HSBC Action May Signal Coming Competition in 2016 for Savings Dollars

HSBC Action May Signal Coming Competition in 2016 for Savings Dollars

Rate information contained on this page may have changed. Please find latest savings rates.

HSBC Bank's recent letter to those who opened promotional savings accounts over the summer may finally usher in an era of more competitive savings rates from major money center banks through their branch networks.

Over the summer of 2015, HSBC aggressively advertised a "Promotional Premier Savings Account" designed to attract new depositors and new money to their branch banking system.  As featured on BestCashCow, depositors were offered a promotional rate of 1.50% which was guaranteed until January 19, 2016.

Since the 1.50% rate was (and is) better than even the best online savings rates, HSBC attracted alot of new capital through this offer.  As January 19, 2016 is approaching, these same depositors were probably preparing to move their savings out of HSBC to one of the leading online savings accounts at that bank's ordinary savings rate is currently only 0.15% on deposits over $100,000 (and 0.10% on deposits over $25,000).

In order to avoid losing the deposits that it courted so aggressively, HSBC has sent a letter to those who opened these accounts over the summer notifying them that from January 19, 2016 onwards they will receive 75 basis points more than the standard HSBC Premier Savings account.  The letter further agrees that HSBC will provide at least 30 days advanced notice of any subsequent decision to remove the 75 basis point incentive.

As a result of this action, those depositors who took advantage of HSBC's summer promotional offer who keep over $100,000 at HSBC will be earning 0.90% going forward until further notice.  This rate of course is not anything to write home about, and is currently 15 to 20 basis points below the best online savings rates available.  However, it offers the hope that 2016 will finally bring more competition from other major banks with large branch networks to attract new capital and keep capital.

Find the best local savings rates where you live.


Salem Five's OSA - Competitive Rate, MA DIF Insurance, Some Challenges

Salem Five's OSA - Competitive Rate, MA DIF Insurance, Some Challenges

Rate information contained on this page may have changed. Please find latest savings rates.

For several years, Salem Five's online savings account has been one of the most competitive online accounts available. Many of our readers suggest that we remove it because it has features that are more onerous and difficult to understand than some of the other savings accounts listed on the site. BestCashCow.com recognizes these issues but feels that it Salem Five needs to be listed among the best yielding savings accounts because these issues can be worked around.

Salem Five is a Massachusetts-based financial institution that has been a competitor in the online savings space for many years.  Its online savings rate today stands at 1% and that is among the most competitive online savings rates.  Because Salem Five is a Massachusetts bank, it is covered under the Massachusetts DIF policy that insures each depositor’s accounts, regardless of state of their residence, to a maximum of $1 million.

Over the last several years, two series of problems have become evident with Salem Five Direct’s online savings accounts.  These problems have been highlighted to BestCashCow.com by our readers and we feel that they still need to be addressed by Salem Five.

First, promotional rates are higher than the rates in the post-promotion period and the rates in the post-promotion period are not transparent on the face of the site.

BestCashCow.com considers the practice of offering a rate dramatically above market to be a bait-and-switch tactic and warns depositors of this tactic.

Salem Five’s post-promotional rates have always been 5 to 10 basis points below its promotional rates which tend to be the only ones listed on its website.   Salem Five should be more transparent about its promotional and post-promotion rates.   Depositors simply should not be required in the post-promotion period to log in to their account weekly or monthly to find out how much below the advertised promotional rate they are earning.

While Salem Five now seems to have suspended, at least temporarily, the practice of issuing promotional rates, we have always found that their entire promotional savings rate thing played into the hands of whoever was writing the script for the Ally Bank television ads.

Second, transfers out of the Salem Five Direct Savings Account are not free and severely limited in ways not consistent with the US online savings account market

When using Salem Five Direct’s online banking interface, depositors are limited to $5,000 per transaction, $5,000 in aggregate per day; and $20,000 in aggregate per calendar month.   Each outbound ACH transfer initiated through Salem Five has a $3 charge.  These limits are very onerous - actually ridiculous.  Using Salem Five’s website, it would take a year and cost $144 to move $240,000 out of Salem Five Direct.  Under no circumstance do these limits and charges match the market practices for online savings accounts.  Their very existence is material to depositors and perspective depositors, and they are not cardinally disclosed on Salem Five's website.

Allso not disclosed on Salem Five’s website is the very fact that the market creates a work-around for the limits and charges.  By initiating your ACHs out of Salem Five through another online bank account, such as CIT, Synchrony or Ally, you can avoid Salem Five's transfer limits and fees.   Your Salem Five Direct account can easily be set up and confirmed as an ACH transfer account using their routing number (211370558) and your account number.  

The feedback that we have received from BestCashCow.com readers that Salem Five Direct has drawbacks that other online banks do not have is entirely correct.  We think it is within BestCashCow’s role as the most comprehensive and informative U.S.-based website on personal savings issues to make consumers aware of the existence of Salem Five’s products.  We also think Salem Five needs to take active steps to provide its customers with better rate disclose and match market practices regarding online ACH transfers. 

Compare the best online savings rates here.

Image: ddpavumba at FreeDigitalPhotos.net

Citibank and Bank of America Merrill Lynch Make Earning No Interest Sexy, If You Also Hold Their Travel Credit Cards

Citibank and Bank of America Merrill Lynch Make Earning No Interest Sexy, If You Also Hold Their Travel Credit Cards

Rate information contained on this page may have changed. Please find latest savings rates.

In this low interest environment, the major money center banks have been offering next to nothing in interest for years. Citibank and Merrill now give you a reason to keep your cash with them.

It is tough to earn next to nothing in a savings account and be excited about it.  Provided you keep $100,000 in total assets with Merrill Lynch or $50,000 in cash with Citibank, you can now make up a lot of lost interest in the form of travel rewards by pairing your account with credit cards that extend certain benefits for preferred customers.

The Bank of America Travel Rewards card offers 1.50% cash back in the form of a direct credit on travel expenses for each dollar spent on the card.   While this offer does not compare favorably to other travel and rewards cards on its face (see the best cards for spend here), the cash back amount is augmented by 75% for those holding balances over $100,000 at Bank of America, Merrill Lynch or Merrill Edge accounts (whom the bank designates as Platinum Honors for credit card purposes).  The 75% augmentation takes the cash back percentage to 2.65%.  While BestCashCow’s own rankings indicate that other travel and rewards credit cards offer value on spend in excess of 3%, the 2.65% return on spend is well in excess of what is offered through any cash back program.  It is also highly desirable for those seeking maximum flexibility in how they redeem spending credits that they have earned through their credit cards as it does not require membership in an air miles or hotel point program, or trying to find those rewards through the program that maximize redemption value.   You’ll also get 10,000 points – worth $100 – just for signing up for the card.

While qualifying for Bank of America’s Platinum Honors status does not make sense if you are holding $100,000 in cash at virtually no interest, it can make a lot of sense to hold and use this card if you qualify through holding equities, debt instruments or other securities in a Merrill or Merrill Edge account.

Full details on the Bank of America program and what is required to qualify for Platinum Honors status are available here.

Citibank offers the Prestige Card that delivers 3 points for travel (including gas), 2x for restaurants and entertainment and 1x for everything else.  BestCashCow.com rates this card and the Citi ThankYou Premier card, its first year no fee sibling, as outstanding travel and rewards cards for recurring spend and for their 50,000 point sign up bonuses.   In particular, BestCashCow.com sees at least 3 cents per point in value on Singapore Airlines Krisflyer, but points can also be worth 1.6 cents each when redeemed against charges from American Airlines.

For a $450 annual fee, the Prestige Card offers an array of benefits including a $250 annual air travel credit (which over two years more than covers the fee), entry to American Admirals club, global entry reimbursement, a fourth night free on consecutive hotel stays and four rounds of golf that the regular ThankYou Premier Card does not offer (read more on the difference between the two cards here).  For those with CitiGold status (ordinarily $50,000 in account balances), the points earned through the Prestige Card are augmented by 15% so that travel earns 3.45 points, restaurants earn 2.30 points and everything else earns 1.15 points.  Moreover, the annual fee is reduced to $350 and the signup bonus increased to 60,000 points (although it should be noted many non-Citibank account holders have reported getting these benefits simply by applying for the card in a branch).  The reduced fee and the increase in points make an already outstanding travel and rewards card still better for Citigold members.

Full details on qualifying for CitiGold are available here.

The augmented credit card rewards that Bank of America and Citibank are offering to their cardholders who maintain qualifying accounts are interesting.  However, before account holders at these banks rush into these cards, it makes sense to run the numbers, comparing these cards with the rewards that you might accumulate through other credit cards.  If you are qualifying by holding cash, you should also factor in the loss of interest you would otherwise be earning.  Leading online banks pay over 1% more in interest in the savings accounts (see the best rates here). 

Compare travel and reward credit card sign up bonuses.

Image: Stuart Miles at FreeDigitalPhotos.net