The Good and the Bad of ING’s $ 25 Promotion – How to get a Good Rate on your Savings

by Bob Brooks

I get a great deal of questions regarding the interest rates on savings accounts. The problem is that not all savings accounts (money market accounts) are the same. There can be a big difference from company to company especially when considering the enticements to join.

These companies are all competing for your cash. www.hsbc.com offers a good example of a marketing message designed to grab your attention. The problem is that the marketing message is completely meaningless once you look behind the headline.

“We are 9X the national savings rate.”

First of all, what does that mean? However, if someone was just looking at that marketing message, they would conclude that 9X must be good. There is no link from that statement to an interest rate that creates maximum value for your money.

If you go to bankrate.com, you will find that HSBC.com is the 6th highest on the list of money market yields. The marketing would lead you to believe they are the best since they are “9x the national savings rate.” You can get better.

Then there is www.INGdirect.com. Their program gives you $ 25 for opening a new account. Of course, you have to go through another consumer that can refer you. The promotion encourages you to refer people to ING. For everyone referred, the referrer receives $ 10 in their ING account and the person referred receives $ 25.

For example, Betty has an account with ING and the ability to refer up to 10 friends to ING. She referred Bob to ING. Betty gets $ 10 for referring Bob. Bob gets $25 for opening the account.

What is the catch?

With an ING account (www.ingdirect), you can earn 4.4% APY (as of 9/15/06). According to Money Market High Yield ( MMA ) and Savings Account Rates through www.bankrate.com, the highest yield on a money market is 5.26% (as of 9/15/06)

Yes, you are getting $ 25.00 to open an account with ING. That would appear to be a good deal but not always due to the much lower interest rate. It ceases to be a good deal if you deposit more than $ 5,900 and keep it in the account for more than a year. Using the information above, you are giving up .86% in annual interest. Above $ 5,900 you are being penalized for taking the $ 25 and getting the lower rate of return.

So the deal is good and bad depending on the amount of money deposited into the savings account.

When evaluating an offer, it is important to look at all aspects and not just at what they are offering.

Always be skeptical of the “good” deals. They aren’t good deals for everyone. However, they are designed to appear to make sense for everyone.