Emigrant Direct Has Onerous Money Transfer Rules

I have had an online savings account with Emigrant Direct since the end of 2005, primarily because it has one of the highest interest rates available, which is currently at 5.05%. Up until last week I had only electronically transferred money into the account from a checking account with my primary banking institution.

Last week, however, decided to electronically transfer funds from the Emigrant Direct account to both my Vanguard and Ameritrade brokerage accounts. I have done such transfers in the past with my old ING Direct account, and never had any problem doing so. Unfortunately, Emigrant Direct has very onerous rules regarding money transfers. Apparently they will only electronically transfer money into "checking" accounts, but not into "savings" accounts. I'm not really sure what the legal distinction is between the two types of accounts, but apparently brokerage accounts are considered to be savings accounts. Emigrant Direct blocked the transfer and I ended up being hit with margin fees in my brokerage account because I had purchased some stock when I thought that the money had successfully been transferred.

The really annoying thing is that Emigrant Direct didn't even bother to notify me that my electronic transfer request had been rejected. Anyone who uses Emigrant Direct should consider himself or herself forewarned. I now realize that to transfer money into a brokerage account, I will need to first transfer the money into my checking account with my primary banking institution, and subsequently transfer that money from that particular checking account over to my brokerage account. I'm not sure why Emigrant Direct has this silly restriction, but it is pretty burdensome to say the least.