While I’m sure that many of you have already taken these steps, for those that are just beginning to get their finances in order or for those who happen to join us late, getting in the habit of grabbing free money when available is always a good idea. Right now the place to get free money is with online banks. An added bonus is that they are paying much higher interest rates than regular brick and mortar banks.
While I recommend opening accounts wherever they are going to give you free money, we will begin with ING. While they don’t currently have the highest rates, they are the bank to start with because of how easy it is to set up the account. I don’t want to get you all frustrated from the beginning since there is a lot of money to be had with these promotions and ING is the bank that is least likely to have problems with sign-up.
To qualify for the $25 bonus that ING provides, you have to make a deposit of $250. Here are a couple of scenarios and how you should approach it depending on which one applies to you.
1. You have credit card debt and no savings: If you currently have credit card debt and don’t have the $250 to open the account, you should not open an account right now, but make an adjustment to the “highest interest snowball” plan we created in Financial Challenge #2. At the very top of your list – before the beginning to pay extra on the highest interest card – place “ING account.” Why place ING ahead of a high interest rate? On the surface it may not look like it makes sense since $25 is only a 10% return on the $250 deposit and your top credit card could easily be charging 20%+. The difference comes in that your credit card is a yearly rate and the $25 from ING is an instant return (you don’t have to wait an entire year to get it – it deposits into your account right away).
Assuming the same scenario we put forth in Financial Challenge #2, you would save $100 for month 1 and month 2 while paying the minimum amount to all the credit cards. In month three, you would take $50 to make the $250 you need to open the ING account to get the bonus (and place the other $50 extra toward the first credit card above the minimum payment). Since there is no minimum requirement in the ING account, as soon as you receive your $25 bonus, you take out $274 (you want to leave $1 in the account to keep it open) and then put the $274 also toward the outstanding balance of the first credit card on the list. That gives you an extra $24 toward your debt for about 15 minutes of work plus a quality account to keep your emergency money in once you have paid off all your debt.
2. You have credit card debt, but currently have $250 in savings: Immediately open an ING account to get the bonus and pay the the bonus toward your credit card debt.
3. You’re debt free: Open the ING account and use it to begin or expand your emergency fund.
While you may or may not use the ING account for your emergency savings since there are other online banks that pay a higher interest rate, it is still a good account to have open because of promotions they run from time to time.
At the same time that you open up your ING account, you should also begin the process to open up an Emigrant Direct account. While Emigrant doesn’t offer an “official” bonus, they do have an affiliate program where websites can earn $20 for referring people to open an account with them. There are a number of websites that offer “unofficial bonuses” of $10. Basically if you open an account using their affiliate link, they receive $20 from Emigrant and then they give you $10 as a “thank you” thus splitting the affiliate bonus.
Nate and I also offer this bonus for using our link, but also offer a $20 bonus by converting 2 of your ING referrals (when you open your ING account, you will receive 25 friend referrals. If you send one of these to a friend and your friend signs up, your friend gets $25 and you get $10. Since Nate and I long ago used up our own and all our family member’s ING friend referrals, we currently use other people’s referrals and split the $10 bonus ($5 for us and $5 for the person who gave us the referral to use). Thus for us converting 2 ING friend referrals for you for $20 is the same as us paying you $10).
Thus you can open up an Emigrant Direct account for $1 and get another $20 to use toward debt or to add to your savings. Emigrant Direct is currently paying 4.0%, but has been an interest leader in the past so it is a good account to have open. The Emigrant Direct account is more complicated to open and takes about 2 weeks in total to complete, but it’s still worth having for special promotions (when Hurricane Katrina hit, Emigrant Direct deposited $1000 into every account of people who were living within the disaster zone as part of their relief effort (you can listen about it by clicking on this link and listening to the Bill O’Reilly Radio clip)
The third online account you want to open is with HSBC. Again, you only need $1 to open the account and
they are currently offering a $25 bonus for opening an account (this promotion has expired). Like Emigrant Direct, it takes a bit longer to open an account with HSBC than with ING, but they are currently paying 4.25% (a promotion is going on where they are paying 4.80% through April 2006).
By opening these three online banking accounts, you can earn $70 in bonuses. You will also have three online bank accounts that pay high interest and when you begin your emergency savings, can switch money around between them to get the highest interest rate possible for your money.
In the time you have allotted today for the Financial Challenge, you should begin the process of opening accounts with these three online banks.
3. Open a HSBC Account with a $25 Bonus – Use Promo Code: start
You should be able to complete the ING application without a problem and get the process started for both Emigrant Direct and HSBC in the time we have for today. As more online banking bonus promotions become available this year we will let you know during the Financial Challenges so that you can continue to add this free money to your debt reduction / savings & investments.
Special Note To Parents: If you have a child, you can also set up an account for him or her and earn 10% interest on the first $500 through a special account at Affinity Bank
NOTE: The entire challenge series is what I would do with my money and is merely my opinion. You should do thorough research and seek professional advice and decide to do what is best for you. My Disclaimer