4 Credit Card Companies and Their Online Banks

The following was written by friend of the site and consumer banking expert, Ken Tumin.

If you open your wallet, you will probably find that you have at least one credit card issued by American Express, Barclays, Capital One, or Discover. And for good reason – these companies are well known for their credit card offering. However, not everyone is aware of their online banks. All four of these companies have internet banks which offer consistently competitive rates on their savings accounts, certificates of deposit, and other deposit products.

Especially in the current interest rate environment it’s important not to focus only on interest rates when you’re looking for an internet bank. The bank should offer features and services that make the account easy to manage. If you can’t easily make deposits or withdrawals, a high interest rate won’t seem that important. The same can be said for customer service. If you can’t easily reach a bank representative when you need help with your account, a high interest rate is of little concern. Many internet banks are weak on their ease-of-use and customer service. That’s not the case with these four credit card companies. They have made large investments in their websites and customer service.

Capital One Bank’s New Capital One 360

Capital One 360 logoCapital One Bank has long offered an internet bank, but in the last couple of years, a major change occurred. Capital One acquired ING DIRECT, the U.S. division of the global financial company, ING Group. ING DIRECT had been the largest U.S. internet bank, and it had long been well known for a competitive savings account rate and a simple and straightforward online interface. When the acquisition became final, Capital One made the decision to put all of its marketing focus on its newly-acquired ING DIRECT division, which is now called Capital One 360.

Capital One 360 has continued the ING DIRECT reputation of a competitive savings account rate, easy-to-use website, and helpful customer service. As one would expect from the largest internet bank, it has invested heavily in new technology like mobile banking, including mobile check deposit.

In the early days of ING DIRECT, the bank’s goal wasn’t to become a customer’s primary bank. That changed in recent years with the launch of an internet checking account, which is now called 360 Checking. With all the features of a regular checking account, including paper checks, 360 Checking can easily function as a primary account.

Barclays’ New Internet Bank

Barclays logoLast year the U.S. division of Barclays launched an internet bank offering a savings account and CDs. Barclays is a British multinational megabank. One of its U.S. subsidiaries is Barclays Bank Delaware, which is best known for partnering with U.S. companies in offering co-branded credit cards. Barclays decided to start an internet bank to broaden its reach in the U.S. and to provide a more reliable funding source for its credit card operations.

From the time Barclays’ internet bank launched, its savings account and CD rates have remained very competitive. The website makes it easy to open and manage accounts. Barclays can be a useful place for your savings, but it currently lacks a checking account, so it can’t yet function as a primary bank for most people.

Discover Bank’s Slow Progress

Discover Bank logoDiscover Bank is primarily an internet bank with no significant branch network. For the last several years, it has been offering a savings account, money market account, CDs, and IRA CDs.  It currently doesn’t publicly offer a checking account, but it has been working to launch one for a while, and over the last year, some Discover Card customers have been invited to apply for the checking account.

If you want competitive rates without monthly fees, Discover’s Online Savings Account is a good choice. The money market account has lower rates, and it also has monthly fees if your average daily balance falls below $2,500. ATM access and check writing are the primary advantages of the money market account.

The bank has slowly moved to become a major player for internet banking. In 2010 it did a significant overhaul of its website and online account management center, which simplified opening accounts and transferring money. Once the checking account is publicly available, Discover should be a good alternative to Capital One 360 as an internet bank that can serve as one’s primary bank.

American Express Bank Keeps It Simple

AmEx Savings logoSeveral years ago American Express used to advertise a savings account as part of the Savings Accelerator Plan, which was connected to the One Card. In 2009 American Express launched a new savings account that has replaced the Savings Accelerator. The new online savings account no longer has any direct connection with the American Express credit cards.

American Express Bank has decided to keep it simple by offering just an online savings account and CDs. The savings account is a simple account with just one top rate for all balances and with no monthly service fee. The account has no check writing or ATM access. Like any of the above savings accounts, the bank makes it easy to link to an existing bank account and to initiate electronic transfers for deposits and withdrawals.

Banks with Large Credit Card Operations

One constant with internet banking has been change. New banks are constantly being launched while others are being changed. Barclays is a recent example of a new internet bank, and Capital One 360 is an example of how internet banks can change. All of the above banks see their internet divisions as reliable funding sources for their credit card operations, and that has encouraged them to remain competitive on both deposit rates and services. No one can guarantee that these banks will remain competitive, but banks with large credit card operations have a history of keeping their deposit account customers happy.

This post was written or last updated January 2, 2014

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