If you’ve been on the YNAB site for only a few minutes you’ve probably already become familiar with Rule One of the YNAB Way: Stop Living Paycheck to Paycheck.
Basically what we want you to do is to take the money you earn this month and spend it/save it next month.
In a prior savings tip I wrote about using an ING High-Yield Online Savings Account (HYOSA people are calling them now — I love acronyms as well) for your Rainy Day Funds (Rule Three). We’ve been using one fantastically well to save for Christmas this year. It should be merry.
However, today I’d like to answer a question I receive from quite a few people regarding the Rule One Buffer (your ‘Buffer’ is the the money you earn in January that will be used in February…earned in March that you’ll use in April, etc.):
Do you ever keep your Buffer somewhere else so you’ll earn interest?
To be honest, I never have. There are a few reasons:
1) It’s a pain to have to move money back and forth. Even if I automate it, I still have to kind of have it in the back of my end.
2) There are two extra transactions I need to record in YNAB. Granted, they’re just transfers, but I try and minimize transactions overall.
3) The Buffer serves to help me if I have an overage (Rule Four). I can basically “borrow” from that money until the next month when YNAB forces me to pay it back.
However, a few Savings Tips readers pointed to ING’s Electric Orange account and I decided to give it a good look.
What is ING’s Electric Orange Account?
It’s an online-only checking account, plain and simple. I’ve had my same checking account for about nine years and have been hard pressed to switch. A few benefits with the ING Electric Orange account have really started to tug at me:
1) I can earn interest on my Buffer money. Now I don’t need to worry about those problems I mentioned above. The money sitting there has an interest rate that’s about 20x better than I currently get at Wells Fargo. (If you keep $50k+ in there the rate actually bests most online savings accounts.
2) I don’t need to pay ATM fees. For Julie’s birthday we went to Melting Pot (I don’t recommend it, by the way, except maybe for dessert). I don’t carry cash on me — it’s something I need to change, I know. At any rate, I didn’t have any cash and we used the valet parking because it was a lot cheaper than the rip-off garages everywhere else. So…I was stuck without cash. I jogged over to a random bank across the street and pulled cash out of their ATM – $3 fee. Lame.
According to ING, if I had been using their Electric Orange account, they would’ve covered the fee for me (I suppose they can, since they don’t have any physical branches…WAY less overhead…).
My first thought is…yeah, but which ATMs? I did a quick check and found there are three qualifying ATMs on my way from the office home (and it’s a 7-minute commute by scooter). It just needs to be on the Allpoint network. Fair enough.
3) Free bill pay. Wells Fargo charges for their bill pay service. I don’t know if your bank does. I think if I have some absurdly high balance with them then they wave the fee. Bill pay is a weaker benefit for me, since I usually set up online payments at each vendor for automatic pulling. However, lately I’ve been wanting to reign in the information that’s floating around out there about us, so it may not be a bad idea to have just one place keeping all of the sensitive data. Point ING Electric.
4) Write checks online. Save on postage. Julie and I don’t write a ton of checks, but it’s enough to dislike doing it. With ING Electric Orange you simply enter the payee information (name, address, etc.) and ING sends the check on your behalf. I save half a buck on postage/envelopes. Nice.
5) Electric checks. This one, at first glance, sounds a lot like Paypal — which I like. It turns out this is basically just an interface to input your friends’ routing/account #s and the you can send them money (they need to enter their routing/account # to receive it as part of a security check). This isn’t as slick as Paypal, but it does go from bank account directly to bank account, so that’s a big plus. I wouldn’t say this benefit has nearly the pulling power as the others listed previously.
6) A Mastercard debit card. This is hardly an extra perk. Every checking account offers this now.
7) Tight integration with your ING HYOSA. Money transferred from one to the other is instantaneous. This is fantastic if you like to maximize every penny you have earning interest.
The Savings Monetized (Sort of)
If your average checking account balance is $6,000 (not at all unusual for a YNAB Budgeter following Rule One), you’ll earn $30 per year in interest (at the time of this writing). Yeah, that’s not much, but it’s worth it.
Assuming you write and send four checks per month, you’ll save an additional $24/year on postage/envelope costs (roughly).
If you ever get nailed with ATM fees (I’ve been stuck w/o cash and a Wells Fargo nearby twice this year), you’ll save there again. For my own calculation, I tacked on four ATM visits at an average of $2.50 a pop – another $10/year savings.
Time. Ah, how do you monetize time saved? I’m not sure. If I save 20 minutes each month because I don’t have to write checks by hand, stuff the envelope, and mail them…that’s 240 minutes each year..4 hours..$400. That’s how I calculate time savings at least :)
A Few Other Fine Print Bonuses
Usually the fine print is where you’re nailed, so I read all of it. I was pleased to find this little nugget:
You pay interest if your balance drops below zero and you use your Overdraft Line of Credit. Unlike traditional banks, Electric Orange does not charge a fee to use your overdraft, and there’s no fee to sign up. If you use it, you will only pay interest on the amount you borrow.
We’ve overdrafted once in our life using YNAB. I think it had something to do with transferring money…I can’t remember exactly why. I think we had thousands sitting in another account and it was supposed to be in the checking account or something..and the IRS cashed our tax check. Yeah. I blame it on the IRS.
So anyway, for some people, you get nailed with a $30 overdraft hit every single time you run a charge when you’re in overdraft mode. You’ve got to stop overdrafting, but it’s also nice to not be hit $30 every time.
Also, the other day a babysitter of ours said she’d lost our $20 check for babysitting. I looked up what Wells Fargo charges for a stop payment on a check…$35. ING charges $25. (We didn’t do the stop payment, by the way).
I Just Re-Read This. It Sounds Like an Advertisement
Yeah, let me give you a downside. There aren’t any brick and mortar banks to visit in connection with this account. My plan is to keep my original checking account but not really use it for anything — just link it with my ING Electric Orange account.
Sorry this sounds like an advertisement. The Electric Orange account isn’t a completely new product. It’s been out for several months now. I wanted to wait a while before I checked it out to see what others have said about it. So far I haven’t heard any negative reports.
At the end of the day, this is about saving money. You’ll save on checks, postage, envelopes, time, atm fees, and overdraft fees. You’ll also earn some interest. It seems like something at least worth checking out.
I’ve thought about using the ING checking account, but there aren’t any benefits over my current account. I have my checking account at USAA and get refunds on all ATM transactions (from any ATM), free bill pay (they’ll mail checks to individuals as well), and no fees (except for shipping checks. I actually kind of like the idea of the electronic check, but probably not enough to switch, and I don’t earn any interest to speak of. For the way we use our accounts, it works out great for us, but everybody is different.
Yeah, the USAA account is phenomenal. My brother (in the Air Force) uses it as well and praises its benefits often :) Unfortunately, not everyone has access to those benefits!
One comment about the ING ElectricOrange account and ATMs. They cover the fee at any “Allpoint network” ATM, not just any ATM.
I have a USAA account, too. I just keep some money in there (it earns a tiny amount of interest) to cover needed ATM withdrawals (because of the ATM fee refund), and any paper checks I have to write (very few). Everything else is in my ING Electric Orange account. I have a recurring weekly item in my to do list to make sure the amount of money I decided on is in the USAA account.
For us being able to have an unlimited number of savings accounts with NO minimum balances and NO fees allows us to have an account for each savings category at NO cost. We have a ING savings accounts for our Buffer Fund, Emergency fund, Sinking fund, Christmas fund, Furniture Fund, MasterCard Fund, and Computer Fund. We set automatic transfers from our Electric Orange checking account to each Fund according to our budget on the second day of each month and schedule the payments that are not automatic debits to be paid on the third of each month from money transferred from the Buffer Fund on the first of every month. We have been a very delighted customer of ING Direct since January of 2001 and we have never paid even one penney for any fees or charges and ING Direct has paid us $3,306.43 as of 31 July 2009. We transfer all interest paid to the Christmas Fund on the first of each month. Christmas is not in our budget because ING Direct provides our Christmas money.
Brad
@Brad — wow. That is inspiring. I love the fact that you’ve made ING your Santa Claus :)
I have been a customer of ING Direct since May 2005 and have been using the ING Electric Orange checking account for over a year now (almost 2 years??) and LOVE IT!!!!. We actually love it so much that we made it our main operating account instead of just an efficient way of getting to our emergency fund.
I have tried other online banks before and in my experience, nothing beats ING Direct’s customer service (you actually speak to a human being!!!!), user interface (soo easy to use), and ability to transfer money with just a few clicks.
I HIGHLY RECOMMEND
I have had an ING Orange Savings account for several years now and recently opened up an Electric Orange Account just because ING had a promotion where they would deposit a $50 bonus in your account if you used the card for 3 pin-base transactions within the first 45 days of opening the account. That was easy for me and I love free money.
I hadn’t really used the account since and it’s just sitting there with only a few dollars in it, but this post has definitely made me rethink that. I think I’m going to set up some of my payees with the Electric Orange and see how I like it and determine whether to use the Electric Orange as my primary checking account or not. I’m so used to Bank of America’s bill pay system, that I’m a bit hesitant to switch, but it’s worth a trial run at least.
Question though, since I will still need to keep my Bank of America checking account for emergencies when I will have to hand write a check, and it takes a couple days to transfer from my Electric Orange to my BoA checking, how do I determine how much money to keep in my BoA checking account for those emergencies?
I have looked at the Electric Orange account. A better deal for me is the online only account at Global Credit Union. You must be a resident of Washington or northern Idaho (or immediate family of an employee) to open an account. The interest rate is currently 3% for account balances up to 10,000. They waive all ATM fees. Free bill pay. Paperless statements. No actual physical checks. The only “catch” is you have to have 12 debit card transactions per month.
@FBCInvestor, even with that catch of twelve debit transactions per month, that still sounds phenomenal. Thanks for sharing!
We’ve been using E-trade for quite a few years. Since we don’t have a large “savings” this has worked very well for us with a much higher interest rate than a regular savings account at our bank. We pay many of our bills directly through our physical bank’s bill pay service.
We have ING Savings and Electric Orange accounts as well. One thing to be careful of as you move money back and forth, you are limited to 6 transfers out of your Savings account per month.
This has not been a problem for us, but it is something to watch.
I am a HUGE fan of ING Direct for both checking and savings. What I did to get around the “deposit” issue was to direct deposit my salary check, and to open an account w/a local brick & mortar credit union and link it to my ING account.
Works like a charm… :-)
I have an ING savings account just for my real estate taxes, so I am never scrambling to come up with the money at the last minute. I have $25 a week automatically withdrawn– once you get used to it being out of your checking, you won’t even miss it. If I happen to have a bit of extra money in my checking, I will only transfer the balance needed to make the tax payment out of the ING account, and leave the remainder in. Then I am ahead of the game for the next tax payment.
I’ve used ING savings account since 2005 and opened an Electric Orange account on May, 2008. I changed all my bills, direct deposit, and any ACH payments to automatically draft. It served me well, but I started to come across smaller banks offering Reward Checking accounts that had interest rates close or higher than CD’s. After a lot of reviewing I opened up an Charter TurboChecking account in August, 2008. It allowed me to open the account online (out of state), which sent me documents in the mail to finalize and I than used ING direct to actually fund the opening balance. It offered 6% APY versus ING’s .25% APY, but has slowly been lowered to 4% APY, which is still extremely impressive. It also provides free access to ATM’s nationwide that is credited back at statements end when requirements are met. You can review the account at: http://tiny.cc/EV4BV. You can find many more by googling Rewards Checking. I have had great service and enjoy the benefits. I still use Electric Orange to link my Chase local account and to link the Charter account in New Mexico. ACH transfers from ING to other banks is completely free, but takes like 2 to 3 days for the transfer. So I still have my direct deposit go to ING and have automated transfers set to send to branch. So basically I use chase to just deposit any gift money, rebates, or whatever. I use ING solely to transfer money around. I use Charter for its high yield interest bearing and thanks to YNAB’s 1 month cushion 2 or 3 days for money being transferred is not even a big deal. It has worked great for me. Just more for you to think about when you get accustomed to ING direct.
This sounds really good. We have been with our credit union for many years but am definitely considering this. Would keep our credit union account open though just in case and due to the fact that my dh feels a bit uncomfortable about online anks and at this time does not want to set up direct deposit to one. He is willing to give it a try though if it will save us money.
I opened an ING savings account back in October of ’08 when I started to pay serious attention to my budget and expenses during the economic downturn…and I’ve never looked back. I love them. The customer service is awesome, it’s incredibly easy to set up accounts, and their interest rates are so much better than my brick and mortar credit union. I also love their saving philosophy. It fits perfectly with the YNAB philosophy. I followed Jessie’s advice and set up separate savings account funds for Christmas, car repairs, a new laptop, etc. and I named them and set up auto transfers. It’s so seemless, i sometimes forget I have them!
I have been using ING for a couple of years now and started the Electric Orange about 6 months ago. Every payday I transfer money from my regular checking account (required by ING) into ING savings. Then the day before my bills are due, I transfer from ING savings to ING checking (instantaneous). It’s all automated, and YNAB’s scheduler keeps it up to date for me. Works great!
ING Direct’s customer service is OUTSTANDING! They consistently do a good job making things easy.
I live in Wisconsin and bank at WCCU, some of the credit unions in Wisconsin have started “green” checking accounts with great perks. I’m earning 4.05% on my checking account balance from $.01 to $30,000. All I have to do is use my debit card as a non-pin based transaction 10 times per month, have one automatic deposit or withdrawal each month, and log into online banking once per month. The green part is that you do not receive a monthly statement. Who needs one anyways these days? I love it, I’ve been getting about 40 bucks a month since May on my regular checking and dont’ need to transfer money back and forth from savings. This is month four I’ve earned the 4.05%. An extra $160 for not doing much of anything, how great is that?