Internet Banks with No Real Branches Offering High Interest Rate Deposits - INGDirect

Submitted by Craig Strzelecki on 6 March, 2006 - 07:29

I received an offer through the post of 6.40% p.a. interest on any new deposits on top of my current deposits for a three month promotional period with INGDirect. INGDirect's current interest rate is 5.40% p.a. meaning if you invest in this technique you would get $54 for every $1000 you deposit a year. But let's say you got suckered into this promotion and you had a spare $2000 lying in your other bank account. So you log onto their internet banking website and transfer over your $2000, lured by the additional 1% p.a. offering that INGDirect was promoting. Now that additional $2000 over the three month period that the promotional interest rate is valid for will earn you $32. ($2000 x 6.4% x 3 / 12)

INGDirect is a bank - a multinational bank from what I gather. From their website: "ING DIRECT is part of the global financial services company ING Group. Active in the fields of banking, insurance and asset management, ING Group operates in over 50 countries and employs 112,000 people worldwide. ING DIRECT launched its first direct banking operation in Canada in 1997. Since then, it has successfully launched operations in Spain, France, Italy, USA, UK and Germany. ING DIRECT Australia was launched in August 1999." They have no bank branches. You basically send in a cheque through the mail or transfer funds from your existing bank account into their bank.

Actually that was the first time I looked at what INGDirect actually does. Looks like a young operation just having started in 1996. Should I trust my hard earned cash with them or should I leave my cash in my/our trustworthy Aussie Banks? Westpac/Commonwealth/ANZ... etc... I'm not sure... What happens when a bank folds in Australia? Do we lose our money? I know in the USA they have some law that says their US government will match every dollar you lose if and when a bank folds. Back in high school if you did commerce you may remember the graph showing the leel of risks in financial investments with cash having the least risk to high risk high return strategies like options and CFDs. What are the risks when you hold your cash in a bank? Do these questions matter?

Anyway, thanks to the extra $32 I would be earning witht he extra high interest rate offering at this at-call Internet Bank, I'll be enjoying a nice dinner out from the proceeds.