HSBC Direct Savings Account Review

A savings account has become somewhat of a forgotten financial resource. With lower rates and the focus on investing these days, you might be wondering if you even still need to have a separate savings account.

The quick answer is yes. A savings account provides you access to things like emergency savings account quickly when you are in need of cash. And while rates tend to be lower, they’re not terrible (as you’ll see below).

In this article, I’ll review one of the best savings accounts you can have right now—the HSBC Direct Savings. We’ll cover the features, pros, and cons, and help you decide if it’s for you or not. I’ll also discuss some of the key, need to know information on savings accounts to help make sure you’re set up for financial success.

Let’s first start with the critical features of the HSBC direct savings account.

HSBC Direct Savings Account Features

For a savings account, the HSBC Direct Savings has quite a few nice features.

No monthly maintenance fee

First, there are no monthly maintenance fees with the account. Many banks, especially ones that operate primarily online, will charge you a monthly fee if you don’t meet a certain minimum balance.

Healthy Annual Percentage Yield

One of the significant pitfalls of savings accounts in the past decade has been poor rates on your balance. Because of this, people started moving away from savings accounts and more toward money market accounts or investment accounts.

HSBC softens the blow that many other banks deliver by giving you a juicy 0.15% APY. For a traditional savings account with no excess withdrawal fees, that’s a great deal. In fact, as of this writing, the national average is less than 1 percent.

Who HSBC Direct Savings Account is For

One of the significant downsides of the HSBC Direct Savings Account is that it doesn’t come with its own ATM or debit card. This means all of your banking must be done online, or through another HSBC account. So if it’s the only account you have with HSBC, you’ll only be able to access your funds online or through the mobile app.

That being said, if you have an HSBC checking account, getting this savings account makes complete sense. You can connect the two and access your savings seamlessly through online banking, or any one of the ATMs HSBC is linked to worldwide.

Since it offers a premium rate (for a standard savings account), if you’re someone who likes to keep an emergency fund on hand, you’ll enjoy this product. The 0.15% APY won’t blow you away, but provide excellent earnings on cash that otherwise sits there.

Pros

• No monthly maintenance fee.
• Fast ATM deposits*. If you have an HSBC account with a debit/ATM card (i.e., one of their checking accounts), you can deposit cash and checks via an ATM. For cash, it’s available the same calendar day. For non-HSBC checks, the first $200 is available the next business day.
• Excellent rates for a savings account.

Cons

• The HSBC Direct Savings account is considered an “online only” account. This means that you’re required to use things like online banking, e-statements, and customer service over the phone.
• The account doesn’t come with any type of ATM or debit card.
• Expensive fees for silly things like closing your account ($25), requesting a special statement ($6), and getting a balance verification letter for things like mortgage loans ($20).

We think the pros of the HSBC Direct Savings account vastly outweigh the cons.

Alternative products – HSBC Direct Savings vs. Discover Online Savings

The only other savings account that I’d recommend at this time is the Discover Online Savings account, which offers 3.90% APY. Discover offers incredible customer service, but they too have their pros and cons. If you’re interested, I’d suggest reading our full review on this account before making a decision.

A deeper dive into savings accounts

Savings accounts don’t always give you the best rates, but they definitely have their place in your financial life. Here are a few things you should know about savings accounts:

What to look for in a savings account

Before we dive into the features of this particular savings account, I want to give you some idea of what you should be looking for when you’re choosing one. Here are a few important things to consider when you’re picking a standard savings account:

1. Make sure that you’re FDIC-insured

In today’s day and age, you’ll be hard-pressed to find a bank that doesn’t have coverage from the Federal Deposit Insurance Corporation (FDIC), who protects your deposits up to $250,000 if your bank were to fail. Yes, HSBC is FDIC-insured, but if you want to check other banks’ coverage, go here.

2. Annual Percentage Yield

The Annual Percentage Yield (APY) is the rate of interest you’ll receive on your deposit, with compound interest taking into consideration. This is where there’s a slight difference between the standard interest rate (which will be lower) and the APY. APY takes into effect how much interest you’ll earn as your balance grows. We put together an excellent resource on the power of compound interest if you want to learn more about this.

3. Access to your money

This is really important. The point of a savings account is to stash cash away for an emergency, a big purchase, or to have as a buffer for life’s unforeseen expenses. There will be times (sometimes multiple times in a month) where you’ll need to pull money out of your savings account. So consider monthly minimum balance requirements, and look into how you’ll pull cash out if you need to.

4. Bonus features

Things that aren’t a necessity but nice-to-have include a robust mobile app, sub-accounts where you can visually split your savings into buckets or goals, and the ability to make transfers to both internal and external accounts quickly and efficiently.

Why savings account rates are low

I’m going to give you a simplified explanation, but know that it’s more complicated than this.

The short answer is because banks don’t make any money if they give you a higher rate.

Basically, to offer products like home loans, banks need your deposits. They count on the money you hold with them in a savings account, for example, to loan to other people.

Banks right now can, on average, get 4 to 5 percent from you on products like home loans. The difference in what they make from their customers on interest and what they pay their customers in interest is their profit. This margin needs to be high enough for them to stay a profitable business.

So for example, if HSBC makes 4 percent interest off of an average customer’s home loan and they offer 1.50 percent interest on a savings account, they’re effectively making 2.50 percent in profits (4.00 – 1.50 = 2.50). Again, this is a simplified example, but you get the point.

Banks can also get money from the Federal Reserve at a discounted rate. So it makes sense for banks to offer around that number to their customers.

Are savings accounts worth it?

This is going to depend on your financial goals and preferences, but my answer is an astounding yes.

While savings accounts don’t give you a massive rate of return, you have to remember that it’s not an investment. In fact, considering the average APY of a savings account and the rate of inflation, it’s easy to argue that a savings account is a depreciating asset.

But so is a car.

Does that mean you shouldn’t have one? Absolutely not.

A savings account has its place in a financial portfolio. To me, it’s a liquid place to keep your money for a longer-term goal.

This might mean an emergency savings account or a down payment for a home. Some might argue that you should still put money for these types of situations into an investment account—and I won’t argue against that—but I prefer the safety and liquidity of savings account for these types of things.

Do what makes sense for you, but I would advise always to have at least three to six months worth of income stashed in a savings account if you can swing it. From there, go crazy with your investments—but you should always have some type of safety net.

Summary

Look, having a savings account isn’t sexy. It’s not even going to earn you very much in interest. Yet it’s one of the most important financial products you should have in your arsenal.

And here’s why:

A savings account acts as an entity that’s separate from your regular spending account (i.e., checking). So it’s money that you can visually see is set aside for something else.

It’s relatively liquid—meaning that you can pull money out when you need to—which makes it perfect for things like an emergency savings account or a spot to house money for a down payment on a home.

So if you’re looking for an excellent way to keep your money safe – HSBC Direct Savings is a sure-fire way to do it.

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