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HSBC Direct Interest Rate APY
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HSBC Direct just raised their interest rate, leading many of their competitors. By comparison, ING Direct sits at at 1.85% and E*Trade remains at 1.95% (they are three of the five online banks I considered the best online savings accounts).
Is it worth it for you to move your funds from a 3.00% APY interest rate bank account to a 3.50% APY interest rate bank account? No, because the time your funds are in limbo, not earning interest, will make the effort not worth it (unless you have a ton of money). However, the cost to open a new bank account is practically nil and HSBC used to be one the leaders prior to the recent string of Fed interest rate cuts.
Also, this rate is guaranteed through September 15th, which means they can increase or decrease it over the next three+ months. So, use HSBC Direct if you don’t have an account but don’t bother opening one to transfer funds in for this rate.
{ 14 comments, please add your thoughts now! }
OK, so now I have to know…
What interest rate would I have to be earning at the other bank to make transferring the funds worth it (assuming 6 days transfer time – 3 from the “old” high-yield savings to a checking account, then another 3 to HSBC)?
I believe, and I could be wrong on this because my math is terrible, the newer rate has to be 365/(365-n) times better, where n is the number of days lost. You have to compare interest rates in APYs (since that will control for the compounding period).
So, if you assume six days, HSBC’s rate has to be better by 365/359x better than ING. ING is 3.00%, 365/359x 3% (1.03) is around 4.72% (correction via Miller, thanks man) if you assume the difference remains for one year.
Someone check my math? (again?)
So if I’ve already got an HSBC direct account, does my interest rate go up too?
Here is my try at the math:
Daily Interest Formula = ((P*i)-P)/365
P = Principle
i = interest rate
Interest Earned over a period of D Days = (((P*i)-P)/365) * D
So, lets say the turnaround time to move money from one bank to the next is t days
The formula I used is
Money earned at existing bank = Money earned at HSBC
And for easy use, lets say principle is 1 (it can be any number)
Money Earned at existing bank where p is 1 = ((i-1)*d)/365
Money Earned at HSBC where p is 1 is = ((1.035-1)(D- t))/365 =(.035(D- t))/365
Setting them equal is
((i-1)*d)/365=(.035(D- t))/365
(i-1)*d = .035(d-t)
i-1 = (.035(d-t))/d
i = (.035(d-t))/d + 1
So, if the money would sit in your existing bank for 60 days, and in HSBC for 54 (6 day turnover), the interest rate at the existing bank would have to be 1.0315, or 3.15%….anything less, and you would be better off moving your money to HSBC.
Since Jim is normally correct, and my answer is different than his, please check my math and assumptions.
I have an HSBC acct and received email today about the rate increase, so yes current customers get the increase as well.
I’m curious…how come rates are going up?
Doesn’t HSBC also give interest on their checking accounts? That’s something I’m interested in, so this might just be what makes me take the leap and switch to HSBC. Does anyone recommend them? Since I’m pretty happy about WAMU so far I wouldn’t want to regret it later.
I have never heard anyone complain about them though people don’t often complain about banks, the exception is sometimes Emigrant Direct (site is sometimes slow, down).
Steve and Jim,
Thanks for the interest rate analysis. I took a stab at it also — figured I’d better put in the effort.
I converted the APY for both into a Daily Periodic Rate and then calculated the future value of $100 sitting in the old for 60 days v/s at HSBC for 54 days.
I’m going to move my cash (currently earning 2%). I figure on each $100 I’ll save $0.17 over 60 days.
I could be wrong, but I don’t want to stare at the math anymore!
I don’t know what is the rationale behind 6 day turnover for transferring funds to HSBC. If the source account is linked in HSBC’s bank-to-bank transfer site, then the turnover is only 2 business days. So one would make up lost interest in 7 days for funds transferred from a 3% earning account and in 18 days from 3.15% earning account.
“I don’t know what is the rationale behind 6 day turnover for transferring funds to HSBC.”
Have you used ING or any of the online savings? 6 days is very legit.
saladdin
Also, go over to my money blog. Jonathan has a “Interest Rate Chaser” calculator.
saladdin
So, question: The rates are guaranteed through August 15. Does that mean if you sign up by 8/15 you’re guaranteed 3.50% for however long you’d like? Or that you’ll only have 3.50% until 8/15, at which point the rate will drop?
Nope, the rate is just guaranteed from when you open until 8/15. There’s no guaranteed rate on savings accounts.