Are these other accounts just more of the same?

July 5, 2008 2:10 PM

When the Citibank e-savings account started (I think about 18 months ago) the interest rate was 3.5%, so I moved all my spare cash there; but now it's 1.5%. Capital One & HSBC are currently offering 3.5% e-savings accounts - is this the same deal? Are these only introductory rates which I should expect to fall dramatically in due course?

If so, this kinda feels similar to those situations where people bounce all their debt around 6 months interest free credit cards. Is this what you need to do if you want the accessibility of an e-savings account with a good interest rate? You'd have to keep bouncing to the latest account offering essentially a short-term high rate.

Or have I got it all wrong. Are those nice people at Capital One gonna hang on to that nice 3.5% for me (or at least let me know when it drops significantly, unlike my buddies at Citibank)? I notice that the HSBC rate is only available through mid August....

posted by forallmankind to work & money (9 comments total)

Capital One & HSBC are currently offering 3.5% e-savings accounts - is this the same deal? Are these only introductory rates which I should expect to fall dramatically in due course?

For the last five years or so I've been putting money in an e-savings account my bank offers which pays approximately 5%. Not an introductory rate or anything like that.

I've never dealt with Capital One or HSBC's e-savings accounts, but at least one savings account labelled 'e-savings' isn't a scam.
posted by Mike1024 at 2:28 PM on July 5, 2008

hsbc has been 3 - 5% since I've been with it (from last year)
posted by yort at 2:42 PM on July 5, 2008

That rate is for the online savings accounts with over $10,000. I have been using their HYMMA for over a year, and although the rate has dropped from 5% to 3%, it is the same as they are advertising and there is no minimum balance. The HSBC rate until August is for a no minimum balance account, so is probably a better deal. They have been pretty consistently among the better rates every time I've checked in the last year.

Bankrate.com has a pretty good list of some of the better savings accounts and some have their intro and after intro rates listed. A lot are the same after the intro, but will go up and down based on the market.

Historically, banks have had to have a certain percentage of cash on deposit to loans. These restrictions have been laxed over the years, but it still makes good sense for the bank to keep this ratio high. As Capital One is one of the biggest lenders, they are going to have more of an incentive to keep their savings balances higher. You may find local banks as Mike1024 that are also offering higher rates. And there are always a few online sites that offer high introductory rates that you can bounce your money around to (like EverBank right now).
posted by Yorrick at 2:52 PM on July 5, 2008

HSBC, at least, is running 3.5% as a promotional rate; they were about 3% before and come August, it'll be 3% again.
posted by Godbert at 3:23 PM on July 5, 2008

HSBC's 3.5% is a promo currently slated to end August 31. They may extend it.
posted by kindall at 4:11 PM on July 5, 2008

As a very satified HSBC customer, I can say that HSBC's rates have been pretty stable except when the federal reserve drops rates. When I signed up (apparently one year ago today, according to email records) it was 5.05%, and then it dropped to 4.5% in September. In December it was down to 4.25% (and the email from HSBC notifying me of the change said it was due to the federal reserve). On Jan 29 it was down to 3.8% and then days later on Feb 4 it was down to 3.55%, and on Mar 24 down to 3.05%. I don't really understand or follow the economy closely, but I'm pretty sure all these rate changes were around times that I remember the news being something to the effect of "rabble rabble economy sucks rabble".

Anyways as Godbert said, the 3.5% rate is a promo until August 15 before it is slated to go back to 3.05%. Other than that, I would expect that HSBC isn't going to pull the old bait and switch on you. If their rates drop, it's probably because the general economy dictates as such.
posted by wondercow at 5:52 PM on July 5, 2008

Here's another possibility for better yields that you might consider: credit unions.

Several credit unions in my local area offer surprisingly high rates for electronic-only accounts. All of them require paperless accounting (i.e., no paper statement mailed to you) Typically there are other requirements too, like a regular deposit--not necessarily a payroll deposit--or a regularly scheduled electronic bill payment, or a certain number of point-of-sale debit card transactions per month. All of them have limitations on the amounts of money eligible for the high rates. But if you can keep within the requirements, you can get a much better interest rate than what you're quoting above, with an electronically accessible account.

There are accounts like Boeing Employees Credit Union's Member Advantage Accounts and Watermark Credit Union's First500 Checking and Savings, which earn 7.5% or 8% respectively on the first $500 in checking and the first $500 in savings. These high rates are also good for kids/minors' accounts, for the first $500 in the account, without the electronic transaction requirements. For monies above that limit, in any of those accounts, the interest rate drops to essentially nothing. But if your savings account isn't too huge it might be a good choice. Or it might be good if you and your spouse and your two kids each have all possible accounts at both banks at the $500 limit, and you set up your electronic payment requirements to hum along and keep your balance at about the 500 limit and no more, which totals up to $6K at those respectably high interest rates. Not that I know anyone who games the system that way, or anything.

There are other credit unions that offer deals like the Velocity Checking Account from Verity Credit Union. It earns 5.05% on checking balances up to $40K (you read that right) and refunds ATM fees, among other things. This requires the 12 POS transactions per months, so they seem invested in you really using the checking account like, you know, a checking account, rather than a holding account.

All of these credit unions require residency in Washington State for membership. If you live elsewhere, you might find a broad-membership credit union that has some attractive products for you.

Remeber that CUs are not-for-profit enterprises, so they're not out to screw you the way that banks are. Generally this translates into lower loan interest rates and higher savings interest rates.

Good luck!
posted by Sublimity at 6:27 PM on July 5, 2008

I have an HSBC online savings account. Experience is pretty much the same as wondercow's. When I signed up it was at 5.05% APY and slowly dropped to 3.0%. Now it's back at 3.5% temporarily. Keep in mind that they calculate your interest NOT as an APR, but as a compounded APY, the rate you would earn over 12 months if you keep all of the interest in the same account, and the new higher total of your account with each month's interest added earns interest.

Stay away from Capital One simply because they're known as horrible credit card loan sharks. Capital One = bottom feeders in the financial marketplace. If HSBC is offering the same rates...
posted by thewalrus at 7:51 PM on July 5, 2008

All of the big banks' rates out there are going to fluctuate along with what the market will allow. When the fed changes rates, it changes what it costs banks to lend/borrow money, and any bank not passing that change on to you is probably making a business mistake that will hurt them in the long term.

I'm happy with my HSBC online savings account, which has no fees for any of the basic needs types of money transfers out there, and has served me well...
posted by twiggy at 2:22 PM on July 6, 2008