Another email from HSBC announcing another rate decrease, this time to 3.80% APY. VirtualBank is at 3.30% and up and ING Direct is at 3.65%. The Apple Bank for Savings is still leading with 4.25%. I just wish the Apple Bank would spend some money on a more confidence-building web site.
We are writing to inform you that based on the recent drop by the Federal Reserve, HSBC Direct has adjusted your Online Savings Account rate to 3.80% APY*. At 8x the national savings average**, you are still earning one of America’s highest savings rates.
HSBC Direct will continue to evaluate and respond to market changes so we can provide you with competitive rates. And if your rate changes, whether up or down, we are committed to always letting you know.
You can feel confident knowing your savings are with HSBC Direct. We’re part of HSBC Group, one of the largest financial institutions in the world, and have over 140 years of experience helping customers manage their savings.
We sincerely appreciate you saving with HSBC Direct.
Jean Carrow
Vice President
Customer Relationship Center
HSBC Direct
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on January 29th, 2008 at 5:29 pm
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Compounding
Compounding adds the interest you earn on an investment and invests it, plus the original investment, for another period. The result is that you earn more interest and a higher rate of return. For example, if you invest $10,000 at 10% for one year with no compounding, you would receive $1,000 in interest at the end of the year. But if the financial institution compounded your interest every three months, you would earn $250 after the first three months, which is added to the original deposit of $10,000 and invested for another three months. After three more months, your $10,250 investment would earn $256.25 in interest. The process is repeated so that at the end of the year you earn $1,038 in interest. This is $38 more than if there were no compounding.
Compounding is also determined by the frequency that you roll over the interest. For example, a bank may offer 10% on a one-year $10,000 CD. If there is no compounding, you will receive $1,000 in interest at the end of the term. If interest is compounded every three months, the rate is 10.38%. If compounded monthly, the rate is 10.47%. If compounded daily, the rate is 10.52%. For a $10,000 deposit, an extra 52 basis points in the interest rate is equal to an extra $52 in interest.
