Banking, Reviews 
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HSBC Direct Review

HSBC AdvanceHSBC Direct has usually had one of the most competitive interest rates, so I opened an account there. I didn’t open it because I was planning on moving funds from a 2.70% ING Direct account, I did it because the cost of opening an online savings account was near zero and because I could then start funneling income deposited into a 0% Bank of America checking account into the new HSBC Direct account. It doesn’t make much sense to move funds from ING or Emigrant to HSBC, but it does make sense to change the destination of funds from Bank of America.

There were a few other non-financial reasons for opening the account. First, there’s no marginal cost to opening another savings account. HSBC has a well known international name and has consistently been among the leaders in interest rates. I would be hesitant to open an account at a lesser known bank. HSBC’s international presence is also a benefit. When we were in China and Taiwan, HSBC was everywhere (along with Citigroup) and that’s a side benefit. Lastly, my mom has an HSBC account, in part because of the China and Taiwan presence, and having that link is convenient as well.

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 Banking 
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HSBC Direct Interest Rate APY

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.


 Credit 
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My Credit Bureau Feature Wishlist

Look! It’s a new credit scoring system for the credit bureaus! Isn’t that great!? It is, except it doesn’t address any of the problems I see with the credit reporting industry. In my mind I have a set of features I think all the credit bureaus should institute if they want to clean things up and make life easier for everyone. As great as that sounds in principle, the problem is that consumers aren’t the primary customers of credit bureaus; banks, credit cards, and other lenders are. All the features I’m about to list are ultimately great for both parties but I think the bureaus are too short sighted to realize this, but I’ll scream into the abyss and ask for these things. Maybe Congress can do something useful and force them offer these. (some of these features may or may not be already available, I haven’t checked, so let me know it’s already available!)

Easily Freezing and Unfreezing Your Account

This is one feature that companies offer nowadays and some states require it, but ultimately it’s very difficult to do. The bureaus should offer online account access that lets you freeze and unfreeze your account with the click of a button. You don’t want credit, tell them to freeze your account and not to let any requests through. If you want credit, log in, unfreeze it, apply for credit, when you’re granted it, freeze your account again. Yes, I understand that that credit bureaus want you to pay for this service but when they’re giving away your information for a fee, it’s not unfair for them to offer this simple service to you.

Email Notification of Inquiries

At a minimum, set up a service in which credit history requests trigger an email that gets sent to an email account of your choosing. Again, I realize that this has costs associated with it but roll that into the cost of a credit inquiry in the first place. It can’t possibly be all that expensive, per inquiry, to set up a system in which an email can be sent out.

Option To Accept or Deny Inquiries

Now, let’s say you opted to keep your account unfrozen, you get email notifications, what if you could accept or deny inquiries? You could deny all those unsolicited credit requests but keep all the legitimate ones, hopefully you can keep them straight in your head.

Reject Non-Perfect Inquiries

When I reviewed my credit recently, I had an incorrect address and two social security numbers listed on my account. I thought to myself – “how could I possibly have two social security numbers!?” When I asked the bureau, they said that sometimes that happens and that errors often result in inaccuracies in one’s history. The social security number was close but one number was wrong, isn’t that grounds to deny a request? Apparently not! Apparently, according to the CSR, it happens all the time. Well, I think it shouldn’t happen all the time and that it should happen, um, never.

If Nothing Else, How About A Password

So you apply for a credit card, enter in your credit bureau password. If nothing else, this is the easiest way to ensure that the request legitimately originated from you in the first place. This seems so simple to me that it should’ve already been implemented.

How This Helps Banks, Lenders, Credit Card Companies

Financial institutions shouldn’t be trying to deluge every single person in the world with credit card offers, they should be deluging those people who want to be deluged. It’s called targeted advertising, it’s why beer commercials are shown during football games, it’s why jewelry commercials are shown during the holidays and Valentine’s Day, and it’s why you see clothing and fragrance ads in men’s and women’s magazines. You might get a few errant signups by shotgunning the masses but it’s far more effective to send offers to those who are interested.

Lenders may complain that this will slow the credit process down (and these will), but if you’ve been reading the news, don’t you think it the market could’ve used some slowing down? Credit was flowing too fast for too long and now the likes of Citi, HSBC, Bank of America, Countrywide, and company are feeling the pinch. Slowing down isn’t necessarily a bad thing, unless you’re the one waiting to be bailed out. How is this related? Sometimes what you expect to be bad, in this case a slowdown in the credit approval process, might actually be good.


 Personal Finance 
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Five Accounts You Absolutely Must Have (And Four You Don’t)

There are five finance related accounts in the personal finance world that I think every single person must have and they should get it as soon as possible. They run the gamut of the obvious, an accessible checking account, to the not so obvious, a high yield savings account (as surprising as it sounds, this is not obvious to most people because they are amazed when I tell them you can get 5% from a regular savings account). So, please enjoy this list of five accounts you absolutely must have and three that you absolutely must avoid.

These Five Accounts You Absolutely Must Have

1. High Yield Online Savings Account

Number one definite must have account is a high yield savings account getting you at least 4%, at the very very least. If you assume inflation at around 3%, anything less and you’re losing money. Take your pick of ING Direct, FNBO Direct, Emigrant Direct, Citi, and you’ll get over 4%. My recommendation is that if you have a Citi or an HSBC bank account, go with one of them because your transfers will be instant between accounts. If you don’t, I use FNBO Direct but both they and HSBC offer 5.05% APY.

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 Banking 
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State of the High Yield Online Savings Account

I’ve recently been getting a lot of emails asking what I recommend for folks looking to open a high yield savings account and, having not kept up to date with the APYs, I didn’t really have much advice other than that they should take advantage of the ING Direct new account referral bonus and then select either FNBO Direct or E*Trade for their main online savings account. (which actually turns out to be good advice)

Until recently, there were a couple folks in the high yield category, including Citi e-Savings, Emigrant Direct, and HSBC. However, just a few days ago the Citi e-Savings dropped their yield down to 4.75% so they are no longer in line with the leaders of the back (I define inline as within a tenth of a percent or so). Unfortunately, ING Direct hasn’t tried to keep up and Emigrant and HSBC are the current leaders in the clubhouse.

Now, HSBC recently announced that they’d offer a promotional interest rate of 6% for new funds until the end of April, giving you a little less than three months of interest earnings – not enough incentive for folks with existing accounts (you lose yield by moving the funds around because of the lag) but it’s a good reason for people without accounts to open one and put their funds there (assuming it will fall back to the 5.05%).

So, in a nutshell, here are where the major (in my mind) online savings accounts stand in terms of interest yield:

  • HSBC: 6% until 4/30, then 5.05% presumably. (if I didn’t have an account, I’d open it here)
  • Emigrant Direct: 5.05%
  • Citi e-Savings: 4.75% – One plus of this account is that you can link regular Citi accounts to it and transfer money very quickly.
  • Virtual Bank: 4.6%
  • ING Direct: 4.5%

ING Direct & Virtual Bank Referral Bonuses:

If you know someone who has an existing ING Direct or Virtual Bank account (I have both, please email me if you want a referral or go to the self-serve ING Direct $25 Promotion page), they can send you a new account referral and you can earn money for signing up. For ING, you’ll need to deposit $250 and you can get a quick $25 (the referrer gets $10). For Virtual Bank, I’m not sure what the minimum is but you get $20 for signing up (so does the referrer). Once you have an account, you can refer up to 25 people for ING and 50 for Virtual Bank.

Caveats to Online Savings Accounts:

With the high yields come some inconveniences that are consistent with savings accounts but that you may not be familiar with because of how you use savings accounts. For example, there is an FDIC limit of six transfers to and from any one particular savings account (reasons are in the linked post) and there is generally a nearly one week lag for moving funds. The one week lag is because the savings account generally doesn’t having an associated checking account, like you would normally, and so in order to access the funds you’d need to ACH it to another account – that ACH process can take five business days. A workaround is if you have a Citi e-Savings account because you can link it to a regular checking account and the transfer would be internal to Citi and immediate. So, with the higher rates, you have to suffer some inconveniences – it’s not as bad as a certificate of deposit though!

If you want to stay current, I recommend visiting Bank Deals, they do a great job getting the latest and greatest info out to you and they also do a weekly summary that has this sort of information, but in greater detail, which is linked to from their sidebar under Weekly Bank Deals Summary.


 Banking 
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Spread Your Savings Across Multiple Online Banks

Update: My funds are now safely split amongst FNBO Direct, ING Direct, and an HSBC Direct account. (ING Direct is merely my online account firewall with PayPal, so it doesn’t have the same amounts as the other banks)

Right now I have all my savings, including my 0% balance transfer funds, in an Emigrant Direct account. With the latest hubbub about Bankrate lowering their rating to two stars (read the discussion here, hat tip to Tessa to clueing me into it initially), I started to rethink my online savings “strategy.” Tessa mentioned that Emigrant Direct could potentially hold my funds hostage for 30 days and so I thought… I shouldn’t have all my eggs in one basket. (Honestly, if I’m in a bind and need the money, any delay is too long) Right now, 75% of my cash is in that Emigrant Direct account (but half of that is 0% balance transfer money)… which is way too much anyway.

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 Debt 
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Student Loan “Dilemma”

Like most folks out there, I don’t like owing anyone money. I don’t like owing the bank money on my first mortgage, I didn’t like owing the bank money on my second mortgage, and I don’t like owing the lender money on my student loans. Here is my dilemma… back in September I wrote a relatively straightforward article titled “Don’t Save, Pay Off Debt!” in which I said that you should list the interest rates of your cash and of your debts in descending order. If you happen to have any cash in an account listed lower than a debt, you should pay off the debt with that cash unless it’s earmarked for a specific purpose (down payment, emergency fund).

Many of us who have student loans probably locked them in at rates way under the 5% you can get any online bank. Personally, I have about $24,000 in student loans at 3.25% (currently in deferral because I’m taking classes) which would put the debt underneath the cash I have in the 5%. Logic, and math, would indicate I should just pay the minimum payment on the student loans and keep the rest of it in my HSBC Direct account (even if you factor in that I have to pay taxes on the 5% interest). In fact, since my first home mortgage is at 5.75% (fixed) I should actually be paying that debt off first before I even consider paying the student loans because it’s at a higher interest rate. And on the first mortgage, I have exactly zero chance of paying off my mortgage (over $200k) anytime soon.

I want to pay off the student loan because it’s satisfying to write a debt off the “books” but I have to keep reminding myself it’s not the smart thing to do.


 Banking 
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Emigrant Direct to 5.0%

Emigrant Direct announced today that the APY on their online savings account is now 5.0%, keeping it competitive with every other online savings account out there. They also increased their MyWay CD rates from 5.0% to 5.35% with minimum opening deposit at $1000 and minimum maturity of 6 months.

While competitive rate wise, Emigrant has no sign-up bonuses. ING Direct offers a $25 referral if you deposit $250, please visit the ING Direct referral page if you want a referral. HSBC is offering a $25 Best Buy card for new account openings though you “must be a Best Buy cardholder to qualify for gift card offer.”


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