I recently received a reader question asking me which high yield online savings account is better – the one from HSBC or Capital One’s 360 savings account? I had previously written about the appropriate use of high yield savings accounts (HYSA) and in uncertain times, like now, they are a good place to hold your cash for potential investment opportunities. When choosing any HYSA, you should use the following 5 key criteria to determine which is best for you:
1. Interest rate or Annual Percentage Yield (APY) they offer – You can see what the industry benchmarks are at Bankrate.com. The account you choose should be paying more than this and make sure you look at the standard or normal APY and not only at any promotional rates they are offering. You may need to read the fine print for this. HSBC and Capital One have historically offered a significantly higher APY than established banks because they want to build market share and have much lower overhead since they are primarily focused on electronic banking.
2. No fees. Always. If an online savings account is charging you account maintenance or other similar fees, move on. HSBC and Capital One are both good in this aspect than they don’t charge any fees for depositing or withdrawing funds.
3. Ease of use. You can demo most of the reputable online banking user interfaces via their websites. See what you like and feel comfortable using. The 360 savings account from Capital One has a very simple and easy to use interface. HSBC’s is a little bit more clunky and slower, but does have some good additional features. Also, ensure that linking to your checking or regular bank account is straightforward, and that you can deposit your pay directly into these accounts.
4. Other features. Most online banks that offer high interest rates can offer these attractive rates because they have low fixed costs – no branches or account frills. However some, like HSBC, do offer branch access in addition to high rates plus great customer service. Branch access is very convenient if you need to resolve issues or have more complex banking needs.
5. FDIC Insured. I recently added this criteria based on all the bank failures from the GFC, in which some customers have lost part of their savings. HSBC and Capital One are both FDIC insured. If you find a financial institution trying to offer you significantly above average APY’s, check their insurance status at the FDIC website. If they are not insured, then it is best to avoid them. All deposit accounts worth $100,000 and less are automatically insured by the FDIC. But since it’s a person’s aggregate deposits, and not their individual accounts, that are insured, any amounts over $100,000 deposited at any one bank are not covered. In a joint account, each depositor is insured up to $100,000 in one bank account. If you have more $100,000 and for other exceptions read the following FDIC rules on your coverage limitations and in some cases having different bank accounts may be better.
I have opened HSBC and Capital one 360 savings accounts to learn more about their offerings. I started with Capital One (known as ING Direct at the time) due to a nice promotional offer and I liked it for ease of use and their no frills high yield savings account. HSBC came to where I live later and I signed up with them via a local branch. Overall HSBC and Capital One’s 360 savings accounts are great choices due to their higher APYs. I would suggest you try both (no fees after all) and pick the one you feel that suits your saving, spending and investment needs the best.