Ally Bank,  formerly known as GMAC Bank,  is an online bank designed with the needs of the consumer in mind.  The bank offers an online savings account, certificates of deposit products, and a money market account – all which are FDIC insured.

About Ally Bank

Ally Bank was built on the foundation of GMAC Financial Services.  They took their years of experience in the industry as GMAC, combined with the knowledge that the consumer has different banking needs in our existing economic conditions, and morphed into Ally Bank and a new way of doing business.  Accounts can be opened without a minimum deposit required, and you do not have to maintain a minimum monthly balance, either.  When Ally Bank says their banking charges no monthly fees – they mean there are no monthly fees.

The Ally Bank Difference

The Ally Bank mission is to be straightforward with their customers.  They strive to find the various pain points customers experience with other banks – and then eliminate them through their own practices and policies.  They don’t hide any terms or conditions – as evident in the many Ally Bank commercials circulating television and Youtube.  While the commercials are very entertaining, they also make the point well that keeping things hidden or in fine print is wrong – and claim that doing so is not how they do business.

Ally Bank alerts their customers when their money could be earning more.  For example, with their 10 day Guarantee for best rates on Certificates of Deposit products, Ally will ensure you get the best rate possible.  Most other banks don’t provide any rate guarantee, which means the CD rate you receive will never be higher than expected, but it could be lower.  Ally Bank compounds interest daily, helping your money earn more compared to banks that compound monthly, quarterly, or even annually.

Another difference between Ally Bank and many others is their understanding that not everyone lives and sleeps on the same schedule.  In order to accommodate the various lifestyles of it’s customers, Ally Bank offers customer support services 24 hours a day, 7 days a week.  This should eliminate some of the frustrations graveyard shift workers experience when trying to call their banks.  People who work the overnight shift are typically sleeping during the standard banker’s hours.

Since Ally Bank is an online bank, their overhead operating costs are much lower than a bank with physical branches to maintain.  The savings they receive through lower operating costs are passed through to their customers in terms of higher interest rates.  Ally Bank, being part of the GMAC family of financial products, also has an asset generation business, enabling them to put deposits to work more efficiently.  They originate competitive, quality loan assets from the GMAC mortgage and auto loan operations profitably at these deposit rates.

Financial Products Offered at Ally  Bank

Ally Bank offers a number of financial products.  If they think your money could be earning a higher rate – you’ll receive a “sleeping money alert”, letting you know you might be able to get a better rate with a different product.  Financial products available at Ally Bank include:

• 1 year classic certificate of deposit
• 9 month no penalty certificate of deposit
• online savings accounts
• money market account

How to Take Advantage of FDIC Insurance at Ally Bank

You can feel confident your deposits are safe, because Ally Bank is FDIC insured up to $250,000 per investor through December 31, 2009.  You can actually insure money over $250,000 as well.  Each individual in your family can be insured up to $250,000 on a single-name, FDIC insured savings account.

For example, Mike Smith can open an account in his name and receive full FDIC insurance coverage.  His wife, Mary Smith, can open another account in her name, and receive full FDIC insurance coverage.  The Smiths would currently be FDIC protected for $500,000.  If they still had more money to deposit, they could open a joint account, in the name of Mike and Mary Smith, and receive $250,000 FDIC insurance protection on that account, too!

In some states, you would also be allowed to open single-named accounts in children’s names.  Another option to increase your FDIC insurance protection would be to consider opening trust accounts, with the money payable to the beneficiaries of the account upon your death.

To open an account or check out the current rates for the online savings account, money market account, or certificate of deposit click here.

FNBO Direct originally challenged a group of five people to pay themselves first and the president of FNBO Direct is now expanding the challenge to Americans at large.

FNBO Direct Pay Yourself First

I think it’s great that FNBO Direct is encouraging people to save more money and to pay themselves first.  Here is how they describe it:

“You pay your bills every month, maybe even through automatically scheduled payments. However, there might be someone you’re forgetting to pay – yourself. Paying yourself first is an important step toward a more secure financial future.”

Certainly it’s not a new concept but FNBO Direct reminds us that if we direct deposit money into our savings account before we use our paycheck to pay our mortgage, credit cards, and other monthly bills then we’re more likely to save some of it instead of spend it all.

Savings Challenge

I think that we as a country are saving more of our money now that the last few years have reminded us of how uncertain our financial situation can be. 

Financial experts were telling us we needed to save more and use credit less back five years ago but not many people listened.  Unfortunately it’s taken a major financial downturn to remind us of some basic rules of personal finance, such as:

• Spend Less than You Earn
• Save & Invest to Leverage Compound Growth
• Diversify Your Savings & Investments
• Build an Emergency Fund for Rainy Days (Years)

Now that times are tough many people have less money to put towards paying themselves first.  Understandably if you lost your job your primary concern is paying your mortgage or rent each month.  However, for those of us fortunate enough to have missed the job cuts it’s not a bad idea to automatically put aside some money each month to help save for whatever our economic future holds.

A mortgage pre-approval letter was very helpful for my wife and I when we started looking for houses about 8 months ago. My wife’s mom is a real estate agent, so she helped us every step of the way, but many agents won’t deal with buyers who aren’t pre-approved for a loan. They don’t want to spend a lot of their time to find out later that their buyer can’t qualify for a mortgage.

Buying a house, no matter what the market is like, should never be taken lightly. Owning a home isn’t always a good idea. You should only buy a house when you are financially and mentally prepared to go through with the biggest purchase of your life. Here are some questions to ask yourself before you start looking for houses with a real estate agent.

How much home can I afford?

Generally, about three times your gross pay is a good figure to start with. So, if you make $50,000 a year, you could look for a house somewhere between $125,000 and $175,000. Use this mortgage calculator to play with different purchase prices and mortgage types to see what your mortgage payment will be. If the payment exceeds 30% of your gross pay, then you should start lowering your target purchase price.

Where should I apply for a loan?

This depends on your situation and how much you are going to contribute to a down payment. If you shoot for putting 10% down, you’ll have a larger pool of options. Conventional loans from your big commercial banks typically require that you put down a 10% down payment and a stellar credit rating. They will give you prime rates and their fees have become more competitive since the housing meltdown. Credit unions are also a great option, but they also require larger down payments and good credit scores.

If you have a less than perfect credit score and you were planning on doing a 5% down payment, then consider applying for an FHA loan or for a loan from a wholesale lender. Mortgage brokers are better at offering these types of loans, because they can shop around between dozens of different companies. Just make sure that you don’t get nickel and dimed by the broker.

What’s on my credit report?

Before you start applying for a loan, request a copy of your free credit report from Equifax, Experian, and Transunion. If you are married, pull all three for you and your spouse. Make sure there are no mistakes on the credit reports. If there are, all three agencies now have an online system for credit report disputes. If you have any outstanding bad debts on your credit report, those most likely be required to be paid before you can close on the loan or get pre-approved.

What Documentation Do I Need To Provide To Get Pre-Approved?

1. Copy of your driver’s license and social security card.
2. Copies of all pay stubs from the past 30 days
3. Bank statements showing all cash and investment assets
4. Federal tax return W-2’s for the past two years.
5. Any proof of other income such as alimony, child support, side business, etc.

There may be other documentation required later in the process or even for pre-approval, but these are the major documents required by most lenders for pre-approval.

The Advantages

You’ll be treated with more respect by buying and selling agents and they’ll be more willing to help you find the right home. Sellers will be more likely to accept your offer if they know that the deal will go through. You’ll also close more quickly, because the loan processing can be the part that hangs up a real estate deal the most.

Next up, interest rates and picking the right mortgage product.

FNBO Direct mentioned their online savings account as an easy method of “going green” in their latest email newsletter.

I guess I’d never thought of online banking as being good for the environment before but it makes sense that electronic delivery of bank statements helps to cut down on paper waste. Here’s a statistic they quoted in their newsletter:

“If every U.S. household stopped receiving paper bills and statements, 687,000 tons of paper would be saved every year, enough to circle the Earth 239 times.”

They also pointed out that using online bill pay, whether through FNBO Direct or any other service, helps to cut down on the number of paper bills and checks each month.

Another obvious environmental savings from online banking is that you don’t have to drive to your local branch for deposits and or withdrawals (FNBO Direct ATM).

Of course, there is certainly energy required to fuel the servers that make the online banking system and document storage run but I was impressed to read that the data center for First National Bank of Omaha is powered by fuel cell technology.

Online banking with FNBO Direct, ING Direct, or any other online bank certainly isn’t going to save the world, but combined with other small changes, like being environmentally friendly at work, it can make a difference.

As an FNBO Direct online banking customer, I get regular emails about their product and services and got one yesterday about thier online bill pay service.  I’ve been using a third party online bill pay service for years and absolutely love how much time it saves me; I literally spend only 10 minutes a month checking on and paying all our bills online.

Online Bill Pay and Interest

One of the things that’s not great about my current bill pay system is that it’s linked to one of our checking accounts so we usually have a big chunk of money sitting there waiting to pay bills and not earning interest each month.  That’s why the email below from FNBO Direct caught my eye, it would be nice to have that money in a high yield savings account and quickly accessible to transfer over when I needed it to pay bills.

Here is what they have to say about their online billpay service:

FNBO Direct Online Bill Pay

Direct deposit your paycheck into your FNBO Direct Online Savings Account. When bills are due simply transfer just what you need from savings to your FNBO Direct Online BillPay account. Whatever’s left over – whether it’s $25 or $500 – stays in your OSA and earns an interest rate that is higher than traditional saving accounts.

Adding a BillPay:

* Log into your FNBO Direct account.
* Click the “BillPay” tab.
* Choose the “Apply” button and proceed to fill out the application.

Setting Up Direct Deposit:

* Contact your Human Resources Department
* Provide them with your FNBO Direct Account number located on your online statement. To access your online statement login to your FNBO Direct account. The click on the View Statement button on the Account Detail page and choose the Save button in Adobe Acrobat Reader.
* Provide them with FNBO Direct’s routing number: 104000016

Timeframe
Transactions successfully requested by Midnight Central time will be credited to the destination account you selected within three business days.

If you’re interested in an FNBO Direct online savings account, and would like to try it out – Click Here.

The best online savings accounts offer high interest rates, no fees, a low minimum balance, easy online transfers, simple ways to deposit and withdraw your money, and of course - good customer service.

Online savings accounts from banks like ING Direct, FNBO Direct, HSBC Advance, WT Direct, Emigrant Direct, and E*Trade Bank have become very popular due to the high yield interest rates they can pay, usually an APY that even the best banks offline can’t match.  As online banking has become widespread, more and more financial companies have begun offering online bank accounts, giving you many different options.

As you review these online savings accounts you’ll find that many of them have pretty similar features but there is usually one or two differences which can help you choose the best savings accounts for your money.

Here is a look at some of the best online savings accounts:

FNBO Direct

FNBO Direct has been known for high interest rates and good customer service. With no minimum balance, an option for online bill pay, and an ATM card to access your cash this high yield savings account is one of the best. I use FNBO Direct and would recommend it. – FNBO Direct

ING Direct

ING Direct has been around for a while and is probably the most well known online savings account.  ING is famous for offering a new customer bonus for opening an account. 

They also introduced the ING Electric Orange Checking account which typically offers a competitive interest rate for a checking account.  Before FNBO Direct came along we used to keep all of our emergency fund in this online bank account . – ING Direct

HSBC Advance

HSBC Advance also offers decent interest rates on the money you deposit into their online savings account. 

Like FNBO Direct, HSBC has no fees and no minimums on their accounts. One benefit of HSBC Advance is they allow you to link your account to multiple other banks to ease money transfers. Earlier this year, Forbes ranked HSBC highly in their annual global ranking. – HSBC Advance
 

WT Direct

WT Direct is the online bank of Wilmington Trust.  With similar features to the other online savings accounts, WT Direct often runs new customer promotions to help set itself apart. 

The latest promotion allows you to earn up to $250 in bonuses depending on your balance in your online savings account over time. – WT Direct

E*Trade Bank

E*Trade is best known for it’s online brokerage account offerings but they needed a way for customers to earn interest on the money they had sitting around, waiting to make a trade.  

The online savings account from E*Trade has historically offered a competitive interest rate and you can link your bank account with your brokerage account – E*Trade Bank

FDIC Insured

One common question I get asked is whether online savings accounts are FDIC insured.  People that use them for large amounts of cash obviously want to know if that money is protected by the FDIC.  Of course you’ll have to check when applying but as of the writing of this post, all the online savings accounts above are FDIC insured.

An FNBO Direct survey of online savings account customers found that money issues and debt were the top holiday stress.  Here are some of the results of the FNBO Direct survey:

• 79% – Economy will impact their holiday spending
• 67% – Still paying off holiday spending from last year
• 33% – Money is biggest stress for the holiday season

Money Stress

We all know how stressful family gatherings, travel, and entertaining guests over the holidays can be, I know National Lampoons Christmas vacation is just a movie but I bet it hit home for a lot of people.

Despite the tensions and challenges of family issues over the holidays the largest group of respondents reported that money was the biggest source of stress.  Of course this didn’t come as a surprise given the current economy but I was surprised by the 67% of people who were still paying off last year’s holiday spending.

Savings Accounts

FNBO Direct reminds their customers that the best way to get a jump on avoiding holiday debt next year is to start a Christmas fund ahead of time.  Of course, saving money is one part of it but simply spending less is certainly another part of the solution.

While they suggest setting up direct deposit into an FNBO Direct online savings account, the most important point isn’t which bank you use, but rather the fact that you start saving early and don’t spend more than you save.

FNBO Direct was named the best online savings account this year by Kiplinger magazine.  FNBO Direct was only created two years ago but in time that it’s become one of the top options for a hield yield savings account online.

FDIC Insured Bank

Of course, it’s parent company, First National Bank of Omaha, has been around for 150 years and the money you deposit with FNBO Direct is FDIC insured, which are some of the reasons that Bankrate gave FNBO Direct four stars in it’s Safe and Sound rating, the highest for an online savings account.

Best Online Savings Account

Here are some of the reasons that Kiplinger named FNBO Direct as the best online savings account:

• No minimum balance requirements - Only $1 to open an account
• No bank maintenance fees
• Ability to link FNBO Direct account with up to 3 other bank accounts
• FNBO Direct offers an interest bearing online bill pay account
• Easy access to funds with electronic tranfsers and ATM card

Reader Bank Review

A reader recently wrote in comparing FNBO Direct vs ING Direct and gave FNBO Direct high marks for their customer service and high yield interest rate.  One useful thing that FNBO Direct does is send out periodic emails with tips about using your account, here is an example of an email they sent out describing how to transfer money between banks.

FNBO Direct Review

I tend to agree with the reader’s findings, that the interest rate and customer service do help make FNBO Direct one of best online savings accounts, you can read more in my FNBO Direct review.

WT Direct is offering up to a $250 cash bonus when you open a new account in their latest promotion.  The amount of the cash bonus is based on the balance you maintain in your WT Direct account over the next three months, the more money you have on deposit, the more you can earn.

We keep a big chunk of money in our ING Direct and FNBO Direct accounts as an emergency fund.  This is a great opportunity for us to move that money over to WT Direct for a few months and earn the cash bonus.  All three of those online savings accounts are FDIC insured and WT Direct offers a comparable interest rate so it’s not a bad move for us.

Click here and use the coupon code of WTG3DN to qualify for the promotion.  You can read more on the deals site about the details of the WT Direct promotion.

FDIC insurance will cover the money you have deposited in an FDIC-insured bank or financial institution up to a certain limit in the event the cash in your bank account is no longer available from the bank. It’s important to be aware of the maxium amount that’s covered by FDIC insurance so that you don’t lose your hard earned money if your bank goes under.

What is the FDIC?

Here’s a description of the Federal Deposit Insurance Corporation from the FDIC website:

“The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects against the loss of insured deposits if an FDIC-insured bank or savings association fails. FDIC deposit insurance is backed by the full faith and credit of the United States government. Since the FDIC was established, no depositor has ever lost a single penny of FDIC-insured funds.

FDIC insurance covers funds in deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs). FDIC insurance does not, however, cover other financial products and services that insured banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or municipal securities.”

Bank Closings

According to FDIC data released in late August the number of troubled U.S. banks jumped to 117 — the highest level in about five years — during the second quarter, up from 90 in the prior quarter. Bank profits plunged 86 percent during that quarter, the FDIC said. By August, 10 U.S. banks had failed. Many of these failed banks were sunk by failed mortgage loans. Third-quarter data is expected by year-end.

Let’s take a look at the federal insurance limits on some of the accounts you might have:

FDIC Insurance Coverage

To help manage the financial crisis the FDIC has raised the limit to $250,000 for all FDIC insured accounts through January 1, 2010.

Non Retirement Accounts
For typical savings and checking accounts the Federal Deposit Insurance Corp. or the National Credit Union Administration limit will return to $100,000 in 2010.  For certain retirement accounts, such as bank-issued individual retirement accounts (IRAs), the limit is will remain where it is now – individual accounts are federally insured up to $250,000 per institution, a limit it raised from $100,000 in 2006.

Retirement Accounts
The $250,000 limit applies to traditional and Roth IRAs, Simplified Employee Pension (SEP) IRAs and savings incentive match plans for employees (SIMPLE) IRAs that are held within these institutions by employers as well as individuals. Self-directed defined contribution plans (including Keogh plans and 401(k) plans) are also included under this limit. 

Under the FDIC/NCUA rules, all of an individual’s retirement accounts at the same insured institution are added together and insured up to $250,000. It’s also important to know that these retirement account insurance limits are separate from any other deposits the individual has at the same institution.

Trust Accounts
Certain revocable trust accounts may also be entitled to FDIC insurance coverage for up to $250,000 for each qualifying beneficiary properly named by the trust account owner. Under revocable trust accounts, insurable categories include: payable-on-death (POD) accounts, which are also known as testamentary or Totten Trust accounts; and living trusts. It’s important to note the following when determining whether such accounts will be insured:

• The owner’s spouse, child, grandchild, parent, or sibling as well as adopted children and stepchildren, grandchildren, parents, and siblings also qualify for insurance coverage. In-laws, grandparents, great-grandchildren, cousins, nieces and nephews, friends, organizations (including charities), and trusts don’t.
 
• The account title must indicate the existence of the trust relationship by including a term such as payable on death (or the acronym POD), in trust for (or the acronym ITF) trust, living trust or family trust.

• For POD accounts, each beneficiary must be identified by name in the bank’s account records.

Protecting Your Money
So what happens if you find the amount you have at any bank for your retirement accounts exceeds the $250,000 limit? 

Retirement Accounts
You might check with your financial professional before moving retirement assets from one institution to another since this may require certain procedures to avoid owing income tax on that money or withdrawal penalties.

While you can withdraw funds and transfer the money to a new institution within the legal rollover window of 60 days, you can do this only once from the originating IRA in a 12-month period, so make sure you do all the transferring you plan to do at the same time. If you are younger than 59 ½ years of age, you’ll risk owing income tax plus a 10 percent penalty on a subsequent withdrawal.

Non Retirement Accounts
You can move the necessary amount of money out of non-retirement accounts into other banks to reduce your total deposit at any one bank.  One option to consider is spreading your money between FDIC insured high yield savings accounts such as HSBC Advance, WT Direct, ING Direct, or FNBO Direct.

Another method the FPA suggests looking into are brokered certificates of deposit; buying multiple CDs at once through a brokerage firm can provide a speedy option to spread out money at different institutions with full FDIC protection.

This article on fdic insurance coverage and limits is produced in association with the Financial Planning Association (FPA), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning.