I had a somewhat related question for you about my HSBC online payment account since you seem well versed in banking rules. I got a “bankmail” letter on my account page a few days ago that said:

“Effective June 14, 2009 your available balance will immediately change when a Bill
Payment is processed (future dated payments are not processed until the scheduled
billing date) for all payment methods. This will better assist you in managing
your finances and will enable us to forward your payments in the most efficient
manner to your payees.”

Now, I was taken aback by this because I had never heard of a bank withdrawing funds essentially when a check was written instead of when it was cashed, so I wrote for clarification and received the following response:

“[Y]our Online Payment Account will not earn any interest on the payments from the scheduled date [to send the payment]”

This sounds like total BS to me, and I can’t believe I haven’t heard rants about this on the financial blogosphere. Have you seen any other banks doing this lately? They are essentially stealing the interest from us between when we send a check and when the recipient cashes it. Remember, this is an online payment account that doesn’t give you real checks, so this bill-pay service to send checks through HSBC is the only option we’ve got. Also, what do you think about the legality of such a move?

It’s Asher Hawkins from Forbes writing. Thanks for your post today — it prompted me to re-write those lines on transaction limits, and hopefully they’re much clearer as a result. Please take a look at the new language when you have a chance.

As far as FDIC coverage, I’d still recommend folks do their homework before making a deposit.

I hope you’ll keep reading my pieces with a critical eye! And feel free to cut-and-paste this message as a comment to your post.

The re-written section of the article corrects the misunderstanding about the six-withdrawal limit.

And being new to online savings accounts doesn’t explain it, either – it’s the standard savings account rules he got wrong!

Regarding the linking, I did include the full link to the Forbes article at the bottom of the post, where I usually list sources when applicable.

-Erica

“4 In order to ensure that no more than the permitted number of withdrawals or transfers are made, for an account to come within the definition in paragraph (d)(2) of this section, a depository institution must either:

(a) Prevent withdrawals or transfers of funds from this account that are in excess of the limits established by paragraph (d)(2) of this section, or

(b) Adopt procedures to monitor those transfers on an ex post basis and contact customers who exceed the established limits on more than an occasional basis.

For customers who continue to violate those limits after they have been contacted by the depository institution, the depository institution must either close the account and place the funds in another account that the depositor is eligible to maintain, or take away the transfer and draft capacities of the account.

An account that authorizes withdrawals or transfers in excess of the permitted number is a transaction account regardless of whether the authorized number of transactions are actually made. For accounts described in paragraph (d)(2) of this section, the institution at its option may use, on a consistent basis, either the date on the check, draft, or similar item, or the date the item is paid in applying the limits imposed by that section.” 12 C.F.R. 204.2(d)(2).
http://tinyurl.com/ja2b5

Thus, the bank could decide to offer an “online-only” account that looked to the customer like a savings account and paid a high-yield but, behind-the-scenes, was actually a transaction account. However, the fact that a bank would need to reserve against the money might lower the APYs it would be able to offer.

My first comment here – but I’ve noticed a tread with bloggers providing general links to a main page (or no links of attribution) rather than a direct link to the news story they reference. Here is a link to the Forbes story mentioned: http://www.forbes.com/2009/06/09/highest-yielding-savings-accounts-personal-finance-online-savings-accounts.html