It’s hard for me to write decisive titles, they’re so usefully dramatic and I feel so worried about dramatic liberties. So let’s add all kinds of conditional clauses. I love Electric Orange accounts, for example, and I’m glad that I have one. I even feel fine recommending them to others (in fact, this crossed my mind when I was updating the referral links). So why are they a bad idea?
Well, the Electric Orange Checking Account works like this. You earn:
1.75% APY on balances up to $50,000
3.20% APY on the entire balance if it’s between $50,000 and $100,000
3.40% APY on the entire balance if it’s $100,000 or more
I’m all about earning 1.75% APY on my checking account. I like that it’s easy to transfer money between the checking and the savings (which earns 3%), so I can keep most of it in savings.
However, to earn good interest on the account, you need a balance of $50,000 or more. Wait, back up. What’s $50,000 doing in a checking account? Sure, in this case the checking account is earning more than the savings account, but ING offers a number of CDs which have even better interest—locked in. Or you could invest the money, which should bring you even better earnings in the long term.
And the best balance is on accounts with $100,000 or more. Hang on, what about FDIC insurance?
My guess and hope is that ING created these accounts to encourage people to use their checking. The 1.75% is quite enough for me. But to sweeten the pot, they threw in high-interest earnings on the few balances that went over $50,000. Making it look like we could earn great interest on our checking account just makes the account more appealing.
But if you had $50,000, wouldn’t you probably put that in a CD or an even higher-earning investment?
So, actually, I think ING’s Electric Orange Accounts are a great idea. They’re easy-to-use and earn good interest for checking. But I also think that holding $50,000 in them just to get the interest is a pretty bad idea.