Internet banks a big disappointment

Internet banks offer competitive rates and we all live with the hope that they will continue to do so although we are also aware that banks might have to lower rates in keeping with the current financial environment.  But there can be no excuses for banks to make cuts that are worse than the average ones.  There are some clues that one could follow to see if the internet banks will remain competitive.

HSBC Advance and the Ready Saver have been two of the biggest disappointment recently as they slashed their rates on their online savings accounts yield from 1.00% to 0.90% and 1.35% to 0.90%.

Most customers who had opened the internet savings accounts at HSBC have already closed their accounts.  The rates had not gone up for many years and they were earlier offered 6% APY as part of the promotional offers way back in 2007.  Whereas, now the rates are below 1.00% it’s a huge disappointment.

Although many major banks have been coming out with internet savings accounts since many years, they have all been major disappointments as their rates have fallen even below the average savings accounts online.

This is especially the scenario when large banks acquire smaller banks.  Then there has always been bad news for depositors.  For instance, the Provident Bank’s acquisition by M&T Bank has also resulted in the same.  Hence, if the takeover of the smaller banks by the big banks can be avoided then they can afford to remain competitive.  Like in the case of the Southern Community, it is not exactly a small bank but it is not a large bank either.  Its assets total up to around $1.66 billion.  The other important thing to consider is the health of the bank which is very important.

The banks that we may assume as good internet banks may not necessarily be so.  Two major examples are the ETrade Bank as well as the E-LOAN.  While both these banks seemed to look promising way back in 2006 – 2007 where they were paying above 5%, it was not meant to last for long.  They even offered account features in their online savings accounts like the bank-to-bank transfers and fast ACH transfers etc.  But the financial meltdown hit both the banks and many customers were moved to other banks.  While there are many reasons for the turn of events internet savings accounts are no longer viable options for most people.