HSBC Direct lowered it savings rate to 2.45% yesterday from 2.60%. This marks the second rate drop among online savings accounts in two weeks. Last week WTDirect, whom once boasted the highest online savings rate, dropped it’s rate to 2.81%.
This certainly makes E-Trade 3.01% APY rate much more appealing in comparison. It also leads one to question whether or not they need to hold that 3.01% rate much longer to remain competitive.
HSBC may be making a risky play here. As of last week they released news that they need to raise $30 billion in 2009 to stay afloat. And reducing their consumer CD rates is not going to bring in the new money they need.
The trend in online savings accounts (and bank CD rates for that matter) is, needless to say, a negative one. Since the summer of 2007 we have seen CD rates, money market accounts, and high yield savings account rates cut in half. To makes things slightly worse, most financial analysts are not expecting a speedy recovery.
Much of the speculation as to why savings rates have drastically decreased over the past year resides on the state of the general economy. However, many also attribute the recent historical fed cut to play a determining role in rate drops as well.
Where to find high yield CD and savings rates now?
This depends on your qualifying investment variables (ie how much you want to invest, duration of investment, etc). If you only wish to invest $1k to $5k then your best bet is to take advantage of various credit unions offering CD promotional rates. In some cases credit unions deliver “teaser rates” to entice you into furthering your business with them, however, some of these teaser rates can really pay off. One credit union is even offering a 10% APY on a savings account for new members (max investment available – $1k).
If you wish to deposit a greater amount, credit unions are typically not going to be able to cater to your needs. To find CD rates yielding the highest returns you may need to compare dozens of banks and credit unions. Some BankVibe readers even suggest speaking directly with representatives and “talking them into” the highest rate. Keep in mind that bank representatives are not used cars salesmen/saleswomen and typically don’t appreciate being haggled. However, if you have done business with this bank or credit union for many years you should be able to lock in a decent CD rate or savings rate with a little face-to-face time.