This morning, online bank HSBC Direct ended the extended promotion in which customers were offered a savings account earning interest of 3.50% annual percentage yield. This was planned; when the promotion was extended back in July, the company warned that after September 15, the interest rate would return to normal, which it has.
The interest rate is still competitive, at 3.25%. I don’t suggest chasing the highest rate at all times when the difference is only a few basis points, but if you’re opening a new account, it helps to weigh the interest rate with your need for excellent customer support.
With recent events, you may even want to forgo high interest rates when the stability of the bank is in question. With FDIC insurance, it’s unlikely you’ll lose your money, but it helps to consider a bank’s stability to avoid any hassles or delays.
For example, Washington Mutual is currently offering 3.75%, one of the highest interest rates for a liquid savings or money market account you can find. But according to news reports, the bank is in trouble. Rates are high to attract capital, something WaMu needs at this point. If WaMu is acquired by another bank, a withdrawal during a conversion period may not be processed as quickly as you might expect. As long as you stay under the FDIC limits, your money will be there, but perhaps not at the precise minute it is needed.
FNBO Direct also offers a relatively high interest rate of 3.50% APY. The bank behind the online savings account, First National Bank of Omaha, has four stars out of five from BankRate and a Safe & Sound CAEL Rating of 2 (with 1 being the best).
I still have most of my cash at ING Direct, though I’ve begun spreading it around to other banks to take advantage of higher rates. ING Direct don’t offer the most interest but they are consistently not far from the top. Their website is simple and I’ve never had any problems with accessing my money. I hear their customer service is usually top-notch, but I’ve never had to use them.
If you have $250 to deposit, you can earn a $25 bonus by opening a new account at ING Direct.
Updated June 16, 2011 and originally published September 16, 2008.