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FirstFedDirect, a New Internet Bank

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More banks are following the lead of EmigrantDirect and starting internet divisions. The latest is FirstFedDirect. Last week First Federal Bank of California announced the opening of FirstFedDirect. Like EmigrantDirect and ING Direct, there's no minimum deposit requirements or monthly fees for the bank's online savings account called the Internet Advantage Savings Account. The current rate is 4.03% APY.

In addition to a savings account, FirstFedDirect also offers CDs which currently have some competitive rates. The rates of the 6-month and 12-month CDs are 4.42% and 4.73% APY. These rates are better than what ING Direct offers, however, FirstFedDirect has a high minimum deposit requirement of $10K for these. ING Direct doesn't have any minimum. The early withdrawal penalty for CDs at FirstFedDirect is a little bit worse than ING Direct's penatly. For both banks, CDs with terms under one year have a 3-month interest penalty. For the one year certificate of deposit, FirstFedDirect has a 6-month penalty. It's only 3-month at ING.

One small advantage of FirstFedDirect over ING Direct is that you can designate "pay on death" (pod) beneficiary at FirstFedDirect. This option is not available with ING Direct accounts.

The big question about FirstFedDirect is how good is their online banking and customer service. I can't find any telephone contact information. Neither the learn-more page or the FAQ page has any email address or telephone number. From reading their FAQs, the account linking feature doesn't seem as good or as automated as the others. To start an account, you have to mail in a check for the initial deposit. The checking account used for that deposit becomes your linked account. There's no information about adding additional linked accounts.

FirstFedDirect is going to have to do more to differentiate themselves from the other online banks. When EmigrantDirect first started, it made an impression by offering a savings account rate about 0.50% higher than the other banks. That helped overcome the newcomer status and the weak website. MyBankingDirect didn't have the best rates but offered a $25 signup bonus. New online banks are going to have to do at least one of these to make it worthwhile for people to open an account.


Comments
4 Comments.
Comment #1 by Banking Guy (anonymous) posted on
Banking Guy
This bank's website has been down for most of Saturday (Dec 17, 2005), and it's not a planned maintenance kind of thing. It's outputing web server error codes.

That's not something an internet bank should allow to happen. They won't build trust that way.

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Comment #2 by Banking Guy (anonymous) posted on
Banking Guy
It's hard to believe, but it's still down as of Tuesday (Dec 20, 2005).

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Comment #3 by R. Welch (anonymous) posted on
R. Welch
Make sure to let all California citizens know that this rate is for everyone living OUTSIDE the state of California. Californians are out of luck.

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Comment #4 by Banking Guy (anonymous) posted on
Banking Guy
Yes, you are right about that. It is only open to those outside of California.

I don't see a good reason for this. EmigrantDirect doesn't exclude New York residents even though Emigrant Savings Bank is based in New York.

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