Over the summer of 2015, HSBC aggressively advertised a "Promotional Premier Savings Account" designed to attract new depositors and new money to their branch banking system. As featured on BestCashCow, depositors were offered a promotional rate of 1.50% which was guaranteed until January 19, 2016.

Since the 1.50% rate was (and is) better than even the best online savings rates, HSBC attracted alot of new capital through this offer. As January 19, 2016 is approaching, these same depositors were probably preparing to move their savings out of HSBC to one of the leading online savings accounts at that bank's ordinary savings rate is currently only 0.15% on deposits over $100,000 (and 0.10% on deposits over $25,000).

In order to avoid losing the deposits that it courted so aggressively, HSBC has sent a letter to those who opened these accounts over the summer notifying them that from January 19, 2016 onwards they will receive 75 basis points more than the standard HSBC Premier Savings account. The letter further agrees that HSBC will provide at least 30 days advanced notice of any subsequent decision to remove the 75 basis point incentive.

As a result of this action, those depositors who took advantage of HSBC's summer promotional offer who keep over $100,000 at HSBC will be earning 0.90% going forward until further notice. This rate of course is not anything to write home about, and is currently 15 to 20 basis points below the best online savings rates available. However, it offers the hope that 2016 will finally bring more competition from other major banks with large branch networks to attract new capital and keep capital.

Find the best local savings rates where you live.

Salem Five is a Massachusetts-based financial institution that has been a competitor in the online savings space for many years. Its online savings rate today stands at 1% and that is among the most competitive online savings rates. Because Salem Five is a Massachusetts bank, it is covered under the Massachusetts DIF policy that insures each depositor’s accounts, regardless of state of their residence, to a maximum of $1 million.

Over the last several years, two series of problems have become evident with Salem Five Direct’s online savings accounts. These problems have been highlighted to BestCashCow.com by our readers and we feel that they still need to be addressed by Salem Five.

First, promotional rates are higher than the rates in the post-promotion period and the rates in the post-promotion period are not transparent on the face of the site.

BestCashCow.com considers the practice of offering a rate dramatically above market to be a bait-and-switch tactic and warns depositors of this tactic.

Salem Five’s post-promotional rates have always been 5 to 10 basis points below its promotional rates which tend to be the only ones listed on its website. Salem Five should be more transparent about its promotional and post-promotion rates. Depositors simply should not be required in the post-promotion period to log in to their account weekly or monthly to find out how much below the advertised promotional rate they are earning.

While Salem Five now seems to have suspended, at least temporarily, the practice of issuing promotional rates, we have always found that their entire promotional savings rate thing played into the hands of whoever was writing the script for the Ally Bank television ads.

Second, transfers out of the Salem Five Direct Savings Account are not free and severely limited in ways not consistent with the US online savings account market

When using Salem Five Direct’s online banking interface, depositors are limited to $5,000 per transaction, $5,000 in aggregate per day; and $20,000 in aggregate per calendar month. Each outbound ACH transfer initiated through Salem Five has a $3 charge. These limits are very onerous - actually ridiculous. Using Salem Five’s website, it would take a year and cost $144 to move $240,000 out of Salem Five Direct. Under no circumstance do these limits and charges match the market practices for online savings accounts. Their very existence is material to depositors and perspective depositors, and they are not cardinally disclosed on Salem Five's website.

Allso not disclosed on Salem Five’s website is the very fact that the market creates a work-around for the limits and charges. By initiating your ACHs out of Salem Five through another online bank account, such as CIT, Synchrony or Ally, you can avoid Salem Five's transfer limits and fees. Your Salem Five Direct account can easily be set up and confirmed as an ACH transfer account using their routing number (211370558) and your account number.

The feedback that we have received from BestCashCow.com readers that Salem Five Direct has drawbacks that other online banks do not have is entirely correct. We think it is within BestCashCow’s role as the most comprehensive and informative U.S.-based website on personal savings issues to make consumers aware of the existence of Salem Five’s products. We also think Salem Five needs to take active steps to provide its customers with better rate disclose and match market practices regarding online ACH transfers.

Compare the best online savings rates here.

A common question we receive at BestCashCow is whether a holder of a savings or CD from a bank needs to pay taxes on the interest generated from those accounts. The short answer is: yes. Interest from FDIC insured accounts (savings accounts, CDs, interest checking, rewards checking) is taxable in the year in which it is received.

In most cases, your financial institution will send a 1099-INT form that indicates the amount of taxable interest you received over the course of the year. It is this number which you should report on your tax form. If you do not receive a 1099-INT and have an interest bearing account, you are still responsible for reporting your income. The IRS expects that you will contact your financial institution and find out the correct information so not receiving 1099-INT or any interest statements by mail is not an excuse to ignore the interest income.

If you have earned more than $1,500 in interest or more than $1,500 in dividends you will need to file a Schedule B, which prevents you from using a form 1040A or form 1040EZ. Note that dividend and interest income are each treated independently in triggering a Schedule B. If you earn $1,000 in interest and $1,000 in dividends, you do not need to file a Schedule B, but if either interest or dividend income is over $1,500 in a given year, you will need to file Schedule B.

Interest on Long-term or Non-maturing CDs

Interest earned on CDs, even if they did not mature in the tax year, is taxible in the year in which it is credited to your account for all CDs greater than 1-year. Even if the bank or credit union did not send you a check for the CD interest earned, but credited it to your principal balance, you still need to report that income on your taxes. The rule holds true even if you do not have the right pursuant to the terms of the CD to access the income. For this reason, some some people prefer to open CDs with their IRA funds, as the income on an IRA CD may accumulate in a tax deferred manner.

For specific questions, please ask a qualified tax accountant.