1

Example: https://www.hustlermoneyblog.com/hsbc-direct-savings-review/ (mirror):

Maximum Balance: $2,000,000

  • 1
    Probably because they want to push you into their InvestDirect brokerage. I'd be surprised if their checking account has a maximum limit. – RonJohn Jan 20 at 2:52
8

An account that offers immediate withdrawals is a risk for the bank. Part of the rationale for savings accounts relies on this being spread between a lot of customers so they don't need to have enough cash on hand to repay everyone's balance.

They don't really want to have multi-million accounts that could cause a cash flow risk.

If you have that much money, they are likely to offer different vehicles for it.

3

The wealthy don't simply bank like us but with more zeroes at the end. If you're a "$2 million in my checking account is a possibility" type of person, you certainly have an accountant. You have investment advisors managing an investment portfolio sitting in investment accounts (at the very least). You're not putting money in a checking account except when you expect to write checks off of it.

You've heard of (mostly fiction about) rich people who get a ransom demand for $500,000, and they're like "I don't have that kind of money lying around, I'd have to raise it". That's valid. Rich people's money is out working for them, not lying around in accounts.

So a bank would be a little concerned about someone who thought a savings account was a good place to leave $2M. It has no sensible purpose, and it creates liability for the bank - particularly someone hacking the account and transferring away the money. Banks cannot always escape liability for such.

It's also a bad financial practice, due to FDIC insurance. Which only covers $250,000 per bank. As such, if you had $2M to keep in such accounts, you'd spread it across at least 8 banks - or rather, your accountant would.

  • Kind of a tangential question but I'm wondering why such a person would "certainly have an accountant". If I'm following the advice often given on here, which is something like: "max your 401k/Roth IRA, then if you have excess money you can put it in savings to save up for a purchase, or in a non-tax advantaged investment account to let it grow. For your investment accounts, choose low-expense mutual funds/ETFs", then it's not clear to me why hitting some $ amount in my bank account would make me want to deviate from that and hire an accountant. What am I missing here? Thanks! – swaggy p Jan 21 at 21:47
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    @swaggyp Good question! I think the answer is "economies of scale". The fact is, what most of us do with our money is sub-optimal. If getting to "optimal" means spending $5000/year on CPAs, tax lawyers and investment advisors, that makes no sense for a 4-digit checking account. But it certainly makes sense for a 7-digit one. – Harper - Reinstate Monica Jan 21 at 21:52
2

There are two things to consider.

  • They can set a maximum amount. The fact that they are still paying the same rate all the way to $2,000,000 is amazing. Some banks will only pay their high rate if your balance is between two amounts. If it is lower they pay way less than 1%, if it is over the higher amount they credit the excess at a very low rate. The range of limits they pick attracts different types of customers.

  • FDIC insurance only covers the customer up to $250,000, that means that if you are approaching the $2,000,000 limit you are putting $1,750,000 at risk if the bank fails. Very few potential customers will approach the maximum the bank is allowing because they have other options without the risk.

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