How to Budget Using ING Direct

(Or Another Full-Service Online Bank)

As regular readers know, I’m a very happy user of ING Direct. They provide my checking services, my savings services, and all of my online bill pay services. They even allow me to set up sub-accounts so that I can save for specific goals. In my opinion, ING Direct is the best of the full-service online banks, and I’m a happy customer of theirs.

Because they offer all of these useful tools, over time, I’ve begun to use ING Direct as my primary budgeting tool. I can set aside money in specific small pools, automatically transfer money back and forth, set up automatic bill payments, and so on. These tools allow me to effectively manage my money.

A Step-by-Step Guide to Full Service Online Banking

Step Zero: Get An Account

You don’t necessarily have to have ING Direct as your bank to do the following. You merely have to have a bank that has online checking and savings access and online bill pay. Many banks offer this – Washington Mutual and E*Trade Financial are two well-known national banks that offer similar services, and your local bank may offer it as well.

Switching to a new checking account is easier than it might sound. I’ll quote the steps you need to take from an earlier post:

1.Open the new checking account.

The first step is the most obvious one. Open the account and get the information you need: account number and routing number. Order checks if you need them. In other words, be prepared. Your new bank may also need the information for your old checking account so you can transfer money from the old account into the new.

2. Make a list and check it twice.

Make a detailed list of all automated withdrawals and deposits from your current primary checking account. The best way to do this is to simply watch the account for a period of two to three months so that you pick up as many of these as possible.

3. Balance your checkbook.

Make sure you’ve accounted for everything outstanding so there are no nasty surprises during the transition. Figure out what you have in the old account down to the cent so that you can avoid overdraft dangers.

4. Switch over all deposits and withdrawals at once.

I find this is easiest to do by switching over the deposits a bit earlier than the withdrawals, so that there is money already in the new account when deposits begin to be set up. I’m also incredibly careful about such things.

5. Leave the old account open for a while with a balance in it to catch any missing deposits or withdrawals.

Even though it might feel like the balance in the old account is just sitting there wasting time, it’s actually there to protect you against your own poor memory. Just be patient and give it several months; you might surprise yourself.

6. Close the old account.

Be sure to leave a correct address behind. You might also want to end other services at that bank, such as a safety deposit box.

If you’re switching to ING’s Electric Orange checking, it may be useful to skip step #6 and leave the old account open, especially if there are no fees on it. I’ve kept my old checking account open for two conveniences – cashing checks with a teller and the ability to write paper checks (on the rare occasions when I do this any more, maybe once every three months).

Step One: Set Up Automatic Bill Payments For Monthly Bills

For every regular monthly bill you have, you can set up an automatic bill payment for that bill so you don’t have to worry about paying it on time. It’s quite simple.

ING screenshot

First, click on the “Electric Orange” tab on the top, then click on “Free Bill Pay.”

ING screenshot

Add a new business (with the name, address, and account number) by clicking on the appropriate link, then add that bill in below. You can specify the amount, the date to pay it, or the regular date to pay it.

ING screenshot

Once you’ve done this, the next scheduled payment shows up in your basic checking account screen, so you can easily see what’s coming up and when.

Step Two: Set Up A Sub-Account For Each Irregular Bill and Savings Goal

What about the other bills, the ones that only come around every several months and seem to always crunch the budget, like homeowners’ insurance or car insurance? For those, it’s useful to set up a sub-account to slowly set aside money so that when the big bill comes, you’re ready. Here’s how.

ING screenshot

Once you’re logged in, in the upper left, click on the “Open Account” option. You can see it clearly in the picture above.

ING screenshot

Choose to open a new savings account on the next screen The “Open Now” link in the image above is where you should go.

ING screenshot

From there, the process is really straightforward – you can call each account you create whatever nickname you like to identify it as a distinct fund: an emergency fund, a “house maintenance fund,” a “vehicle replacement” fund, a “house insurance” fund – whatever works for you.

After that, you should set up an automatic transfer into that account. You can do that by clicking on the Transfer Money tab along the top.

ING screenshot

Then, fill out the information below. As with the automatic bill payments, these will appear on your default checking account view so you can quickly see the money that’s going to be automatically withdrawn from your checking account.

My recommendations? I leave the amounts for the regular but varying monthly bills in my main checking account – things like the cell phone bill and the electric bill just come straight out of the checking. Other bills, especially large ones with longer periods like car insurance and homeowners’ insurance, are handled by having a tiny weekly deduction from my checking account into a special fund just for that purpose. For example, our car insurance is about $400 every six months, so I transfer $15 a week into an account just for that. This way, I don’t really notice that $15 going away, but when the big bill comes, it’s not a panic time – the money’s just sitting there. So I transfer it back into my checking and pay the bill, all online.

Step Three: Pay Your Bills As They Come In

After this is all set up, your only real responsibility is to pay the bills as they come in. I usually pay all outstanding bills once a week, on Sunday afternoon. Keep on top of these bills, so that you’re not dinged with a late fee. With many of the bills handled now by automatic transfer, you won’t have that much to deal with – I usually just have one or two bills a week to pay attention to.

Step Four: Use Your Debit Card as a Mastercard and Use It For Regular Purchases Like Groceries

If you wish to completely centralize all of your spending until you get things under control, ING’s Electric Orange checking service will issue you a debit card that also functions as a Mastercard. If you’re just getting your budgeting under control, it may be useful to spend a few months just running all expenses through that card, so you can keep a careful eye on what you’re really spending. Once you have a strong grip on your spending, you can move on to using other mechanisms for your expenses, but sticking with a check card for a while is a great way to make sure your spending is under control.

These steps, all together, create a centralized view of your day-to-day finances and also form the basics of a budget. This is exactly how I do things right now in terms of day-to-day money management. I use ING Direct to do all of those things, and it’s done wonders for keeping my money in line.

This plan requires you to do some basic math with a calculator. Since you’re already at the computer, using the simple calculator tool on your computer for addition and subtraction should do the trick quite nicely. I tend to use Excel because I usually already have it open in order to update my net worth calculations.

Good luck!

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  1. Josh says:

    Is there a simple way to remove old savings accounts that were used for a one time goal? Or do you just rename/reuse or just let sit with an empty balance?

  2. Andy says:

    Thanks for the walkthrough. I have been thinking about setting up a new account online to handle these sorts of things, and the sub account feature sounds really nice (both for savings things and the minimal blog income I have).

  3. Joe T says:

    ING Direct is fantastic. I’ve had Orange Savings and Electric Orange checking accounts with them for a year now, and I’m very happy with them.

    That said, Electric Orange Online Checking comes with an overdraft line of credit, from $165 to $10000 last time I checked, depending on what you ask for and what you qualify for when they check your credit. This is a nice convenience, but it’s something to be aware of if you’re addicted to buying on credit and trying to get control of their finances.

  4. Frugal Dad says:

    I’m a big fan of ING Orange Savings accounts, but have yet to go with the checking account. Thanks for posting this – when the time is right I’ll refer back to this and make the change.

  5. JB says:

    I love the subaccount feature and saving for irregular bills. I do this for once a year bills/big purchases like property taxes, car insurance and save for Christmas year-round.

  6. !wanda says:

    ING Direct is offering 4.5% now? Are those only available to people who have Electric Orange accounts? (If not, well, wow, you must have started this post a long time ago.)

  7. DB says:

    Trent – you mention using a debit card for regular purchases. Clark Howard discourages the use of debit cards (he calls them “piece of trash fake visas”) because they don’t offer nearly the same level of consumer protection that credit cards do. What do you think of this?

    Go to Clark’s web site (clarkhoward.com) and do a search for “debit cards” for his take on them.

  8. DB says:

    I use sub-accounts for my savings as well. I have found that it helps me to separate out various savings targets. For each sub-account I have a target amount (either a specific dollar amount, or “ongoing until needed”), and a defined-use requirement (example: next auto fund: “to be used only toward the purchase of our next vehicle”).

  9. Enrique S says:

    That’s an excellent tutorial. I just opened an ING savings account, and now you’ve given me a reason to open a checking account. Thanks.

  10. Fred says:

    If you use your card as “credit”, then you’re protected by Visa/MC. If you swipe it as debit, then this does not apply.

  11. Claire says:

    Thank you so much for this! I’ve been micromanaging my money (gifts, periodic bills, etc) and it really helps with unexpected expenses, but I’ve been keeping track of it in Excel (I also use Money) and it’s been a pain in the neck. This is a GREAT way to do it. I’ll be spending some time setting this up soon! Thanks Trent!

    P.S. BTW, I just found out today that due to a “business reorganization”, my position at work has been eliminated effective in July. Thanks to some diligence on our part, and lots of hints and ideas I’ve learned from TSD and other sites you’ve recommended, I’m not particularly concerned about our finances. We may have to stop saving quite as much for a little while, but I don’t think we’ll have to dip into our emergency fund (but it’s there in case we have a crisis). Knowing that our money is OK makes the stress of finding a new job so much easier to handle.

  12. Debbie says:

    This is exactly what I’ve been doing with my ING accounts. I love ING!

  13. JB says:

    Since I already have automatic bill paying coming from my checking account, how do I stop them if I want to switch to ING checking?

  14. Trent Hamm Trent says:

    “ING Direct is offering 4.5% now? Are those only available to people who have Electric Orange accounts?”

    Nope, just an older screenshot. The only thing that’s changed is the percent offered – it’s now just above 3%, if I recall correctly.

  15. Yep, just over three. I signed up when it was over 4.5%, but the rates have been dropping along with the economy.

    I really like the ING service and the ability to have separate funds for separate goals.

  16. Pearl says:

    I had really wanted to open a checking account with them but my credit isn’t very good and I’d heard they often close the account in that case. Has anyone else had this kind of problem as well recently? I really like that they have the options for dividing the account up into different budgeting sections.

  17. Diana says:

    One caution about the ING savings account. There’s a maximum number of withdrawals you can make from the savings account (I think per month) before they close your account. I learned the hard way. So use it only to pay occasional bills.

  18. I need to start a budget, even though I’m way ahead of the game. I’ve just never had the patience to have one. This sounds like a good starting plan.

  19. JerryInOCMD says:

    I have both an Orange Savings account and an Electric Orange Checking Account. I also use sub-accounts, and find them a great way to save towards specific goals.

    One Question though. What is the difference between using the MasterCard as debit or credit card? Does it not have the same net effect? The money is pulled directly from your account instantly. Just wondering.

    BTW, I love the blog!

  20. Kimberly says:

    Due to an illness that forced me out of work for 6 months I realized how much I needed to get a better handle on the finances.
    My bank has online bill paying already, so that combined with Quicken has helped us see where our money is going. AND it’s helped me show DH that a budget is necessary! And I broke down and converted my ATM card to a debit. After I reordered 2 boxes of paper checks, I realized I’m writing one a week. Everything else is paid online, with cash or the debit. Could have saved that $$$.
    I do have an ING savings account as well and do make regular payments to it. I expect to be able to have my emergency fund fully loaded in another 2 months.
    Glad to know I’m on the right road taking care of my money!

  21. katy says:

    Trent,

    I don’t understand closing a safety deposit box. My bank won’t let me have it without a checking account – am I missing something? thanks!

  22. mollyh says:

    Hi Trent –

    My husband and I have been using ING for a long time, we have several sub accounts that are savings “buckets” for our different goals. We recently moved and decided to use Electric Orange as our new primary checking account. Since the savings accounts offer better rates, we thought we had come up with a pretty ingenious plan of leaving the majority of our money in a savings account and then putting just enough to cover our set monthly bills into Electric Orange. We even have our salaries direct deposited into one of the savings accounts. But here comes the downside….we got an e-mail earlier this week from ING stating that you’re only allowed 6 withdrawals per month from any one savings account or else they legally have to close the account. This pretty much screws our plan of using the savings account as a “float” for the majority of our money – we were planning on transferring money from the savings account into Electric Orange on an as-needed basis, but if we’re only allowed 6 per month, I guess we’ll have to leave more of a buffer in Electric Orange (and suffer the lower interest rates). I’m also wondering how that works with automatic savings plans. Since we just re-arranged everything to be almost completely ING based, what if our automatic savings plans require more than 6 withdrawals from that main savings account in order to fund all our smaller ‘buckets’? I guess I’ll be calling ING about that. Other than that little kink in our plan, we’ve loved ING.

  23. Josh says:

    A quick positive word about the ING overdraft protection.
    I’m still in the process of working out and sticking to my budget and occasionally overdraft my account. Before ING, I would simply transfer some money from my savings account to cover the overdraft. Of course, I never transferred that money back to my savings account. The net effect was I’d get hit with transfer/overdraft protection fees and have less money in savings.

    With the ING overdraft protection, there are no fees and the amount gets automatically “paid back” when my next check comes in. Over 5 months ING has effectively “saved” me over $500.

  24. Diolla says:

    ING didn’t make up the 6 withdrawl rule it is a Federal Banking Regulation. The idea is that if you make more than 6 withdrawls a month then it is not really a savings account. My bank automatically converts the account to a checking account, as opposed to closing it, if you break this rule.
    Some banks also have an excess withdrawl fee if you make over a certain amount of withdrawls per month from a savings account. The idea is that savings are supposed to hang around for awhile.

  25. JerryInOCMD says:

    mollyh-

    I hope that’s not the case. One would think that moving the money around within ING would be allowed as needed.

    Let us know what you find out. Thanks

  26. Spencer says:

    mollyh and Jerry-

    Nope, all banks have the same legal restrictions on the number of transfers. This is due to money laundering fears. I bundle up my daily expenses and then make two transfers a month to my checking for two weeks of expenses. This gives me a few extra transfers a month in case I need to shuffle money for other reasons.

    The interest you are loosing by having a week or two extra float in you checking account is not worth worrying about.

  27. liv says:

    I was just thinking about how I need a “New Car” account, and this sounds perfect. :)

  28. Jeff says:

    Re: Comments about moving money from Saving accounts.
    This isn’t just and ING thing, but a federal law. My CU has the same but they don’t close the account just lock it until the next month.

    Best to have your paycheck deposited into you checking account and then distribute it from there leaving you average expense balance in the checking. Yes its a lower interest rate but ING’s is better than most.

  29. JM says:

    Do other banks offer sub-accounts? I had ING but they closed it due to inactivity and won’t let me open a new one. Presently, I use HSBC.

  30. Jimmy says:

    @mollyh
    Although you can’t make more than 6 withdrawals per month on a savings account, you can still make unlimited deposits.

    Have your paychecks deposited directly into your Electric Orange checking accounts and schedule automatic transfers from there. That’s how I use it. I put in enough money to cover a week’s worth of bills. Of course, if you can set things up so that most bills are clustered, you would get a better float.

  31. Eve says:

    If you use Bank of America for your checking (you can still link to ING for savings), you can use B of A’s free online “My Portfolio” for budgeting and calculating your net worth. I love it because it’s easier than creating my own spreadsheet, it updates automatically every time I log in, and it automatically creates and updates graphs and charts that show me in a very visual impacting way just how far over/under I went in each budget category and how much my net worth grows/shrinks each month.

  32. brooke says:

    I’m fairly certain the 6 withdrawals per month limit is a law and applies to all savings accounts. That is why those savings accounts should be set up for periodic expenses only. Other spending will need to be tracked in a different way, via pen & paper or Excel.

  33. MJB says:

    Thanks you for this great idea; I already have an ING account but never thought of using it like this. Now I can make good use of it, by creating sub accounts to save for things like car insurance, new TV, and emergency funds.

  34. Ashley says:

    For budgeting purposes, I highly recommend Bank of America’s My Portfolio feature for B&A members. It’s fantastic.

  35. Marcia says:

    I used Microsoft Money instead of a savings account to save for large bills. Each month I logged a fake check as Electric or Car Insurance, etc., for 1/12 of the expected amount plus a bit extra. I used a category of “Hold”. When the large amount came due, I already had the money in my checking account. I wrote the check correctly and then deleted my “hold” categories under Electric or Insurance as I paid each one. I was never short to pay a large bill and never had to worry about too many withdrawals from savings.

    (Great Post)

  36. Thanks for this detailed information and “user guide” for online banking. As someone who works with computer consultants starting their own businesses (often from scratch and with little experience setting up all the finer points) I know that all the details necessary to do things right from Day 1 can be very overwhelming. This information is helpful I think for both those setting up personal accounts and those setting up separate business accounts for the first time. It’s also good to see a review and explanation of one particular banking system, and I would love to see how it measure up to other online systems.

  37. Faith says:

    Hi Trent –

    I’ve been using ING happily for a while now. However, as savings rates are falling, including ING’s, I’m tempted to move my money to HSBC Direct, as they now have a 3.5% APY as opposed to ING’s now 3.0% APY. Is it a good idea to shift savings to where the rates are better? I’ve already moved some funds to my bank’s online savings account, which offers a 3.3%APY, again better than ING’s 3.0%.

    Thanks, and thanks for the blog. I really enjoy it and have passed it along to friends.

  38. keith says:

    yea ING’s worked well for me too. Sure is better than leaving your money in a savings account like wamus. In fact, check those minimum balance requirements for some savings accounts – you may actually be losing money – I was. Some sort of a service fee.

  39. arungupta says:

    I also use a variation of the same process but with my credit union. I also opened an account at ING few months ago but found various limitations.

    a) To open an account at ING, you must have a checking account at some other bank. ING does not offer paper checks at all nor do they honor paper checks if you get your own printed. You have to use some other checking account if you want to write paper checks. There is no way to use ING for all my banking needs.
    b) ING allows you to link one checking account at other financial institution at the time of opening ING checking account. After that, there is a 30-day wait period before you can link another account. Why?
    c) The 3.0% rate ING advertises for their Electric Orange checking account is only if you maintain %50,000 balance. Otherwise it drops to 1.7%. Who has $50,000 lying around in checking account? I wish I was that rich.
    d) ING cusotmer service is very poor. It takes them two business days to respond to a simple e-mail question.

    I like their web site. They have you click a keypad with mouse to enter your password. This would effectively defeat any basic keystroke logger. The keyboard option is also there in case someone is watching over your shoulder.

    I agree with the strategy presented in the article but ING did leave a bad taste for me.

  40. CJ says:

    One annoyance with ING Direct’s bill pay feature. You only have two options, pay a bill once or set up a recurring item to be paid the same day each month. Anything that is billed quarterly, every four months, etc., require reminders on your part and can’t really be set up automatically.

    Oh, and you can’t schedule a payment for more than 90 days out. That may not sound like a big deal, but when it’s something like a $3,000 tax bill due in 120 days, I want to keep that cabbage earning interest right up until I have to turn it over to the tax man.

    Other than that, two thumbs up for ING Direct. I’m very pleased with them.

  41. @Dollar Frugal – If it’s ok with Trent, I wrote an article you can read on how to create a budget that will help you survive good times and bad. Here’s the link:
    The 40-30-20-10 rule.

    @Trent – nice site. Found you through lifehacker. The only scary thing about setting up automatic payments is if you’re on a really tight budget you could end up spending something you don’t have. I have online bill pay set up through my credit card in which I pay most my bills.

    This is advantageous because I earn Travel Points for the spending and then I simply pay the credit card from my checking account attached to it.

    Just another way ;)

  42. Alex says:

    This looks great, especially the no ATM fees. Unfortunately, they don’t appear to have any international services. I’ll be moving to Toronto next year and am looking for a Canada-friendly checking/savings account since I’ll be spending a lot of time in both the US and Canada. Any suggestions for this? Surely I’m not the first to have a need for one.

  43. Mol says:

    If you open multiple accounts in order to save for irregular bills such as car insurance, does it affect how your interest is distributed?

  44. liz says:

    I’m a big fan of INGDirect, I use it for my bill pay, checking and savings. along with http://www.wesabe.com, I can tag all my purchases and see my spending habits, and me and my fiance can get our (ok, my) spending under control.

  45. Timmy says:

    About step zero #6 – Closing old account.
    A credit advisor once told me to always keep my oldest bank account open because it can bolster my credit worthiness. What are your thoughts on that?

  46. Arif says:

    I use B of A’s “My Portfolio”, but for some reason, it stopped being able to access my ING account to update net worth. I haven’t made any changes to the account, so I wanted to know if anyone else was having this problem.

  47. Eric says:

    I have been very interested in opening a ING savings account and possibly a checking account. But I have a dilema…I am currently using Bank of America and they charge $3 transfer fees for $$$ going from BoA to another bank. But I am interested in the high yield savings, and possibly using them as a primary bank…but is there any way I can still transfer money to/from Boa/ING without paying the $3 transfer fee?

  48. ChristianPF says:

    I have been using ING as a budgeting tool for a while as well! It really is a great (free!) way to budget!!

  49. Cindy Morus says:

    I’ve been an ardent fan of ING since 2002! I have multiple savings accounts for my various savings and future payments. I also like their CD’s. A few years ago, I started putting $100 a month from my emergency fund into CDs (earning as much as 5.35%!). Now I have over $500 in 12 CDs. Every month, I add another $100 so if I ever need them, I know I’d have $500 or more coming due each month. Another reason to have them in smaller amounts is if you should need to break a CD for an unexpected expense it would be better than breaking $10,000 or even $1,000. Next year, I’ll start a new round of CDs so that I don’t have more than $500 per CD. And if long-term interest rates ever go up, I can use the money to create a CD ladder.

    Long live ING!

    Cindy Morus,
    http://www.MendYourMoney.com

  50. Jacob says:

    I am an international student, residing in the US with an SSN and a US address. But ING won’t let me open an account :-(

    * * *

    Who can open an account?

    HSBC Direct: You must…have a U.S. Social Security Number or Personal Tax ID number

    ING Direct: You must be a US citizen or permanent resident…

    There were more than 500,000 international students enrolled in US institutions in 2006-07. Guess which bank they choose?

    ING, wake up!

  51. Tim says:

    “I have been very interested in opening a ING is there any way I can still transfer money to/from Boa/ING without paying the $3 transfer fee?

    Eric @ 3:08 pm July 1st, 2008 ”

    I am a long time BofA customer and just opened an ING savings account. I have not tried this personally yet, but I assume that when you want to transfer money from BofA to ING, you go to the ING website to initiate the tranfer. I would assume that BofA only dings you the $3 transfer fee when you use the BofA site to initiate the transaction.

  52. jp says:

    I have been with ING for several years. I have found a great way to maximize the interest earned from my ING account(s). It’s all about timing. I have a handle on my expenses. I have requested most of my bills’ due dates fall towards the end of the month so that I can earn the most interest possible each month. As soon as my monthly paycheck is directly deposited into my checking account the money to pay bills and save is transferred to my ING savings account. This account is paying the most interest. Two days before my bill payments are to be made, I automatically have the bill paying money transferred to the Electric Orange account, leaving the money for my savings in the savings account. I make sure to schedule my payment dates about 5 days before the due dates so that no late fees occur. I earn higher interest for about 21 days of the month on money that previous learned little to no interest at all. I go to the site just once a month to set up my bill payments. This system allows me to feel free of money worries. I also have several expense designated CDs for property taxes, incomes taxes, registrations fees and personal savings. ING encourages accounts being opened with low minimums, so it’s easy to get started. It’s a great banking tool to get your feet wet with and try out this thing called “personal finances”. ING’s products and services have allowed me to be enaged and empowered with my financial choices.

  53. Stephanie says:

    @Arif:

    I’m having the same problem. I’m told: Credential Re-Verification Required…but I’ve tried re-entering everything, and it still doesn’t work. Has anyone had this problem and found a way to fix it?

  54. RM says:

    ING-DIRECT with BOFA Credential Re-Verification Required

    Delete the account from your BOFA portfolio.

    Login to ING Direct, Go to My Info, edit your login setting. There are five secret questions , set the answers as you wish.

    Go to BOFA profile. add ING DIRECT bank.
    Add your customer ID , pin and the five questions that you set in ING Direct. You don’t have to enter all 10 questions.

    Voila. It works

  55. cate says:

    After hours of puzzling, I finally noticed that one of the security questions as listed on BofA was phrased differently than on ING’s site.

    Something like:

    BofA: In what year was your father born?
    ING: What year was your father born?

    Once I deleted that question from the setup on both accounts, it worked. Whew!

  56. jr says:

    Did you notice the interest rate change from 4.5% to 1.4% Any thoughts on that? How long do you think they will keep the interest rate that low? It seems it has only been a couple of weeks that it happened. My b+m bank offers a similar rate for 1.35%. I wanted to open an account with ING but now am having second thoughts. Any advice?

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