Closing a Virtual Bank

Well, not exactly a virtual bank, but Virtual Bank, the bank that I used for about a year.

As part of the plan to simplify our finance, I called Virtual Bank yesterday to close my account (they are quite nice to call me back to confirm with me after I sent the request via bank email). The account was opened in March 2006 and at one time it was my primary online bank when it had a better rate than Emigrant Direct and HSBC. But that didn’t last long and the account was almost empty for most of the time. In fact, their 4.60% APY even beats ING Direct’s rate, but still isn’t good enough for me to keep the account open.

After closing Virtual Bank, I still have five online bank accounts at ING Direct, Emigrant Direct, HSBC, IGoBanking, and FNBO Direct. I want to get rid of one or two more, but will wait till September after the promotion period at FNBO Direct ends to decide what to do. Fortunately, none of these banks requires minimum balance, so I can leave a few bucks in the account without having to close it. Who knows maybe some day one of them will offer a good rate. Then I can always move back in.

Now three or four online banks still seem to be a large number and if any new deal pops up later, I doubt I will keep quite and do nothing (FNBO is an example). The advantage of having multiple accounts is quite obvious to me: I can always find a bank with the best rate and shift my money to it. Then on the flip side, the drawbacks of having too many accounts include:

  • Difficult to manage all the accounts;
  • Money, even small amounts, will be all over the places and it could be even worse if the bank requires something like $500 or $1,000 minimum;
  • Some banks do hard credit inquiry even for a savings account, so it could potentially damage the credit score if applying for several accounts in a short period of time (like within 12 months).

I may only have problem with the first one, but not the other two. Any other bad things of having too many accounts that I missed?

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6 Responses to “Closing a Virtual Bank”

  1. goldfish |  Jun 23, 2007 at 2:07 pm

    Hi Sun,

    One thing I would suggest is to set up a mechanism so your spouse knows where to find these accounts.

    Enjoy the good weekend,

    goldfish

  2. Sara |  Jun 23, 2007 at 2:34 pm

    I suggest you to use Yodlee (https://moneycenter.yodlee.com) as all your account aggregator. I’ve been using it and I am very happy with it. Above all its free!

  3. Tim |  Jun 23, 2007 at 2:41 pm

    It must be bank cleanup time of the year, because i just closed two accounts: ING and Grand Bank. my wife and I have our citi promo accounts and I have wachovia promo account that we will close in august. then we have the BofA MyAccess promo account that we have to wait 50days to get the $100, which means we’ll be closing that account in August as well.

    the hard pull to open accounts isn’t going to have a long term impact on your FICO. if you aren’t planning on taking a loan out in 6 months from it, don’t worry about it.

  4. zeron |  Jun 24, 2007 at 2:42 am

    when it’s difficult to manage, you loose productivity.

    the more banks you have, you increase your security risk. the smaller the bank, the greater the risk.

  5. Sun |  Jun 24, 2007 at 2:50 pm

    goldfish: Thanks for the great suggestion. Actually, I used to have a piece of paper with all the account numbers and user name and passwords for my wife since she almost doesn’t involve in managing accounts a lot. But I haven’t updated the list for a while. I feel it’s due for an update as I have added many accounts in the past two years.

    Sara: I actually have an account with Yodlee, but never really used it. There are many people using Yodlee to manage their account and I have heard some positive experiences. However, I am a little hesitate to put all accounts at one place. But I use Fidelity’s Fullview, which I believe is powered by Yodlee to manage all my investment accounts. I have to say it’s very convenient. Maybe I should consider Yodlee.

    Tim: I remember once you mentioned you and your wife have several accounts with sign up bonus. You must have made a decent amount of FREE money :)

    For the hard pull, it seems most of them will stay on credit report for only 12 months. The impact on credit score is minimal if you only get a couple of account every year. For long term, as you said, the damage is very small, if any.

    Zeron: Well, there are always risks when doing business on the internet and there are quite some sites I have avoided in the past because I don’t fell comfortable to buy stuff from them. However, for those banks I use, there are all the online division of a B&M bank that has been around for a while. Thus, I kind of trust their security measures. But I will definitely have a second thought if it’s a totally new site with no connection with a physical bank.

  6. Ernie |  Jun 28, 2007 at 9:56 pm

    Also, transferring that money back and forth – in addition to taking a lot of time (losing productivity like someone else mentioned – what is your time managing these accounts worth?) – loses you the float for several days.

    You really have to have a lot of $ to benefit significantly.

    Even though I have a fair amount of dough to me it’s not worth it. I like to do funner things.