HSBC Direct started a new promotion duplicating what ING Direct did last year with its Winter Save Up Sale. HSBC is offering a 6.00% APY in its Online Savings Account on all new money deposited from January 29 to April 30, 2007. Old money will continue to earn the 5.05% APY. This applies to both current and new customers.
HSBC has a special FAQ for this promotion. For those who keep most of their liquid money elsehwhere, this can be a good deal. Just transfer the money in and that new money will earn 6% APY (5.84% interest rate). However, if you've been keeping most of your money in this Online Savings Account already, you'll get stuck with the 5.05% APY. Also note if you withdraw money, this will reduce the amount that earns 6%.
So if you have $10K in there now and you make another $10K deposit, you'll earn 6% APY on that second $10K and 5.05% APY on the first $10K. If you withdraw $10K, you'll earn only 5.05% on the remaining $10K. HSBC calls this the Last in First Out calculation of New Money interest.
HSBC Online Savings Account Overview
For those who don't yet have an account with HSBC Direct, this might be a good time to open one. Even without the promotion, it has some nice features although there are some downsides. Here's my list of both:
- Standard rates have remained competitive
- No minimum balance requirements
- ATM card available for savings account
- Bank-to-Bank ACH transfer system allows unlimited links to external accounts
- Links to external accounts can be set up online and verified with trial deposits. No checks need to be mailed in.
- Checking accounts are available. The checking accounts can appear with your savings account in your account page and online transfers can be done between them.
- No hard credit pulls. I didn't get a hard pull when I opened the Online Savings Account in 2005.
- Security Key and the virtual keyboard should reduce the risk of hackers accessing the account
- Not the best standard rates in its history
- No sign-up bonuses currently available. There have been many in the past
- Slow ACH transfers to and from other banks. Transfers can take a minimum of 3 days with 2 days of no interest. For example, I specified a withdrawal at HSBC on January 16th for money to be transfered to EmigrantDirect. It was debited from my HSBC account on the 17th. It didn't show up at EmigrantDirect until the 19th.
- Security Key and the virtual keyboard requires another password that must be remembered and makes the account login longer.
How Much is Safe to Deposit?
According to HSBC's FAQs, you can deposit up to $2 million dollars into HSBC's Online Savings Account (I haven't tested this out :-). For those who may want to deposit more than $100K, keep in mind that you can extend the FDIC insurance coverage over $100K with a joint account. Here's an example provided at the FDIC webpage regarding joint accounts:
A husband and wife could have up to $200,000 in one or more joint accounts at the same insured bank and the deposits would be fully insured.
You can also extend coverage over $100K with Payable-On-Death accounts and In-Trust-For accounts with qualifying beneficiaries. This FDIC webpage provides the details. According to the HSBC FAQ's, you can designate one beneficiary per account:
Once the account is set up, send us a BankMail with your child's name. You are welcome to open as many accounts as you like, but each account can list only one beneficiary.
In addition to listing a qualified beneficiary, the account must also be titled with a term such as payable-on-death, in-trust-for or as-trustee-for to qualify for the additional insurance. I couldn't find any documents at HSBC regarding this so I called. The CSR said that savings account would NOT have this account title. I'm not sure if she exactly understood the issue, so I'll follow up with BankMail. As it looks now, joint accounts seems to be the only way that will extend your coverage over $100K for the HSBC Online Savings Account.
The importance of FDIC insurance coverage for a bank like HSBC is debatable. HSBC Direct is part of the HSBC Holdings plc which is one of the largest banking groups in the world (see background). The US arm is HSBC Bank USA, N.A. It's FDIC insured. One interesting note is that it currently only has a 2 out of 5 star safe-and-sound rating at Bankrate.com.