High-interest savings accounts
Posted on June 2nd, 2008 – 2:16 PMBy Kara McGuire
Just received this email earlier today:
HSBC Direct announces Online Savings rate increase to 3.50%
– High Rate Rewards Savers on New and Current Funds —
HSBC Direct has increased the rate for existing and new Online Savings Account customers to 3.50% APY on all funds – both new and current. The offering rewards savers with a rate that is nine times the national savings average, and is up from 3.05% APY. The increased rate is effective as of today, and will run through August 15, 2008.
“We are committed to helping our customers get the most from their money, and we constantly look for ways we can reward them,” said Kevin Martin, executive vice president and head of HSBC Direct U.S. “Increasing our HSBC Direct Online Savings Account to 3.50% — when other savings rates have been falling — gives new and existing customers an even better reason to start saving more.”
I have much of my discretionary savings swooped from my checking account into HSBC each month, so this is a nice surprise. Warning: I think the web site is cumbersome. The rate is better than the 7-month CD the bank is touting on its site for 2.80 APY. Now if they’d just give away $25 or so for opening an account or sending referrals…
I have other high-yield online savings accounts that pay less in interest.
ING currently offers 3.0 percent. E-Trade’s is 3.15 percent. You’ll only earn 2.75 percent with Emigrant direct.
Banks always have inertia working for them. Getting a new savings account with a higher interest rate isn’t top priority on most to-do lists, nor is it probably worth it to collect savings accounts for just a few extra basis points. How many consumers have had their money earning next to nothing for months without taking action?
But with an abundance of savings options out there for go-getters, banks have to do something to entice them. What better than to offer interest rates that are nearly double the 2 percent rate set by the Federal Reserve?
How about you? Spotted any good rate offers out there?
9 Responses to "High-interest savings accounts"
With the CPI-U having increased 3.9% year over year to April, even the government-reported statistics have you losing real money. I’m not sure I’d call that a “nice surprise.”
-Ryan
We currently have our savings at Capital One Direct, which is also at 3.50% for balances over $10,000 (they were at 3.75% until recently). We also have an HSBC account, but moved over to Capital One when we found they had a better rate, and that the website is more user-friendly. We kept the account open so we have another option if our current rate goes down. I hope HSBC’s move will prompt others to consider raising their rates to compete!
Cumbersome is a nice way to describe the HSBC site - but if you only go there once a month it’s not too bad.
Low rates on savings accounts bolster the argument that a HELOC may be a viable alternative to the traditional “6 months of living expenses in savings”.
Finally, I’d bet that a lot of people have consumer debt at rates that far surpass the rate they are getting on such savings accounts…
It’s amazing to me how much “ease of website use” influences my patronage of companies. I’m getting less interest at ING, but their site is so easy to use, I have no desire to switch to HSBC just for a bit more buck. It’s not like I have $100K in there or anything.
Same with Vanguard vs. Fidelity. I have both, but prefer the former. Sure, no site is perfect, but some of these sites are just horrendous.
Whatever you do, it’s about priorities. Definitely those with a bunch of credit card debt shouldn’t be worrying about online savings accounts.
Good point, Ryan. Where do you put your liquid savings? I-bonds or TIPS?
I understand your point as well, David. I don’t have a lot of money sitting in such accounts, but I think some amount is a necessity.
I have a small amount of I-bonds and CDs, but I try to keep it to a minimum. I also like the Merk fund — essentially a money market fund of foreign currencies (so it will fluctuate in dollars somewhat.)
Can anyone comment on the advantages/disadvantages of high-interest checking accounts? Some have rates around 6%, but I feel like there must be some sort of catch.
@Kristen
I have the ING Checking account.
I can’t hand write a check, I can’t walk into a bank and make a deposit into my account. Personally I don’t care about those but some people might see them as negatives.
Today, I received notice that my FNBO Direct online MM acct interest rate was increasing from 3.25% to 3.5%. Not bad these days for a FDIC insured, no minimum balance and no fee savings acct. I transfered some of my funds from ING to FNBO because of the higher rate.
