If you’ve stumbled onto this review because you’ve been looking at high-yield online savings account, then you must have noticed the abundance of choices and options.

HSBC Direct started offering their online savings account back in 2005 with little fanfare, but they have since become much more well known through the years.  This is an in-depth review of the HSBC Direct Online Savings Account, with screenshots of account usage and bank transfer from over three years of account ownership.

You can read the entire review from start to finish, or skip all the way to the summary for a list of pros and cons.  If you have any feedback on the HSBC Direct Online Savings Account or this review, feel free to leave a comment below.

Account Opening Process

Opening an account at HSBC Direct should be a breeze for most people. You fill in the usual personal information and type in other information requested. HSBC’s opening application distinguished itself with a few convenient features:

1. You can save the application and finish it later
2. Different options for linked account verification

When you open an online savings account such as HSBC Direct, you will usually have to link the savings account to an existing checking account. To verify the linked checking account, most banks will usually do a two deposit verification method. In this method, two small trial deposit will be made to your checking account, which you later verify the amounts to confirm your identity as the account owner.

One of the account verification methods is an “instant verification” process, which simply requires you to input your online account information (the login & password) of the checking account being verified. The instant verification is limited to the Yodlee online banking solution, an online banking method that most major banks utilize.

The rest of the account opening process is smooth, albeit slow. Unlike ING Direct, which allows you to open an account without waiting for any mail — a problem with many online-only-accounts from traditional bank, is that the account opening process still heavily relies on snail mail.

HSBC has the same problem, but fortunately the mails were sent within a reasonable time period. You should expect to receive six separate mail piece:

1. Temporary login for online access
2. Temporary password for online access
3. Account number and ABA routing number
4. A letter informing you that the ATM card is on its way
5. The actual ATM card
6. The PIN for the ATM card

You will need all of the mail above, except #4, to have full access to your account. The time frame for the mail to arrive will vary depending on your location. It took about 12 business day for me to receive all the mail from New York to California. It’s understandable that this information was sent separately, as privacy and security is important — but HSBC can probably streamline the process better & faster.

Account Access and Interface

When I first got an account at HSBC Direct, the domain HSBCdirect.com was not setup yet — in fact, it wasn’t even called HSBC Direct yet. It took a bit of digging to find out where to login to access my account. Today, all you have to do is head to HSBCdirect.com and the link for account access will be on the front page.

The first page you’ll see when you login is fairly straight forward. You will be greeted by an Account Summary page, which gives you a quick summary of your account balance as of today. Click on the left picture below to see the Account Summary page.

The Accounts Detail page is self explanatory. You will see balance information such as bank balance, available balance, last state date, year to date interest, and the last nine transactions on your account. If you wish to view previous transaction, you will have to use the transaction search function, which allows you to search through different date and amount ranges. One feature that’s lacking is a daily update of interest earned for the month. You can click on the right picture above to see the Accounts Detail page.

You can also export your account data and specific transaction date ranges into three different file formats. HSBC supports Quicken (qfx, qif) and MS Money (ofx). Your account statements can be view with the eStatements tab, which also allows you to save & print the statement in pdf format.

Online Bank to Bank Transfer

This is the meat of an online savings account, the online transfer capability. Clicking on the Bank to Bank Transfer tab will bring you to an annoying Security Key screen. In order to create a Security Key, you will need your ATM card number and its PIN number, both of which will arrive via snail mail. In another words, you won’t have full access to your account until you receive both of those mail piece. You are required to use the virtual keyboard to input your security key. HSBC requires a certain length to the security key, so it can become quite a hassle to input the key. Click on the left picture below to see the Security Key interface.

Once you have input the security key, a new window will open up with the Bank to Bank transfer feature. In this page, you can add, remove, and transfer funds between accounts. The interface is straight-forward, adding accounts requires the usual two trial deposit verification. A great thing about HSBC’s Bank to Bank transfer is that it allows an unlimited amount of accounts linked. You can add your checking, savings, and brokerage account from various financial institutions. The Bank to Bank electronic transfer service is provided by CashEdge.

Be aware that some accounts cannot be linked to the HSBC Online Savings Account, such as the ING Direct Oranges Saving Account. According to HSBC, members of the CashEdge network can exclude themselves from being linked. Apparently ING Direct excluded themselves to be linked (an understandable action to prevent easy withdrawal of account funds to their competitors). You can click on the right picture above to see the Bank to Bank Transfer interface.

Bank to Bank Transfer Speed

Up untill this point, everything about HSBC Direct is decent enough. Unfortunately, there’s no such thing as a perfect banking experience, so here’s the drawback to the HSBC Direct account — the online bank to bank transfer speed. Compare to other competitors ACH transfer speed, HSBC’s transaction speed is ridiculously slow. Through my various transfer to and from various accounts, the transaction speed of HSBC is usually slower by 1-2 days, and at times, 3 days slower. Whenever I push a transfer from another source to HSBC Direct, the deposit will show within a reasonable 1-2 business day time frame. However, if the situation is reverse, and I pull the amount from that account to HSBC, via HSBC’s Bank to Bank transfer feature, the same transaction takes an extra business day or two.

There is a great HSBC Direct transfer speed experiment that can be found over at MyMoneyBlog.com. In the experiment, Jonathan conducted various transfer through different financial institutions. The result is quite interesting and correlates with my experiences with HSBC Direct. You should definitely check out Jonathan’s post for more information.

The lowdown on the transfer speed is that HSBC is probably keeping a day or two of interest through the ACH — interest that you’re not earning. When you utilize the Bank to Bank Transfer, you should pay close attention to HSBC’s transfer schedule, and make due sure you initiate transfer before the 8 PM EST cut-off. Looking at HSBC’s transfer schedule, the best days to initiate a transfer would probably be Sunday through Tuesday.

Customer Service Functionality

You can contact customer service via the Bank Mail interface in the online account, or by calling HSBC at 1-800-975-HSBC. The call center is 24/7, although the quality and availability of support will vary depending on the time called. Your best bet for non-emergency inquiry would be the online Bank Mail feature. Response time for my test questions were within a reasonable 4-8 hours time frame. Answers provided were thankfully not robotic responses. The response to my basic question about how-to use a function was written clearly and straight-forward.

Contacting customer service via phone definitely leaves a lot to be desired. The wait time at peak business hour can be quite long (over 10 minutes) and at times, you may reach a customer service rep that’s not knowledgeable on the HSBC Direct Online Savings Account. According to Gethuman.com, the fastest way to reach a human operator at HSBC is by calling 1-800-477-6000 — press 1, 3, then 0. It would be great if HSBC eventually introduces a specific number to reach operators that specialize in HSBC Direct specifically.

Overall Account Impression

As mentioned, HSBC’s questionable ACH delays can be a big turn-off to many, but in my opinion it isn’t a major issue for a savings account. It would have been great though, to use HSBC Direct as a central hub to transfer funds, thanks to the account’s unlimited account linking capability.

HSBC Direct’s APY rate is consistently competitive among other no fees, no minimum accounts. They have stay within the market’s rate, and at times have lead the pack. Although you are required to have $1+ to receive the current APR, unlike Emigrant Direct, your account at HSBC Direct will not be closed if the balance reaches $0. I’ve had $0 balance at HSBC without issue, but to be safe and avoid hassle, you should still leave a small amount in HSBC Direct.

If it wasn’t for the slow ACH transfer speed and a few other minor quirks such as the Security Key interface, HSBC Direct would be a pretty sweet high-yield online savings account. That said, HSBC Direct is still semi-sweet — like, kettle corn sweet.

Pros:

• Competitive high-yield rate
• No fee, no minimum, FDIC insured
• Unlimited account linking
• Decent account opening process
• Functional, error-free site

Cons:

• Slow ACH speed compare to competitors
• Hassle access to ACH due to Security Key
• Snail mail required for account opening

Current Rate:

• 2.60% APY as of 1/07/09