having to provide as little information about myself as possible).
The Not So Good
1. When you write a check, ING deducts that amount from your account. You do not earn interest on this deducted amount. If the check isn't cashed within 90 days, the money is placed back into your account.
2. The paper checks are pretty much useless. We use checks to pay our credit cards, tuition, loan payments, and at places like the doctor's office. We also give checks to family members and friends, as well as contractors, repairmen, supermarket clerks, and the like. We can divide these into two groups: payments that can already be done electronically, without paper checks, and payments where we present a physical check.
Credit card bills and some tuition and loan payments can be done online. If you're already using an online-only checking account, you already know how to pay for these things online. Sending a paper check from ING can result in lost or late payments, and you don't earn interest on the money removed from your account when you draft the check.
Tuition and loan payments that require payment coupons (those things that you're supposed to include with your check--they state your account number, how much you owe, etc) cannot be made with Electric Orange. This is because you have the coupon at home, while the checks sent from ING are in South Dakota. This is all to say that you can't send payment coupons (or letters, etc) with your checks.
The ING check also comes in a difficult to open envelope that looks like junk mail. People working at billing processing centers might discard the envelope. If they succeed in opening it, they may wonder who the payment is from and what it's for. The space in the memo is limited. As no letter or payment coupon accompanies the check, there are potential problems here too.
While Electric Orange has some uses above (it can be improved, for instance, with an add a letter function), it is useless for "bring your checkbook with you" situations. If you want to pay for your doctor's visit with a check, give a last minute cash birthday gift, or pay for groceries, you can't use Electric Orange.
I wanted to see if I could get around this limitation by having the check sent to me, so that I could then give it to the payee. The payee's address is on the check. If I want to receive the check intended for the payee so that I can later give it to him, my address will be on the "pay to the order of" portion instead of his. Some payees and banks will not accept this.
Moreover, say you don't know who to make the check out for or for how much. With ordinary checks, you just take your checkbook with you. With Electric Orange, you can't send the check to yourself to fill out later (and anyway, imagine sending a blank check through the mail--not a good idea). An improvement here would be having the ability to print the check at home.
1. No physical location to make a deposit. You need an existing bank account from which to transfer your deposits to ING. Unless all your funds come from direct deposits, this is inconvenient.
2. Five day holds on deposits. Given #1 above, you can't deposit cash directly into ING. Say you have to make a payment today, don't have enough in your account, and don't want to use your line of credit. With a regular bank checking account, you simply deposit cash, write your check, and mail it. With ING, you have to wait for funds to be transferred into Electric Orange, and then wait five days to use them. If you want to deposit a check into ING, it takes even longer, because you also have to wait for it to clear your regular bank. Since you need a regular checking account anyway, there's no point in using Electric Orange. Yes, Electric Orange earns interest, but
3. The interest rate is not very high.
4. Apparently, ING sends electronic payments instead of paper checks when it has the payee's account information. This can lead to problems, as Joe recently found out. His rent payment was canceled because ING tried sending an electronic payment instead of a paper check. Joe points out that this can have disasterous effects. Credit card companies, for instance, often make their interest rate higher if there's a late or missed payment. This sort of thing cannot happen with regular checking account.
While innovative, Electric Orange is not very practical. As far as online only accounts go, its only advantages are that you can send paper checks (which work best in situations you don't need paper checks and work worst when you do) and you don't have a transaction limit. There is lots of room for improvement. Extra features, like being able to attach a letter or a scanned copy of a payment coupon, would go a long way to making Electric Orange useful. You might want to consider the account if you like the idea of an online only account and usually have lots of electronic transactions.
If you're looking for a free checking account that earns interest, you might consider Charles Schwab. Just recently it yielded 3%, but as of 10/27/08, it pays 1.75%, which is still pretty good.
This Electric Orange review will be updated every six months or whenever I become aware of changes to the account.
Feel free to leave a comment about your experience with Electric Orange. Please let me know if anything above is inaccurate.
October 30, 2008