Money Blue Book

Borrow Money Or Invest In Interest Earning P2P Loans With Lending Club

With the lowering of interest rates by the Federal Reserve in response to the current economic climate to the lowest levels we have seen in years, the interest rates offered by high yield savings accounts and high interest certificate of deposits are now simply not as attractive as they once were, only a few years ago. With the stock market still suffering from unstable price swings and massive volatility across all sectors, it makes present day sense to look towards alternative investment ideas to make some money.

While I have been a quiet Lending Club member for a few years now since the online company opens its doors to loan investors, I haven’t felt the need to review the program until now. Until recently, the top high yield savings account and best CD rates at most banking institutions offered a reliably consistent rate of return on deposits. But with market turmoil ever present and the specter of worsening bank failures looming, I’ve begun to turn my attention to other investment possibilities in an attempt to diversify my portfolio risk and seek a higher rate of return. The ability to earn a reasonably competitive interest income with the added ability to diversify risk via peer to peer lending networks like Lending Club and Prosper is becoming more and more attractive. At the very least, P2P lending programs offer potential profit seeking investors like myself the ability to play the role of the banker and help people out with their loan needs, while at the same time earning interest income that’s higher than what’s currently available in a regular savings account or bank CD.

What Is Lending Club and What’s P2P Lending and Borrowing All About?

Lending Club is a person to person, also known as a peer-to-peer, lending website that matches ordinary borrowers with ordinary local lenders (who are ordinary people themselves) through a pairing system that combines social networking, a computerized search algorithm, and manual credit worthiness checks. Essentially, Lending Club is a way to offer low interest loan rates to borrowers with good credit, while at the same time offering willing potential lenders like you and I the ability to earn a reasonably high interest rate of return with a relatively low risk of default on the loans that we extend to these borrowers. It’s an alternative way (that’s growing in popularity) for ordinary Americans to borrow money, get qualified, and get funded for loans expediently without the complex hassles of applying for traditional bank loans or having to deal with the riskier side of 0% balance transfer credit card offers or getting mired into the clutches of payday loans. On the whole, Lending Club offers borrowers better interest rates than can be obtained from any credit card offer, even those that purport to be low interest.

The whole business concept behind P2P lending networks like Lending Club is built on the premise that borrowers will be less likely to default to members of their own local communities. The Lending Club online system offers anonymous borrowers and local micro loan lenders a way to find each other and get matched up based on personal preferential demographic factors like geographic location, educational and professional background, and activity within a particular social network like Facebook (the social networking site where Lending Club had its upstart roots).

Still don’t believe Lending Club or peer to peer lending and borrowing programs are legit? Just take a look at a recent article from the Harvard Business Review, which notes the remarkable rise of peer to peer lending programs and documents the rise of such emerging programs as the next big wave of important financial innovations in the coming years, especially in light of the ongoing economic recession and the collapse of traditional lending institutions. It looks like P2P lending is here to stay, one way or another.

My Lending Club Experience – Investing In High Interest Bearing Loans

As a person who’s always up for trying out new financial products, I signed up for Lending Club when it first came out and have been using the online service ever since. So far, my Lending Club experience has been pretty positive, yielding fairly respectable returns in the process. Currently, my entire Lending Club participation has only been that of a lender and I have yet to participate as a borrower. However, while I can’t comment on Lending Club through my own personal experiences as a borrower, I have had numerous extended online conversations with actual people who have used the Lending Club service for their borrowing needs, primarily to help pay down existing high interest debt. Most of the Lending Club borrowers I’ve come into contact with have been pretty receptive to the user-friendliness of the Lending Club online platform and pleased with the convenient access to reasonably priced loans that the website affords, particularly when compared to last ditch lending alternatives like car title loans or payday cash advances.

One of the reasons why I slightly prefer Lending Club over other peer to peer lending networks – is its non-eBay auction-like nature. Having to engage in a convoluted bidding process for loan offers or loan investment prospects would inject too much complexity into an online loan matching process that’s trying to cater to the ordinary masses. Fortunately for investors in particular, Lending Club offers its loans on a take it or leave it store front basis. If you find a loan and the credit characteristics and interest rate of return strikes your fancy, you can buy it on the spot, or pass.

As primarily an experimental investor and cautious lender, I have mostly sought out high quality, lower risk of default type loans. As a relatively risk adverse lender with an infrequent appetite for riskier loans, I am not to keen on the prospect of any of my loan investments ever defaulting. However, at the same time, I understand that it’s a trade off – safer loans generally yield much lower interest rates of return, while riskier loans almost always yield much higher rates of return to compensate for the higher risk of default and nonpayment. The vast majority of my Lending Club loans as a lender have been A-grade, personally-chosen loan investments. Thus far, I have stayed away from using Lending Club’s computerized LendingMatch program to pair me with desired loans. I guess I have confidence in my own ability and prefer to retain control, rather than let some computer software do the leg work for me.

Currently, I have a little more than $800 invested into numerous micro loans with local borrowers. I’m always on the look out for high quality, attractive loan prospects but unfortunately, they are not always available. When they do become available, I try to snap them up quickly. These A-grade Lending Club loans have become quite a set of high yielding cash cows for me. Thus far, I’ve been very lucky and relatively fortunate as none of the Lending Club loans that I’ve extended have been significantly late or have entered default. Intriguingly, my Lending Club loans have earned me a steady interest rate of almost 8%, which is 2-3 times higher than what I earn with my best CD rates, best high yield savings, and even best money market accounts. As Lending Club continues to grow in popularity, its borrower base will inevitably grow larger in size, and the volume of attractive loan investments are bound to increase. If my default-free track record holds, I may decide to dabble in slightly riskier Lending Club loans in the near future to see if I can snag a higher rate of return but still maintain my default-free streak. Stay tuned!

For those wondering about the prospect of income taxes levied on the earnings off of Lending Club loans – yes, you are personally responsible for paying ordinary income taxes on all interest income that your Lending Club investing activities generate (you are issued a handy 1099 form at tax time).

Setting Up A New Lending Club Account Is Free and Quick

Opening an account with Lending Club is easy and efficient, and as expedient as opening a new online bank account. To open an account and start lending money through Lending Club, you simply submit your personal information, bank name and bank transfer account numbers, along with some optional background information. Thereafter, the account registration process wraps up with the obligatory bank test deposits to verify true bank account ownership

Opening a new Lending Club account for borrowing purposes on the other hand entails a stricter registration process that necessitates that the applicant provide a Social Security Number and other identifying information for a full credit report and  FICO credit score background check (try looking up your own free FICO credit score beforehand). Though Lending Club imposes a rather strict set of prime standards for borrowers, this attention to credit quality over mere quantity ultimately ensures a better experience and loan exchange for both lenders and borrowers in the long run.

Borrowing Money and Getting A Loan From Lending Club

For prospective qualified borrowers, Lending Club offers an attractive way to obtain a loan at comparatively affordable rates – offers that beat out most personal bank loans and credit card interest rates. However, do be forewarned that Lending Club’s qualification standards for borrowers are high grade and rather stringent. Lending Club pretty much only wants prime, or near prime borrowers with good to excellent credit. Those with very bad or subprime credit are probably out of luck when it comes to Lending Club, and will probably have to resort to less than advisable, bottom tier loan alternatives such as bad credit credit cards or payday loan borrowing.

The process of applying for a Lending Club loan is surprisingly straightforward. Approved Lending Club borrowers get a 3 year unsecured fixed interest rate loan, with repayment obligations managed by Lending Club. There is no haggling or negotiations to contend with as you simply submit an application for a loan, and based on your FICO credit score, credit report, and background check, you are offered a fixed interest rate loan to accept or reject. At Lending Club, you can borrow anywhere from $1,000 to $25,000 as an unsecured loan, to be used for just about any purpose, including but not limited to, high interest credit card repayment or small business financing.

To get started as a Lending Club borrower, simply open a new Lending Club account as a borrower, and submit a loan application. At the time of registration, Lending Club will obtain a credit report and FICO credit score check of the borrower in order to rate and assign a credit risk grade (ranging from A thru G) and determine the appropriate interest rate the borrower can solicit on the site. Once approved, the borrower is free to list his or her loan request on Lending Club for prospective lenders to review and examine. During the credit risk scoring process, particular attention is paid to the borrower’s credit rating history, the amount of the desired loan balance, and the borrower’s current debt to income ratio.

Lending Club’s standards for borrowers are high and the program only currently accepts members who can meet the followings status and credit history requirements:

• Must be a U.S. resident.
• Must have a FICO credit score of at least 660, with a debt to income ratio (excluding mortgage) below 25%.
• Credit history report must indicate that you are a responsible borrower.
• Have at least 1 year of credit history, showing no current delinquencies, recent bankruptcies (7 years), open tax liens, charge-offs or collection accounts in the past 12 months.
• Must have no more than 10 inquiries on your credit report in the last 6 months.
• Must have a revolving credit utilization of less than 100%.
• Must have more than 3 accounts in your credit report, of which more than 2 are currently open.

For their middle man loan matching services, LendingClub charges a processing fee (ranging from 0.75% to 3.50% based on Lending Club’s assessed credit risk grade), which is included in the annual percentage rate (APR) and is subtracted from the loan proceeds prior to disbursement to the borrower.

Lending Money and Earning A Comparatively High Interest Rate On Lending Club Loans

To qualify as a Lending Club loan investor, you must meet and satisfy certain preliminary state and financial suitability conditions – translation: you must belong to an approved state and/or pass certain income and net worth requirements. With exemptions for certain states such as California, you generally must have an annual gross income of $70,000 or a networth (including your home) of at least $250,000.

As for the state residency requirement, you must be a resident of one of the following states below. Your state not on the list? Fear not – Lending Club has submitted proposals to all states and new ones are being added as they are approved.

• California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Minnesota, Mississippi, Montana, New Hampshire, Nevada,New York, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin, West Virginia, and Wyoming.

As a prospective Lending Club loan investor, you can start with as little or as much money as you’d like. Once you have opened a Lending  Club account and transferred in the appropriate funds for lending purposes, you will be asked to indicate your level of risk tolerance (credit risk ratings that range from A – G) and prompted to search for loans either manually, or get matched up with prospective loans with the aid of Lending Club’s computer algorithm based LendingMatch software. The Lending Match program generates a suggested loan portfolio based on your level of risk desired and your connections with the borrowers in your account. As mentioned above, I have chosen to stick with manual loan evaluations (with great success thus far) as I feel more comfortable with my own ability to assess loan prospects than entrust that duty to a random computer program.

Those who are new to peer to peer lending may wish to start with small incremental investments and tinker a bit with the seesaw effect of risk and interest rate of return, before diving into larger denominational investments. Those who get the hang of it may actually find the loan investment hunting and evaluation process rather interesting and personally rewarding (remember, you are potentially helping out someone who is in desperate need of a loan to get his or her life going again).

There are two loan components that will be of paramount importance to prospective Lending Club loan investors – the interest rate of return offered, and the rate of default risk. The current range of interest rates that Lending Club lenders and investors can potentially earn varies from 7.37% to 20.11% (depending on how risky the loan is in terms of risk of default, as determined by the automatically assigned Lending Club loan grade.

The worst case scenario for any Lending Club loan lender or investor is the dreaded loan default, which occurs when the borrower refuses or is unable to fulfill the obligations of his or her loan principle and interest rate repayment. Lending Club’s website indicates that the current overall default rate is less than 3%. However, and probably due to my personal strict and stingy loan evaluation tactics, I have yet to experience a loan default on my Lending Club loan investments. On the downside, I probably earn a much lower interest rate of return on my loan investments than I would be able to garner if I opted to invest in slightly more riskier B and C grade loans.

As a Lending Club loan investor, one of the general statistics and trends I track closely is the company’s continuously generated performance stats for all loans. As you can see from the current Lending Club loan stats, Lending Club does a pretty commendable and transparent job of providing updated statistics relating to all late and defaulted loans for all members to review and assess. As the updated loan default statistics demonstrate, rather surprisingly perhaps, the vast majority of loans (particularly the A graded ones) are current and not late or in default. The B and C loans are also not as horrendous in terms of late payments or defaults as one may have assumed. Those who are into mathematics and willing to play the odds of probability may find it worth the slight risk of partial loan default to capture the higher interest rate of return on their investments. As always, smart Lending Club investors ought to spread their loan investments around to minimize the chances that one unexpected loan default will torpedo their entire Lending Club portfolio.

Lending Club Loans Are Now More Liquid Than Ever And Can Be Traded Like Securities

As Lending Club has completed the SEC registration process, all Lending Club notes and loans issued on or after October 14, 2008 can now be purchased and sold as securities, as they now represent Lending Club security investments rather than direct loan obligations of the underlying Lending Club borrower.

Now instead of waiting for the 3 year locked in loan commitment notes to reach maturity, they can now be traded on the secondary market through Lending Club’s trading platform agreement with FOLIOfn Investments Inc, greatly enhancing their liquidity and versatility as investments. While only loans and notes issued after Lending Club’s October 14, 2008 SEC registration date may be traded, in due time, it is reasonable to expect the number of trade-able notes to balloon in the coming future.

For those concerned about the safety and security of their invested loan funds as a lender in the event of a Lending Club failure or bankruptcy, Lending Club actually addresses this issue on their webpage. According to Lending Club, in the event the company, for whatever reason goes out of business or is no longer able to continue servicing loans, in order to ensure continuity, Lending Club has a backup servicing and successor agreement with Portfolio Financial Servicing Corporation (www.pfsc.com) for PFSC to take over loan servicing.

While the Lending Club business entity itself is still burning through venture capital cash like it’s going out of style, particularly as it focuses on promoting the growth and adoption of peer to peer lending, I personally think the concept of P2P social network lending is here to stay. Whether companies like Prosper or Lending Club will be around forever, or whether they ultimately will be bought out by more traditional banks eager for a piece of the peer lending pie, remains to be seen.

Updated List Of The Best Money Market Savings Account Rates Below

Amidst the current economic recession and ongoing credit crisis, there is an active flight to quality as consumers flee risky and volatile investments in stocks and mutual funds in favor of safer asset choices like high yield savings accounts and certificate of deposits (CDs) with the nation’s best banks. But while bank deposit products all enjoy similar safety and security assurances under the auspices of the federal government, they are not all created equal, as certain deposit categories offer higher interest rates than others, while others afford greater comparative flexibility.

In the world of FDIC insured banking products, there is a natural give and take tension between the interest rate of return offered by any banking product and the degree of liquidity or flexibility afforded. The rate of return for any banking product refers to the annual percentage yield (APY) or interest rate offered in exchange for investing your money in a particular banking asset. Liquidity and flexibility of any bank account product refers to how quickly and easily you can tap into your money at will and convert it into immediate spendable currency. The general rule of thumb for bank accounts is that the higher the interest rate of return offered, the less flexible or liquid the account. Likewise, the more flexible and readily accessible the bank account product, the lower the interest rate offered as tradeoff.

When it comes to getting the best interest rate of return, the best CD rates easily beat out the best interest rate yields offered by checking and savings accounts most of the time. However, CD terms and conditions tend to be substantially more restrictive compared to the other mentioned bank deposit products. When you open a CD savings account, you agree to lock your money up for a predetermined fixed period of time in exchange for a higher than average fixed interest rate of return. Until the CD deposit term limit matures however, you won’t be able to access the interest bearing CD account early without paying a hefty early withdraw penalty fee. On the other far end of the interest rate/liquidity spectrum are checking accounts. Checking accounts offer the most flexibility and convenience for consumers, with the fewest number of restrictions if any. With checking accounts, you can access your money at any time, write as many bank checks as you wish, execute as many ATM transactions as needed, and generally fund your account with as little or as much money as you’d like. But the inevitable trade off for the more favorable account terms is an account that earns very low interest if any at all. Aside from a few high yield online checking accounts, retail checking accounts offer pretty pitiful APY rates. Don’t count on retiring with the minuscule interest income earned from your checking accounts.

Money Market Accounts Are Hybrid Mixtures Of Bank Checking Accounts and Savings Accounts

Those that want to capture the high interest rate benefits of restrictive banking products like CDs, but still be able to enjoy much of the account flexibility and cash accessibility of checking accounts may want to take a look at money market accounts. Money market accounts offer high yield savings account-type interest rates while also delivering checking account style features like free check writing and convenient access to brick and mortar bank ATM locations. The primary compelling reason to open a money market account is to avoid having to extraneously maintain both a checking account and a savings account. For efficiency sake, some people simply prefer having a single hybrid money market account rather than maintaining multiple specialized bank accounts. I personally don’t mind owning over 15 different checking and savings accounts, but not everyone is so amicable to such artful juggling of their money.

While money market accounts offer the best interest rate features of high yield CDs and savings accounts, they also suffer from a few of the same limitations that plague such higher rate of return bank accounts. Such limitations include a maximum fund transfer limit of 6 ACH electronic transfers per month (may be limited to anywhere from 3-6 ACH’s depending on specific money market account terms), as well as tiered interest rates that often require the account holder to maintain high bank balances to earn the maximum interest rate yield.

While money market accounts are available everyone and can probably be found at your local brick and mortar bank branch or neighborhood credit union, the best money market rates are usually found online. For Internet promotional purposes, many online banks restrict their best money markets to online customers only. Here is an updated list of the best MMA interest rate offers currently available.

List Of The Top High Yield Money Market Account (MMA) Rates

Don’t Confuse Bank-Based Money Market Accounts With Broker-Based Money Market Funds

Money market accounts and money market funds sound similar but they are in fact two different animals altogether. Money market accounts are generally run by banks and credit unions – functioning as FDIC insured deposit accounts that offer a variable interest rate of return. Money market funds on the other hand, are mutual fund investments run by premium and discount online brokerages that invest primarily in short term lower risk assets like U.S. Treasury Bills, bank CDs, short term high grade corporate bonds, and government-sponsored municipal bonds. Unlike bank run money market accounts that are usually fully ensured by FDIC insurance, money market funds are offered by brokers as security investments, and thus do not enjoy the same FDIC protections afforded to traditional bank accounts apart from any temporary governmental guarantee program in effect.

Full FDIC Insurance Protection For Money Market Accounts Up To $250,000

Like other FDIC insured bank products such as CDs and savings accounts, your investment in a money market account is insured by the Federal Deposit Insurance Corporation (FDIC), which protects bank deposit assets in the event of bank failure or catastrophic financial loss. Backed by the full faith and credit of the United States government, FDIC insurance currently offers full protection for accounts held at member banks up to the current FDIC coverage limit of $250,000. With exceptions for different account categories, so long as your total money market account balances remain below $250,000 at any one institution, your entire balance enjoys the maximum protection afforded under the law.

If I had to place a bet, I’d wager that chances are, you probably have never heard of WT Direct savings bank before. Compared to more popular online banks like ING Direct or HSBC, WT Direct is a relative unknown in the world of high yield savings accounts. However, its comparative obscurity shouldn’t necessarily prevent the bank from becoming the perfect fit for those looking for the best online savings account available. Oftentimes, it’s the smaller financial institutions without the gigantic advertising budgets or over-hyped marketing departments that truly offer consumers the best savings account profiles and highest interest rates for their money. While I’m not exactly raising WT Direct up to the status of the absolute best online bank, the company’s flagship banking product certainly deserves a bona-fide chance at a fair evaluation. For those holding onto a savings stash that is less than minimal, the WT Direct high yield savings account offers a pretty competitive banking package.

While WT Direct Bank  and the WT Direct high yield savings account are relatively new creations, they are both the online product extensions of Wilmington Trust FSB, a major financial services corporation publicly traded on the New York Stock Exchange, with more than a century worth of banking experience under its belt. Though the Wilmington Trust parent company is headquartered in Wilmington, Delaware with numerous brick and mortar offices and domestic branches spread throughout major cities in the United States, its new online division of WT Direct is actually based in Baltimore, Maryland. While the actual physical business location of such cyberbanks as WT Direct should be of little concern to most online bank account holders, the fact WT Direct actually has an accessible one and the fact the online company has divisional ties to an established and relatively stable parent bank in Wilmington Trust FSB should offer prospective online customers a more reassuring sense of confidence in this new Internet startup. But of course, before plunking your hard earned money into any deposit institution, it’s important to thoroughly dissect the bank’s features and verify that the company is solidly legitimate.

WT Direct Offers A Competitively High Interest Rate For Higher Deposit Balances

Glancing at WT Direct and the individual features of its high yield savings account offer, it’s clear the bank account caters to account holders looking for a banking option that provides above average customer service attention with the flexibility to manage larger deposits. While the bank has all the traits of your typical online-only Direct bank with its high interest yields, no fees, no minimum balance requirements, and the ability to link up an unlimited number of multiple bank accounts for quick balance transfers, it also provides a complete array of customer service options via e-mail, postal service, fax, and 7 days a week telephone customer support. But as a trade off for the higher level of customer support and online banking attention, the WT Direct high yield savings account calls for a higher deposit balance (compared to other top online banks) to garner the highest interest rate payout.

While it is true that WT Direct does indeed offer a fairly impressively high interest rate yield on its savings account deposits, its interest rate is based on a tiered system. Here is how WT Direct’s interest rate offer works. For the first 2 months (60 days) that a new WT Direct savings account is opened, the account holder will automatically earn the top interest rate on his or her deposits regardless of the balance. While there are absolutely no hidden account fees or minimum balance maintenance penalties to worry about, after the 2 month initial activation period, the interest rate is adjusted according to your account balance. After 60 days, the savings account balance must be above $10,000 in order for the entire balance to continue receiving the top interest rate, otherwise, the rate will drop to .50% APY until the account balance is increased past $10,000. It’s all or nothing after the 60 day trial period – either the entire balance exceeds $10,000 and the entire balance earns the highest interest rate, or it’s below $10,000 and the entire balance earns the lower rate. While this lower interest rate is much lower than WT Direct’s top rate, it probably is still better than that offered by most traditional brick and mortar retail savings accounts at places like Citibank, Bank of America, and Wells Fargo.

Why Open A WTDirect Savings Account?

Perhaps the WT Direct savings account’s greatest feature is its tandem of great bank rates and commendable customer service support. While national interest rates have ebbed and flowed with great fluctuations due to the economy, WT Direct’s top interest rate has historically and consistently ranked in the top 5% of all banks in the U.S., and the hassle free experience and fairly extensive customer support have been well touted by editorial commentators. While the tiered interest rate system of the WT Direct savings account after the initial 2 month trial period may appear as a downside to many smaller deposit holders, the bank account offers numerous benefits, features, and promotional bonus perks that still merit serious consideration.

In my opinion, WT Direct’s 60 day trial period is actually a pretty appropriate way for new account holders to get introduced to the WT Direct high yield savings account and decide for themselves whether they want to remain a customer for the long term. The 2 month trial period affords ample opportunity to slowly fund your way to the $10,000 level to continue enjoying the highest rate after the introductory period. Unlike some other premium savings accounts that require large initial upfront deposits, WTDirect gives you at least 60 days to reach the magical balance of $10,000 or more. Even if you don’t reach that amount for some time, you will still earn interest income until you do, albeit at a lower rate. You can easily add to your account balance online at any time, and in the interim still enjoy all of WT Direct’s other banking perks.

1) No Minimum Balance Requirements, and No Service Or Maintenance Fees

Along with the usual FDIC insurance protection for all bank deposit accounts, WT Direct offers its customers a genuine hassle free banking experience free of hidden fees, extraneous charges, or annoying account minimum penalties. WT Direct Bank also does not require savings account holders to open a new checking account as some other banks do or demand that customers fund their new accounts with a minimum deposit. However, do keep in mind that while there is no minimum balance required to earn the basic interest rate at all times (.50% APY), to get the highest tiered interest rate yield after the expiration of the initial 2 month trial period requires a steady balance in excess of $10,000.

2) Great Customer Support Online and 7 Days A Week Assistance Via Telephone

When I opened my new WT Direct savings account, I immediately received an automatic telephone call from a live WT Direct customer support representative who wished to verify my identity for fraud protection purposes. She was also able to answer a few questions I had about WT Direct such as the type of credit inquiry the company made for new accounts.

A quick browse through WT Direct’s online website reveals a fairly extensive customer and technical support system in place to help and guide new and existing customers through the world of online banking. While savvy banking consumers such as myself will probably be content with just using WT Direct’s secure online customer support messaging system, WT Direct also offers a 7 days a week toll free customer service phone number for those who prefer talking to a live bank employee. While I don’t anticipate utilizing the phone support line too often, I can see how this feature can prove to be an invaluable and extremely convenient feature during a hypothetical banking emergency, particularly in a scenario where the account customer finds him or herself without a working Internet connection.

3) Unlimited External Accounts and Efficient Electronic Fund Transfers

As is the case with opening any new high yield savings account online, there is no need to switch banks completely to take advantage of the high interest rates of WT Direct. By setting and linking up external bank accounts to WT Direct, you can keep accounts at other financial institutions and transfer money between those accounts and WTDirect as needed. By electronically linking bank accounts with your WT Direct account and establishing an electronic funds transfer connection, the link enables transfers between accounts within 3-5 business days. While all high interest savings account fund transfers seem to take a few days to execute (with WT Direct being no exception), WT Direct sets itself apart by offering a nice bonus feature – the ability to continue earning interest income on the transfer amount until and including the day the funds leave the bank. Unlike many other banks that stop paying interest as soon as your transfer request is made, WT Direct continues to pay interest on your transfer amount for as long as possible.

In terms of the maximum number of external accounts you may set up, the nice aspect about WT Direct is that you may link up as many as you like. WT Direct does not limit the number of checking or savings accounts you can link to your WT Direct account, unlike some other financial institutions that may permit only 2 or 3 external accounts such as ING Direct, Emigrant Direct, FNBO Direct, and E-Loan Bank.

4) Easy Online Savings Account Set Up With WT Direct

Like most well run online-only high yield savings accounts, the WT Direct new account opening process is relatively speedy, efficient, and quick. The WT Direct online application form took me less than 10-15 minutes to fill out and submit for approval. Another positive aspect to note is that WT Direct does not perform hard credit checks for new accounts that can potentially hurt your FICO credit score, but rather initiates a simple benign soft credit check – and only for personal identity verification purposes.

Signing up for WT Direct involves the usual online application steps – you will need to provide personal information such as your name, address, phone number, and social security number. You will also need to verify your identity and select a funding source for your new account. The minimum deposit required to open a new WT Direct savings account is just $1.00. Customers can always start with that amount and slowly transfer in additional funds as needed once they get comfortable with using WT Direct.

Those who select an existing checking account as their funding source will need to complete the additional step of verifying ownership of the checking account via a series of automated test deposits to properly link it to the new WTDirect savings account. A few days after you’ve filled out the online application and selected a funding source, two small bank deposits (less than $1.00 each) will be automatically made to the external bank account that you designated to help WT Direct confirm ownership of the account. Once you’ve receive the two small deposits, simply return to WTDirect.com and click on the “Verify Trial Deposits” button, and submit the two amounts for final online account activation and setup. During that period, you will also likely receive an automatic courtesy phone call from a live WT Direct agent to make sure your new account opening experience went smoothly. I did, and it was much appreciated as they answered several pressing questions about WT Direct that I had and alleviated any identity theft or fraud protection concerns I may have had. However, the vast majority of questions can easily be answered by reading WT Direct’s exceptionally thorough online help pages and list of frequently asked questions and responsive answers.

Is Your Savings Account Money Safe and Secure With WT Direct Bank?

Because of WT Direct’s less well known brand name recognition in the marketplace and its less aggressive online marketing approach (compared to popular online banks like ING Direct) and less extensive television advertising presence (compared to bigger names like HSBC Direct and E-Trade), there persists latent concerns about the safety and security of WT Direct online accounts. However, after examining the worrisome rhetoric and comparing them to WT Direct’s actual financial specifics and available rating reviews, I must conclude that WT Direct bank passes the stability test and its financial condition appears otherwise free of the problematic credit loans and worrisome subprime mortgage assets that have doomed other major banks such as Washington Mutual.

As many online readers seem to place much authority into  Bankrate’s proprietary Safe and Sound rating system that assesses the financial strength and stability of various financial institutions in terms of capitalization, asset quality, profitability, and liquidity, it’s worth mentioning that Bankrate has issued a fairly respectable assessment and Safe and Sound review of Wilmington Trust. Currently, Bankrate rates Wilmington Trust as exhibiting a generally satisfactory condition with good asset quality free of toxic assets with strong capitalization and seemingly ample liquidity. As it appears Wilmington Trust Bank and WT Direct did not participate in the whole subprime mortgage lending debacle that has hammered many of the other big name banks in the marketplace, both seem positioned to weather the worldwide economic recession and credit crisis with less hidden risk to account holders.

Full FDIC Insurance Protection Up To $250,000 For All WT Direct Deposit Accounts

In this day and age, FDIC insurance is an absolutely vital and and important must-have when evaluating any high yield savings account option. Backed by the full faith and credit of the United States government, very few other financial guarantees in life are as rock solid. You should never sign up for a new bank account that isn’t fully FDIC insured up to the maximum coverage limit.

Fortunately, WT Direct is fully FDIC insured and a quick browse through the FDIC website reveals that WT Direct is insured and operates under the same FDIC insurance certificate that protects its parent company Wilmington Trust FSB. WT Direct customers who place their deposit savings with WT Direct can rest easy. With some exceptions for different account categories, so long as the deposit holder’s entire combined account balance (checking, savings, and CD accounts) remain below the current FDIC limit of $250,000, the entire aggregate balance is fully protected from any type of catastrophic bank loss or failure.

Extra Information and Resource:

• WT Direct ABA/Routing Number for direct deposits and ACH transfers: 052173464

Back in the pre-Internet caveman days, the very concept of a high interest savings account consisted of a bank deposit at your local neighborhood banking branch that offered an underwhelming .50% interest rate on deposits (merely half of a single percentage point). For most aggressive savers at the time, the only practical way of achieving a high annual percentage yield (APY) on bank deposits was to seek out the best CD rates by setting up a certificate of deposit account. However, given the less liquid nature of CDs compared to savings accounts, and the greater complexity with CD management and rollovers upon expiration, most bank consumers ended up accepting the low APY rates of the day. But with the emergence of the Internet and the World Wide Web came a new innovation with the force to change the financial landscape forever – online banking. With the rapid ascension and development of online banking came the emergence of online-only savings and money market accounts. With the ability to tap into substantially lower overhead costs, and the ability to eliminate the need to operate expensive bank branches or pay live tellers to manage them, online banks quickly surpassed traditional retail banks in what they could offer consumers in the way of improved 24/7 on-demand services and higher rate offers for bank deposits.

ING Direct – Leader Of The Early High Yield Savings Account Movement

One of the very first Internet based financial services firm to enter the U.S. virtual banking market was actually a large Dutch bank based in Amsterdam, Netherlands called Internationale Nederlanden Groep. Today, most of us know the company simply as ING or ING Direct. Arriving onto the scene in 2000 during a time when Internet banking was still a new and developing concept, the branch-less direct bank ING Direct quickly set the stage as the premier trailblazer in a new line of heavily marketed high yield savings accounts. With its aggressive high interest rate promotions and slick marketing ads that enabled the ING Direct brand to go viral with great appeal to early adopters, the company quickly captured a large piece of the online banking pie with its colorfully named Orange Savings Accounts, and cemented itself as the granddaddy of all online savings accounts. With its slick marketing approach and prominent display of the ING Direct trademark orange ball in its advertising, to this day the company continues to successfully draw in new customers seeking the perfect balance of CD-like high interest yields, with the liquidity benefits of ordinary saving accounts.

In step with its innovative online beginnings and willingness to experiment with better ways of providing banking services, ING Direct has even opened up a few ING Direct Cafe chains in the six major cities of Chicago-Illinois, Philadelphia-PA, Los Angeles-CA, New York City-NY, St. Cloud-Minnesota, and Wilmington-Delaware, each serving a unique menu of coffee drinks. Inside each of these novel ING Direct Cafes are internet computer workstations that allow patrons to enjoy freshly brewed coffee while banking online and surfing the web free of charge. The ING Direct Cafes even occasionally feature live seminars on various financial and investment topics such as retirement portfolio management, credit and debt reduction, and home mortgage loan refinancing. While the company has had its share of ups and downs over the years, including a particularly bumping integration phase involving failed virtual bank NetBank, which ING acquired in 2007, the company has managed to stay on track as an oldie but goodie in the ever advancing world of new and better high yield savings accounts.

Why Choose ING Direct Over Other High Interest Checking Or High Yield Savings Accounts?

I’ve had ING Direct as one of my best online banks for many years now. As an aggressive bank rate chaser and someone who has a fairly substantial amount of cash deposited into safe and secure FDIC insured bank accounts, I utilize a strategic number of top rate bank accounts (ING Direct being one of the more prominent ones) to keep myself well under the FDIC insurance coverage limits while earning a good return. While ING Direct’s interest rates have ebbed and flowed over the years and its current rates may not be the absolute highest available, I still like and appreciate the popular online bank’s historical consistency in terms of simplistic features, ample customer support, and lack of any fees or hidden costs.

1) ING Direct Online Accounts Are Uniquely Easy To Use and Manage

Logging into my ING Direct online account, it’s clear the bank was meant for those consumers who wanted a simple, self run high interest deposit account without the hassles or complexities of full service accounts burgeoning with all sorts of unnecessary bells and whistles. The ING Direct account web interface is extremely bare bones and easy to navigate. Take the ING Direct Orange Savings Account for example – after logging into your secure account, you are immediately plainly presented with all the important bank account information you really need – your precise current annual percentage yield (your interest rate), your transaction history and current balance, and a easy to read ongoing tally of the cumulative interest income you’ve earned this month thus far. Furthermore, all of your balances and transactions can be easily downloaded into free Quicken Online, desktop Quicken, or Microsoft Money to help you better track and manage your cash flow habits. Few other online banks offer such simplistic perfection in terms of account interface for the novice and entry level online banker.

2) Ability To Rename Accounts and Set Up Sub-Accounts For Targeted Savings Goals

ING Direct offers a few unique account perks not found in other online banks – one of them being the ability to readily denote and create custom nicknames for individual accounts. The other unique function is the ability to create sub accounts under your primary ING Direct account.

In my case, having a unique readable name for each ING Direct account helps me identify and chart out savings goals via automatic savings plans. Under my primary Orange Savings account with ING Direct, I can create a sub-account named “Emergency Fund” or perhaps another one tagged with the name “Future Plasma TV”. Certainly having actual names for individual accounts means more to most people than simply “account number: #A1234567″, and encourages active saving and better planning. While the new sub bank accounts that you create are regarded as separate savings accounts along with your primary account, because they are all tied to your single customer ID number, they appear viewable as a list on your primary ING Direct account page. Having your savings accounts broken down into listed chunks with custom tags like “Christmas Shopping”, “New Dining Table”, or “Trip to Paris” can greatly help you achieve your targeted savings goals and better manage your money. Best of all, as you save, your money enjoys the quiet benefit of a reasonably high APY interest rate of return.

3) Setting Up An ING Direct CD Ladder Is Very Easy

When it comes to opening a certificate of deposit and setting up a CD ladder to maximize liquidity and CD interest rate of return, ING Direct really shines in this department as it makes the process effortless and straightforward. Once you have your basic ING Direct savings or checking account set up, with just a few keystrokes online, an ING Direct CD ladder can be created easily by selecting the monetary amounts and time period maturities desired.

4) Absolutely No Fees, Maintenance Charges, Account Minimums, Or Inactivity Charges

One of the best features of ING Direct is the fact that there are absolutely no fees, no minimums, and no hidden charges. With other high interest savings accounts, the same cannot be said as some banks have a knack for imposing a tiered interest rate system – offering a lucrative high rate for those with a significant amount of money deposited into a savings account and a much lower rate for those with smaller, modest amounts. With ING Direct, there are no tiered interest rates as everyone enjoys the same equal rate on all deposits at all levels. As indicated on its website, all account holders earn the same high interest rate regardless of their account balance, and no one pays a fee. Thus, you can open your new ING Direct checking or savings account with as little as a single dollar and still enjoy ING Direct’s highest variable APY interest offer.

5) Ability To Earn Extra Money and Referral Income By Referring Friends

Unless you own your own website and run an affiliate publisher business, usually there are very few ways for ordinary bank account customers to earn some extra money on the side by referring new customers (other than the occasional free iPod type promotion). However, ING Direct is an exception and actually provides monetary cash incentives to encourage new customer referrals. Under the ING Direct referral bonus payment plan, the bank will pay existing customers $10 for every new Orange Savings account or Electric Orange checking account customer they recruit. As a promotional incentive, it’s also not just the referring account holder that benefits. All newly recruited customers who open a new ING Direct account utilizing the referral link within the email message generated by the referring customer will also earn a nice $25 welcome bonus deposit as well. Currently the maximum ING Direct referral bonus amount you can earn is $500 due to the referral limits of 25 new Orange Savings accounts and 25 Electric Orange Checking accounts, at $10 each.

6) Enjoy A Competitive Interest Rate On ING Direct Electric Orange Checking and Orange Savings Accounts

The crux of ING Direct’s offerings is comprised of its two primary interest bearing bank accounts:

The ING Direct Orange Savings account features no opening requirements, no account fees, no minimums, and the bonus benefit of a competitively high APY interest rate.

The ING Direct Electric Orange Checking account features high interest checking and free bill pay features. With free bill pay, you can send electronic or paper checks to any individual or company as payment for free. I utilize free online bill pay to automatically pay my monthly rent without having to go through the hassle of licking stamps and remembering to send checks out every month. Access to your Electric Orange checking account funds can be made via the web or with your free ING Direct debit card at any checkout register and at any one of the free ATM machines that comprise the ING Direct ATM network.

While currently ING Direct does not offer the absolute highest variable interest rate for its account deposits, it offers an established history of rates that are at least competitive with what’s offered in the market place, frequently and reliably beating out the pitifully low rates offered by major brick and mortar banking giants like Citibank, Bank of America, and Wells Fargo. Particularly when it comes to interest checking accounts, those desiring something better than a negligible rate should look into an Electric Orange Checking account as an option. Not only can you earn a decent interest return on your idle checking balance with ING, you also get to enjoy free checking account benefits such as free bill pay, free electronic checks, and even free paper checks. If you’re paying for those services at your current bank, you may be wasting your money.

7) ING Direct Bank Safety, Reliability, and Security With Full FDIC Insurance Up To $250,000

As with all FDIC member banks, all checking, savings, and CD deposit accounts are fully protected up to the current full FDIC coverage limit of $250,000, backed by the full faith and credit of the United States government. This type of iron-clad guarantee essentially renders all FDIC insured accounts immune from bank failure or any type of catastrophic financial loss. While there are ways to maximize the FDIC insurance limits beyond $250,000 with joint accounts, as a general rule of thumb, so long as your total individual deposits at ING Direct remain under that amount, you are fully protected against loss. Rest easy.

8) While Remarkably Simplistic, ING Direct Still Offers A Wealth Of Bank and Brokerage Services

While ING Direct’s bread and butter is the Electric Orange Checking account and the Orange Savings account, ING also offers a reasonable wealth of other full service banking amenities:

• Savings (Orange Savings)
• Checking (Electric Orange)
• Certificates of Deposits (Orange Certificate of Deposit)
• Home Mortgage Loans (ING Direct Orange Mortgage)
• Home Equity Line of Credit (Orange Home Equity)
• Stock and Mutual Fund Investing (ING Direct ShareBuilder – one of the best brokers) – features no account minimums and is currently offering a free $50 bonus on new accounts.
• Business Accounts (Business Savings, Business CDs)

When it comes to ING Direct’s online customer service, while not particularly exemplary, the customer service support has generally been on par with that of other online banks. In my experience, ING Direct agents have always responded fairly timely whenever I had a question or pressing technical issue.

9) Opening A New ING Direct Account Online Is Quick And Automated

Those accustomed to the speed and web-only nature of opening up new online bank accounts will find ING Direct to be no different. As the entire application process is conducted via the ING Direct homepage, there is no cumbersome paper work involved, unless you choose to link your funding checking account with your new ING Direct account using a paper check. Otherwise, the entire online driven application process should literally take less than 10 minutes of your time.

As the instruction states, after providing the customary personal information (name, address, social security number) and agreeing to the standard terms and conditions, you will need to complete the process by making an electronic deposit from your existing checking account. But before your new ING Direct savings or ING Direct checking can be funded and electronically linked up to your existing bank account, you will need to verify ownership through a one time deposit test. After submitting your ING Direct application for approval, the system will automatically request that you verify the amounts of two deposits, each less than $1.00 that ING Direct will temporarily deposit into your funding bank account. The deposit itself usually takes 1-3 days to be made but once that happens, you can complete the link verification and finalize the account setup. While you can choose to fund your new account with a paper check, I highly recommend learning to set up online ACH electronic transfer for quick future bank fund transfers. After all, online banking is all about efficiency, speed, and the quest to do away with paper transactions completely.

Extra Information and Resource:

• ING Direct ABA/Routing Number for direct deposits and ACH transfers: 031176110