Here are the results of my bank transfer timing experiment to help estimate the lost interest when transfering money from one online bank to another. I scheduled transfers very late on Monday (~9pm Pacific) to and from various online banks and recorded when the money was taken out of the originating bank, and when the money was noted as deposited in the destination bank.
I would have posted the data earlier, but I’ve been trying to pore through all the fine print to figure out exactly when the banks stop and start paying interest during withdrawals and deposits. I’m still fuzzy on several things, but I just made some assumptions and ran with them for now. Here are the (I think reasonable) assumptions I made:
» All the banks stop paying interest on the day that the money is debited from the account. For example, if the debit is marked on 1/18, no interest will be paid on the 18th. All the banks that did have wording involving this seemed to work this way.
» Presidential and Bank of America start paying interest the same business day that the deposit is made.
Per their respective fine prints:
» Capital One 360 starts paying interest two business days after the deposit is made.
* (The bolded bank is the one which initiated the push or pull)
So, it appears that although both E-Trade Bank and HSBC Direct both use the CashEdge system to perform their transfers, the HSBC implementation somehow takes 2 full business days for both deposits and withdrawals, whereas E-Trade Bank actually gives you an extra day of interest on incoming transfers and only 1 lost day on outgoing transfers. So it’s isn’t CashEdge’s fault. In the end with E*Trade it seems you don’t lose any interest at all on a round-trip transfer!
Also, even though ING for some odd reason only starts paying you interest two days after the deposit date, it also makes the deposit date very early, before the money even is debited from the other bank. In the end, you only lose one day of interest for incoming and outgoing transfers.
Emigrant and VirtualBank were similar in losing 1 day of interest for outgoing transfers and losing zero days for incoming transfers. Maybe they are trying to encourage something?
Keep in mind that this was only for one day, so these are not rock-solid conclusion results. However, I would say they reflect accurately what I have read from comments on my blog and elsewhere.
Best Bank for Transfers – E*Trade Bank
Worst Bank for Transfers – HSBC Direct
The question remains – Is HSBC taking advantage of the float? I can’t tell. According to the fine print, it says that in between transfers there is no interest earned by the third party (I assume Cashedge). However, they also say “we reserve the right to hold funds beyond the normal period and if any interest is earned will be the property of HSBC.” What the heck is up with that?