High-yield savings accounts raking in the
customers
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Perhaps it stands to reason that as consumers become
comfortable with online
banking, more and more of them are discovering the convenience
of paying bills online.
For them, depositing a couple hundred dollars and
paying three bills online per month probably isn't a high hurdle
to opening a high-yield account.
"Retail banking is saturated with great players,
and banks have to have superior service or great rates to get customers,"
says Karen Massey, senior consumer banking analyst at Financial
Insights.
"The ones with superior service will retain the
customer, but when it comes to attracting new customers, rates are
very eye-catching."
No-frills online banks pay more
High-yield savings accounts have caught the eye of Jennifer Benedict,
a student at Canisius College in Buffalo, N.Y., who writes a blog
called Broke-Ass
Student. Benedict tries to encourage 20-somethings to become
more financially savvy and avoid the debt that traps so many kids
as they're starting their adult life. She socks her savings away
at iGObanking.com.
"They have a high rate, no strings, $1 to open
an account, no minimums, no fees and a 5.35 percent yield. It's
phenomenal. I get feedback from my readers and some of them say,
'Cool. I never realized these things are out there but I will definitely
look into it.' It's a matter of getting the information out to younger
people. My biggest thing with the education system in the U.S. is
they don't teach enough about personal finance."
IGObanking.com is a division of New York's Flushing
Savings Bank. Marketing director Bill Franz says the online bank
opens the door to expanding their geographic boundaries.
"People are savvy to higher rates, and online banking
makes it convenient to open an account and you have to be aware
of that. We've launched savings accounts and CDs online and we're
looking at what other online banks are doing in terms of launching
checking accounts. It's a way to solidify relationships, and we've
taken note of that."
Online, interest-paying checking accounts appear to
be the next frontier in the battle to get and keep customers. EverBank
has set the standard pretty high with its FreeNet 6.01 percent three-month
introductory yield, which, at current rates, would drop to 3.25
percent for balances under $10,000 after the first three months.
ING Direct, which has long required its savings account customers
to link their account to a checking account at another bank for
the purpose of transferring funds, now has an online paperless checking
account called Electric Orange, which pays 3 percent on balances
up to $50,000.
In fact, the slim product lines being offered by many
online institutions could be beefed up considerably as banks try
to keep customers from bolting to the next bank that's raising the
bar on high-yield accounts.
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