Updated on 09.12.14

# The HSBC Direct 6.00% APY Promotion

If you haven’t heard the news, HSBC Direct is running a promotion from January 29 to April 30, 2007. During that promotion, all new deposits earn 6.00% APY through April 30, 2007. Naturally, given my curious self, I couldn’t help but wonder how good of a deal this is, so I used a pretty standard situation as a model to estimate how much that’s actually worth to an investor.

Let’s say that on January 29, 2007, Bill opens an account with HSBC Direct and deposits \$100 in it. Bill wants to build an emergency fund, so he schedules a \$100 deposit each week. I’m also going to simplify HSBC’s method of making interest payments just a bit, and say that they deposit all of the interest from the previous month into the account on the 22nd of each month, which is roughly accurate.

On May 1, Bill wakes up and checks his account. With the old rate of 5.05% APY, Bill would have earned \$8.87 in interest over the period. With the new introductory rate, Bill earns \$10.53 over the period, meaning the introductory rate earns Bill an extra \$1.66 in interest. That’s not bad, considering the relatively small amounts that Bill’s working with.

However, the best way to leverage this feature is to deposit a large amount into the account. Let’s say Jill deposits \$50,000 into her HSBC account next Monday morning, February 5. She heard about the interest rate and wants to capitalize on it. On May 1, Jill checks her balance. With the old 5.05% APY, Jill earned \$576.38 on her money, but with the introductory 6.00% APY, she earned \$684.45 in interest, a difference of \$108.08.

What’s the drawback? There are two big drawbacks with this offer: it only affects new deposits (meaning that money already in your HSBC account gets the old 5.05% APY – and by new they mean anything over your balance on January 29, so a withdrawal and redeposit won’t help) and it ends on April 30. For me, it’s not enough to make HSBC my primary savings account for my emergency fund, but as a person who uses HSBC for a small savings fund, I quite like the extra money.

However, if you’ve never tried out an online savings account before, this is the most lucrative offer I’ve heard of, and it’s from one of the leaders in the field, backed by the FDIC and by one of the largest banks around. Just visit http://www.hsbcdirect.com/ and see what you think.

1. Mission Debt Freedom says:

I have my emergency fund here and love it. I especially like the ATM access. I had to test it out a few weeks ago when the motor on our dryer burned out. I when to the ATM in the late evening, withdrew \$350 and paid for a new dryer with cash. What a great feeling to have cash on hand for life’s emergencies!

2. James Denyer says:

Funny, I’ve been with HSBC UK (formerly Midland Bank) since I was a student twelve years ago. I’ve finally woken up to my 0.1% interest rate and am about to switch to Alliance & Leicester Direct at 6.1% credit rate and 0% overdraft fees up to £1000 guaranteed until April 2008. At least HSBC are paying someone something somewhere in the world. You lucky devils! Anyway, wrong currency, but many of the methods still apply, so thanks for the tips all the same.

3. Don says:

Trent, where is your primary savings, if not at HSBC? ING?

4. TFB says:

“However, the best way to leverage this feature is to deposit a large amount into the account. Let’s say Jill deposits \$50,000 into her HSBC account next Monday morning, …”

The bigger question is why is Jill keeping \$50,000 in cash? Does Jill have any debt? Is Jill contributing the maximum possible to her 401k and IRAs? Should Jill invest \$X from her \$50,000 in a mutual fund for better return longer term? Should that \$X be \$10,000? \$20,000? \$30,000? Finding out a *temporary* good rate for one’s money is great, but if this causes Jill to miss out the bigger questions, she is worse off in the end.

5. Michelle says:

I looked into ING and HSBC the other day. ING looks pretty good, but I’m not sure I want to trust HSBC with my money. See http://householdwatch.com/ for information on how they treat their credit card customers. Do you think I’m overreacting?

6. T. Blake says:

I found your site since it refers to ours. Let me say HSBC is probably very good at this point if they do not adopt too much from HSBC Finance Corp. Yes, HSBC is suffering from their purchase of the predator, formerly Household International. What I find very unfortunate is HSBC did not change Household International to fit the well-heeled HSBC image. Racketeering, RICO, suits, settlements, bad service – they all come from HSBC Finance Corporation and their interaction on behalf of over 60 merchants. HSBC Plc and HSBC USA suffer accordingly. Many people judge HSBC as one entity, and perhaps they are right to do so.