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Paperless checking: new to online banking

Could you get by with never writing another paper check? Despite the fact that some 40 billion paper checks still are written annually in the U.S., the check is more than likely marked for extinction; the only question is: when?

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ING Direct -- pioneer of the online, high-interest savings account -- is offering an online, high-interest checking account dubbed "Electric Orange." The account is hailed as paperless and, although ING Direct's goal isn't to single-handedly deliver the knock-out blow to checks, the trend is progressing as banks seek to cut costs associated with processing paper.

Jim Eckenrode, managing director of banking and payments research at Tower Group, says the time has come for a noncheckbook-oriented account. "So many consumer payments these days may be direct-deposit or electronic-bill-pay. Similarly, if you attach an ATM or debit card to it, you can make purchases at retail stores and get money out of ATMs, so you really don't need a checkbook."

Electric Orange, which is in a startup phase and launches nationwide March 13, has all the bells and whistles necessary to make a checkless account feasible for many people and, true to form, ING is sticking with its no-minimums policy to make this a free checking account.

Debit card and bill pay, too
It provides a debit card that enables customers to access money at any ATM and make purchases wherever MasterCard is accepted. Cash withdrawals are free at ATMs in the Allpoint network.

To avoid fees charged by other ATM owners, the bank advises customers to ask for cash back when using the debit card for store purchases. Funds can be deposited either by electronic transfer from another account or by mail.

The bill payment service is free and, although the checking account is paperless, there is a "Send Paper Check" feature that allows the customer to fill out the details and have the bank send a paper check to other recipients at no charge.

The interest rate paid on the account's balance is subject to change, but the current annual percentage yield is 4 percent for balances less than $50,000, and up to 5.3 percent for balances larger than $100,000.

"This is about letting customers self-select if they want to be part of this new wave of customers who only want to do things electronically as opposed to the old way of writing 30 to 40 checks a month," says Jim Kelly, chief operating officer at ING Direct.

"Even on our bill pay service the number of payments that go by check is declining daily. Most are being sent by ACH transfer now. It's just so much more efficient; why wouldn't you want to do that? We actually give Electric Orange customers the ability to transfer money directly to someone's checking account. You can send a payment to your friend or babysitter and put it right in their bank account. It's the wave of the future; we're just trying to avoid the legacy of the past."

Next: "I don't think that ING Direct wants to be your transaction account."
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