Posted by Ryan on December 21st, 2007 in Investment Products

Well, the theory that Cash is No Longer King seems to be holding up. Here’s an email I received yesterday from HSBC:

Dear RYAN,

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 4.25% APY. At 9x 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.

While declines on returns for high-yield savings and other fixed-income investments were to be expected, as discussed in Fed Rate Cut, Bad News for Savers, this is a drop considering just a few months back HSBC was paying 5.05% for their savings plan.

HSBC is correct though, this is still a healthy return for a savings account, which you have immediate access to your money, unlike a CD that will charge a penalty for accessing your cash before an agreed expiration date. But, you can bet that there will be more decreases to come. Economists are forecasting that the Federal Reserve will continue to cut interest rates, and the return on fixed-income investments (such as CDs and high-yield savings accounts) will shortly follow.

For your cash on hand, better rates can be shopped at Bankrate.com. You just have to ask yourself if you want to hop around from bank-to-bank every month chasing the best interest rates. The alternative short-term, guaranteed investment is a 3-month CD, which is at the moment still offering a 5.5% annual percentage rate . . . at this moment anyway.

Millionaire Money Habit: Millionaires never keep their money idle. If some money is being held on the sidelines, keep it in a place that will at the very least beat the 3% inflation rate.

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