Thursday, January 24, 2008

Liking ING Direct

Since I opened up my savings account with ING last November, I have been drawn to its minimalistic yet functional user interface. It is so refreshing compared to my other banks.

Bank of America used to have a quick-loading interface until they changed it. Its current interface has more functionalities, but of the kinds that I don't need. It has became slower and not as agile as the previous one. Compared to ING's, the size of the main content column is smaller too. Transaction descriptions are wrapped and often end up truncated. You'd have to click twice to see the full description and the full description display replaces the transaction list display. It's cute, but not functional. I rather have a wider main content column so I don't have to be clicking around just to read the full description, just like in their older interface.

Bank of America's disappointing new interface along with their lack of any savings or CD accounts with decent rate prompted me to consider other banks as my primary bank.

At that time I already have a HSBC checking account for me to withdraw money from while traveling abroad since HSBC has branches in just about every place I have and am planning to go.

So, I setup online access to HSBC and found that its login procedure was clunky. Type in username in one screen. Move to another screen to type in your password and clicking your secret word on a virtual keyboard. Cumbersome and misguided security implementation. While the position of the virtual keyboard keeps changing, the relative distance between the keys on the virtual keyboard is constant. A key-logger simply has to record the relative coordinate of each click to figure out your secret word.

The interface is not fancy, but quite decent. One thing I find is inadequate is the lack of running balance in its transaction listing. Transactions are also not posted until the next day. So, if you make a payment for today, the money will be deducted from your account today and you'll see that the available balance goes down. But you can't see the transaction that causes that until the next day.

HSBC's online account opening is also another thing that is lagging behind other online banks I've dealt with. It took me almost two weeks to finalize opening a savings account. I did it in less than half hour with other banks offering online account opening: BofA, ING, ETrade, Countrywide, Wells Fargo, Wachovia, etc.

Yet, I am still sticking with them because of their international branches and also decent savings and CD rates.

But, nowadays, ING is my primary bank. Its interface is quick-loading and minimalistic. There is no distracting in-bank advertisement on the top, sides, or anywhere else on the screen. I don't need to have a javascript-enabled browser to access it. It does not use silly virtual keyboard for authentication. It has a wide main content column so transaction descriptions are not wrapped and truncated. It has running balance. Posted transactions show up immediately. And it has a feature that no other bank has yet: its transaction listing screen shows scheduled transactions that is going to be applied to the account. You get to see all the pending transfer and bill payments together with posted transactions so you get an overall sense of the activity.

The only thing I hate is the screen for entering payee information. Too many small fields so you can't copy-paste information from the payee website effectively. You'd have to copy-paste information in small chunks. It's so frustrating. By far, BofA's bill payment interface and functionality are still the best I've seen.

The rates in ING are not exactly spectacular but also not something to sneeze at either. Among online banks, its rate offering has lately fell somewhat below the average. That really does not matter for me because I'm using it as my primary bank and the cost of not incurring aggravation on myself due to having to use badly designed user interface more than make up its so-so rates.

Tuesday, January 22, 2008

First Lesson in 2008: Storing Emergency Fund

Already, 22 days into 2008, I am humbled by my mistake of not diversifying. In my previous article, I recognized that I have not been storing my emergency fund correctly because I didn't diversify the maturity dates of the CDs holding the fund.

I stored it in two CDs, the 40% and 60% as I called them. 40% of the fund in a 6-month CD, 60% in a 1-year CD. That had been working great during the economic high prior to late 2007. But, this will be the first economic downturn my emergency fund experiencing.

So, since I had access to the 40% in liquid form (laying around in savings account) earlier today, I put half of it in a 1-year CD, and the other half in a 6-month CD. So, that's 20% each of total fund.

The 60% CD will mature next week. I shall split it of into 3 equal parts, each is 20% of the total fund. The first part will go to a 1.5-year CD, the second to 2-year, and the third to 3-year CDs.

I am hoping to end up with a 3-year ladder with 6 rung, each 0.5 year away from each other. Putting the fund into such ladder makes sense to me. The size on each rung, 20% ($4K), is big enough for many immediate needs and small enough that I can bear the pre-withdrawal penalty.

A longer ladder brings about more rate stability. This bankrate article on CD laddering uses a 5-year ladder with 1-year rung as an example. But with stability, there is also the risk that the fund won't be coping with inflation in an extreme economy.

I think if there is a symbol for living on the edge, and if my generation, gen-X, can speak as one voice, we would have picked that symbol. Our entrance to the world is marked by extreme events. Extreme sports. Extreme weather fluctuation. Extreme economy fluctuation. Extreme job-hopping.

5-year turnaround is too long. Things change much faster nowadays. 3-year is the longest I can talk myself into. There has not been a recession lasting longer than 3 years, and by keeping the turnaround lively enough, I get to stave off the risk of losing its value due to extreme inflation.

Quick, Stash that Emergency Fund

The Fed just made a surprise cut on its short-term interest rate by 0.75%. This will likely bring about inflation as well, and I want my emergency fund to keep up with the inflation, at least.

This also means that Savings and CD interest rates will shortly fall at least by that amount too. How soon? Who knows. But when they do fall, they will certainly fall behind the inflation rate. According to, the inflation rate in Dec 2007 is 4.08%. Meanwhile, the average 6-month CD rate is 4.66% (4.75% APY) according to Fed's cut will likely bring that to under 4%.

60% of my emergency fund is already in CD. 40% was laying around in savings accounts. To keep up with inflation, I need to consolidate them to fixed-rate CD accounts immediately. I don't think there will be enough time to shop around for good deals on CDs and transferring the money there in time before the rate adjusts. I just have to settle for whatever CD rates my current banks offer.

Lucky for me, I've been preparing for this for a while. Back in November, I've setup accounts in ING and E-Trade. I've been banking exclusively with HSBC. My primary account was there. Yet, HSBC had this outdated and slow online account opening mechanism that required you to mail/fax in documents and took weeks (days if you were lucky) to open. With ING and E-Trade, the account opening and funding procedure takes 5 minutes to complete (with ING, it took only 10 seconds!).

I did that and now I have 40% of the emergency funds that was laying around in savings accounts locked away in a 6 months 4.35% APY CD. They were in savings accounts because I had a trip to Las Vegas last December, and preferred to have them in liquid form while I was away. So, when the CD that was holding them matured last November, I simply transferred it to the savings account.

Unfortunately, the other 60% is in a CD that will mature next week. I am pretty certain that by then the rates would have adjusted. I don't know yet where I'm going to put that.

I think I'm going to ladder it. Having my CDs maturing at short intervals from each other exposes me more to bad CD rates. During uncertain economy periods, like we are in now, the bad CD rate may not keep up with the inflation rate.

Thursday, January 3, 2008

Happy New Year 2008

I just got back from a 15-day vacation in Las Vegas, San Deigo and Grand Canyon.
I expect that once the dust has cleared, that vacation will make some dent on my expected net-worth. That's OK since I had a great vacation.

Happy New Year 2008. My new year resolution is to keep on achieving monetary experience. That means wising up financially.