HSBC CD Rates Review: Worth Your Investment?
Put your money to better use if you don't need it for a while.
You know that's a smart move.
A certificate of deposit (CD) is just what you need to do the job.
As you come across HSBC, one of the biggest U.S. banks, its CDs may sound like something you'd consider.
But, first, learn more about the interest rates and fees. Then, compare them to other CDs.
Rates Do Not Impress
CDs can offer significantly higher interest rates than other accounts, like checking, savings, or money market accounts.
The number one reason you’d want to open a CD is the high rate of interest they offer, so you should always start by looking at the interest rates if you’re comparing CDs from different banks.
HSBC offers a different set of CD rates based on where you open the CD -- online or in-branch.
The HSBC online CDs offer a slightly higher rate than the CDs opened in a branch.
Unfortunately, HSBC’s interest rates don’t measure up to the rates offered by other banks, especially online banks.
HSBC’s rates are closer to the rates that are offered by brick and mortar banks.
Many banks will offer interest rate tiers based on the amount of money that you’re able to deposit to a CD. People who deposit more money earn a higher rate.
HSBC doesn’t do this, offering the same rate to people regardless of whether you deposit the $1,000 minimum or $100,000.
Early Withdrawal Penalties
CDs are a lot like savings accounts in that they’re supposed to be used for long-term storage of extra money.
However, there’s a major difference that you have to keep in mind.
When you open a CD, you make a promise that you’ll leave your money in the account for a set period of time. This period of time is known as the CD’s term.
As part of opening a CD, you agree not to withdraw money until the term has ended.
HSBC offers the following terms for its CDs:
- 6 months
- 9 months
- 12 months
- 18 months
- 24 months
- 36 months
- 48 months
This is a good variety of terms, but some banks offer more customizability or terms as long as 5 to 7 years.
However, the CDs with terms other than 6, 12, or 24 months have incredibly low rates.
You may be tempted to open a CD with the longest available term, just so you can earn the highest rate.
If you cannot truly commit to leaving your money in the CD for the full term, resist that temptation.
If you withdraw money from your CD before its term ends, you’ll have to pay an early withdrawal fee to compensate the bank for the unexpected withdrawal.
HSBC bases its early withdrawal fees on the original length of your CD’s term. The fee structure is as follows:
HSBC Bank CD Early Withdrawal Penalties
|Up to 369 days||30 days' interest|
|370 - 733 days||90 days' interest|
|734 days or more||180 days' interest|
Keep in mind that early withdrawal penalties are the only way that you can lose money by opening a CD.
Minimum Deposit Requirements
Many banks won’t let you open a CD without having a sizable opening deposit.
Many CDs have high minimum deposits that block people from opening CDs.
If you’re not able to get enough money together to meet the minimum deposit, you’ll have to open a savings account, which pays a lower rate.
HSBC requires a minimum opening deposit of $1,000.
This is not an unusual minimum deposit, but many banks offer lower minimums.
Some brick and mortar banks have minimums as low as $500.
Online banks can have even lower minimums or no minimum deposit requirement at all.
If you want to deposit more than the minimum, don’t forget that CDs are insured by the Federal Deposit Insurance Corporation, but that the insurance has limits.
The FDIC will only protect up to $250,000 in your account. If your balance exceeds that amount, any amount over $250,000 will be uninsured.
If you need additional protection, you’ll have to open a new CD at a different bank for the amount over $250,000.
No IRA CDs
CDs offer safe, predictable returns, so they’re popular for many retirement savers.
Unfortunately, HSBC doesn’t offer IRA CDs, so you’ll need to work with another bank if you want that service.
Individual Retirement Accounts (IRAs) can give savers the opportunity to save money on taxes while they build their retirement nest egg.
Traditional IRAs offer upfront tax savings.
When you make a contribution to a traditional IRA, you can deduct the amount of your contribution from your income when you file your tax return. This results in you having a lower tax bill or a higher refund.
In exchange, you have to pay income tax when you make a withdrawal from your traditional IRA.
Roth IRAs offer those benefits in reverse.
When you contribute to a Roth IRA, you pay taxes as normal. When you make withdrawals from the account, you pay no tax, regardless of whether you’re withdrawing principal or earnings. That means your future tax bill is reduced.
What Happens at Maturity
When your CD’s term ends, your CD is said to have matured.
That is your opportunity to make changes to your CD or to withdraw money without paying a fee.
HSBC offers a ten-day grace period from the maturity date of your CD. You can make changes during this period fee-free.
If this period ends and you make no changes, your CD’s balance will be rolled into a new CD with the same term.
The new CD’s rate will be based on the current market rate.
How It Compares
HSBC’s CDs compare pretty poorly with the CDs offered by online banks.
Its offerings are even outshined by the CDs offered by other brick and mortar banks, especially for the CD terms that are only available in the branch.
If you’re shopping around for a new CD, you should consider working with a purely online bank. They tend to offer higher rates and lower minimum deposits.
When you’re comparing CDs from different banks, look at the following factors.
Start by comparing the interest rates of the CDs. Opt for the highest rate if all else is equal.
Also, make sure that the bank you’re working with offers a term that works for you. Some banks specialize in long-term CDs and others in short-term CDs.
Finally, take into account what happens when your CD matures. Make sure you have enough time to make changes so you won’t get locked into a new CD.
HSBC’s CDs are nothing to write home about.
There’s nothing that really makes them stand out.
Other banks offer higher rates, more flexible terms, or lower minimum deposits.
The only argument in favor of opening one would be if you’re an existing HSBC customer who wants to keep all of your accounts in one place.