High-yield savings accounts raking in the customers
By Laura Bruce • Bankrate.com

It's hard to keep up. This article started as a look at high-yield online savings accounts that are paying at least 5.25 percent. Then HSBC muscled its way to the top of the pile with a 6 percent account. It's a promotional rate, but it's still attention-getting, and consumers are taking notice.

HSBC has signed up more than 300,000 customers, who have plunked $7 billion into their deposit accounts since the bank launched its HSBC Direct savings account in late 2005, according to spokesman Stephen Cohen. Citibank quickly followed suit with its online-only e-Savings account in March 2006 and has also opened over 300,000 accounts with more than $9 billion in deposits, according to JupiterResearch.

Clearly, consumers are hungry for what today constitutes a decent yield on their savings accounts and they appear willing, to some extent, to move money around in the chase for the best return on their savings.

Originally, HSBC wouldn't have made it into this article. The bank's online savings account normally yields 5.05 percent.* Then HSBC announced that new money deposited into its online savings account will earn a promotional yield of 6 percent until April 30, no strings attached.

"Competition is very stiff," says Cohen. "Certainly when we introduced the account it was all about simplicity and customers being able to access their account, a very straightforward offering. No minimum, no required amount of time to keep the deposit with us, no link to checking accounts. We took a lot of time talking with potential customers and understanding the marketplace."

Small banks getting involved
But it's not just the financial giants that want new customers and a piece of the deposits pie.

Salem Five Bank in Salem, Mass., which has local branches, opened an online-only eSavings account available nationwide with a 5.25 percent yield that has no specific end date. But the account has enough strings to entangle an alley cat.

You have to also open an eChecking account and put at least $100 into both the checking and savings accounts (no interest on the checking), and you must pay at least three bills online each month or your savings rate will sink to the current rate of 0.50 percent.

"We're still working through the details," says Jay Spahr, vice president of eCommerce at Salem Five. "We ran tests in December and it appeared that the strings were a problem, but recently it seems that people are happy to have a relationship and have access to high-yield savings.

"This is a commitment for us. We have deployed a growth strategy at the bank and that's the strength for our future. If you want to grow, you have to fuel the loans in some fashion, and you need deposits to grow."