Three Online Savings Accounts Compared - E-Loan, HSBC, and E-Trade
(Rates may be out-dated. Please see the Current APY Wiki for updates)
Still keep your savings in a local bank earning a piddling amount of interest? So was I, until last year. Then I discovered online savings accounts, and I realized I could earn a much higher return with the added benefit of not having to leave the comfort of my home in order to move money around. Sure, my local bank always had a tray of cookies available for customers, but that was the ONLY benefit. 
To be fair, some local banks offer savings accounts in the vicinity of 5% interest, but the vast majority are closer to the 1% range or even lower. If you have money sitting in bank account earning less than 4% interest, get it out NOW because you are losing money. That’s right. If we consider that inflation occurs by about 2-3% each year, then your money is actively dropping in value. Scary thought, huh?
Many online savings accounts currently earn more than 5% APY. I have three accounts open right now, each with a different rate. Why three different accounts? Well, each account has its benefits and downsides, and I will briefly summarize them here.
One thing that all these accounts have in common: they all are meant to “link” with an existing account that you already own. In my case, I simply have all three accounts linked with my primary checking account.
- Current APY: 5.25%
- Required to open: $5,000
- Required minimum to stay open: $500
- Can only link to one external account
E-Loan was the first account that I opened, and I still have the most money there. The current rate, 5.25%, is nice, but was higher (5.5%) when I opened the account. The sign-up process was painless and the web interface is easy to understand. Transfers for me usually take about three business days, which is average.
E-Loan would have been by one and only account, but they have had some growing pains. Specifically, one day several months ago E-Loan duplicated transfers for some of its users, causing them to be withdrawn twice. I was caught by this issue, but since I only made a $200 withdrawal that day it was not a problem. Imagine if I had make a $5,000 transfer that was then duplicated! In their defense, E-Loan issued an apology and covered for people who “overdrafted” their accounts, but problems like this do not exactly inspire confidence.
- Current APY: 6% (until April 30th, 2007)
- Required to open: $1
- Required minimum to stay open: $1
- Can link to an unlimited number of external accounts
The second account that I opened was with HSBC Direct. What tempted me was the 6% interest offer on new money until 4/30, after which the rate will drop somewhere around 5.05%. The sign-up process took longer than I desired, and included waiting for two letters via snail mail. Their web interface is also torturous to use after seeing E-Loan, but fortunately offers access to any other HSBC services that you have. For instance, I have a Mastercard through HSBC, and I can view its information on the same web site as my savings.
Web aesthetics aside, my main gripe with HSBC Direct is the transfer speed. If I send money from my checking account to HSBC, I can usually count on at least four days for it to process. I suppose there are worse issues in life, but I’ve just learned to initiate any transfers to/from HSBC on a Monday. Because of the slow transfers, any money that I add will stay for a while, as there’s no sense in losing interest while shuffling it around.
The most recent account that I opened was with E-Trade. I admit, I only opened it because they offered a $25 sign-up bonus back in February, but this account has really grown on me. First, a summary:
- Current APY: 5.05%
- Required to open: $1
- Required minimum to stay open: $1
- Can link to an unlimited number of external accounts
E-Trade’s interest rate is currently the lowest among the three, but ironically I have been using it the most recently. The account opening procedure was simple and took less than ten minutes. Within a few days I received a packet of information plus a paper I had to sign and return. I was a little overwhelmed by the web interface at first, but I quickly grew accustomed to it and now enjoy it just as much as E-Loan’s interface.
Despite the slightly-lower interest rate, E-Trade’s knockout feature is its transfer speed, which simply puts HSBC to utter shame. Typical transfers from checking to savings take one business day. That’s right. I can initiate a transfer on Thursday morning and it shows up in E-Trade on Friday morning. This sheer speed alone causes me to use it most actively now.
Though there are a few services offering a slightly higher rate than even E-Loan, I have no immediate plans to open any new accounts. If one of my current accounts really drops or increases its interest rate, I can always shuffle money accordingly between the three. Each account has its strengths and weaknesses, but they are all good places to store your extra short-term funds.
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