The New Age Of Net Savings
The Fed has been raising interest rates to keep inflation in check — but rates are still near historic lows.
CBS News Correspondent Wyatt Andrews reports that many Americans, looking for a higher return on their savings, are turning to banks that do business only on the web.
If you ask Doc Popcorn, the hottest thing these days is his bank. Rob Israel — aka Doc Popcorn — recently opened an Internet-only savings account at Emigrant Bank, which pays him six times more interest than his checking account.
To Rob's small business, that rate means an extra $2,000-$3,000 a year.
"I gotta sell, you know, a thousand bags of popcorn to make that. That's a lot of popcorn," Israel said.
And a whole lot of money.
Driven by the slick ad campaigns of the industry leader, ING Direct, Internet-only savings accounts have attracted tens of billions of dollars — as savers learn the advantages of these high-interest, no-fee, government-insured accounts.
According to Jim Essey, who also has an Emigrant account, it's simple.
Starting with your own checking account — at any bank — you go online and open an Internet-only savings account. Just by pointing and clicking, you send money in to savings where it earns the high interest. Then when you need the money, or need cash, you transfer it again, back into your checking.
After pushing a button and waiting two hours, Jim just transferred $25,000 into his checking account.
"You just sit here and transfer money from one place to another and they're also paying a pretty high interest rate," Essey said.
What you don't get is also important. NO ATM machines, no bank tellers and no branches to do business.
But what has really changed, reports Andrews is that retail banking customers used to need to have a bank building somewhere — both to feel secure about the bank and also to have a place to withdraw cash. Now it's just the customer — and the computer.
"The beauty of being an Internet bank is there are no costs," said John Hart, CEO of EmigrantDirect.com. "Virtually free."
ING Direct does have cafes in a few cities, but all transactions are done by computer. In the new age of banking you can walk out with coffee, but you can't walk out with cash.