Taoyuan Nights

[If you are a foreigner working in Taiwan, I strongly encourage you to read this article.]

Like Britain, most of the high street banks in Taiwan pay out effectively nothing on their current accounts, and a pittance on the savings accounts. Current accounts run at 0.1%, and savings accounts often only offer 0.5%.

When I got here, one of the first things I did was try to find some way I could get a better savings rate. It turns out, the best short-term savings account rate (currently around 1.735% in most banks) is based on leaving your money in a ‘time-deposit’ setup, which works as follows…

1. Go to your bank.
2. Wait 15 minutes to get served.
3. Try to explain what an automatically recurring one month floating rate time deposit with reinvested interest is (trust me: it’s best to prepare your mimes and diagrams in advance for this one).
4. Fill in about 10 billion forms transferring the money between yourself and yourself and yourself.
5. Wave goodbye to your money – you won’t be seeing it for a while.
6. Wait 30 days.
7. Profit!!!!

By automatically recurring, I mean that after 30 days, your money (and perhaps also the interest) automatically gets fed back into another 30 day time deposit for the next month, without you having to visit the bank again. This is very important, if you value your will to live.

Bear in mind that withholding tax will still be charged on the interest at 20%, as it is on all bank interest in Taiwan, but that any excess you get charged (over your normal income tax band in Taiwan) can be refunded at the end of the tax year. [Unless you haven't spent over 181 days in Taiwan during the year, in which case, sorry mate, you're paying 20% tax, like it or lump it.]

This time deposit malarky can probably be made to work quite well, if you know the Chinese characters for ‘time deposit’ or have a fluency in Mandarin that I blatantly lack. Particularly so, if you know of a time when the bank won’t have queues to get in your way. However the approach has a few little stings in its tail.

1. If you really need that money, you can get it back – but you lose all the interest you would have gained during the month. And it’s hassle, too, trust me. Basically, they will find it hard to believe that any sane person would choose to give up e.g. $23 of interest they have accrued on paper.
2. If you want to cancel the time deposit, you have to go in on the exact day it ‘loops’ and goes into another 30-day cycle. You can’t say to them “Please make it stop on the 16th”, if it’s only the 15th when you ask. Why, that would be absurd! It would go against everything Taiwan stands for!
3. If you want to get your hands on the money, you will need to visit the bank in person. You can’t control it via the ATM.

Fortunately, Nature abhors the savings vacuum of a banking cartel, and so HSBC (one of the world’s largest banks by assets, operating in 80 or so countries) has stepped in to fill the void with a decent account: HSBC Direct. You may have seen this advertised on TV, in the MRT stations, or elsewhere in Taipei. I must admit I haven’t seen any ads in Taoyuan.

It works as follows:

1. Set up an account. Slightly annoying since they will want to verify your ID a lot of times. However, the staff in branch, on the phone, and on the Internet, uniformly speak EXCELLENT English and are unfailingly polite.
2. Transfer over some money from your normal account using an ATM or in branch. ATM will cost about $15 to send the money, in branch will cost $30. But fear not! HSBC will refund this evil charge up to 3 times! Hurray!
3. Log into the internet and admire your bank balance.
4. For security, you can’t move the money to any other bank accounts. It’s designed to be like a ‘moneybox’ for your main banking accounts rather than a current account. Given the levels of financial fraud here, it’s a smart move by HSBC to be super-paranoid.
5. You get an ATM card in case you need to get your hands on the cash quick and don’t want to transfer out of HSBC and back to your current account.
6. Transfers out of HSBC are free.
7. Interest accrues daily (so you could leave your money in for 3 days, and get a little interest), and is paid at the end of the month.
8. Best of all: they pay a whopping 1.5% interest!

Now, you might think 1.5% is rather crap, but I think it beats 0.1% or 0.5% hands down, particularly when it is effectively just an easy-to-use savings account with ATM card. On 300k of savings it’s a 3-4k bonus per year for doing nowt. I toyed with the idea of a mix of time deposits and HSBC for my needs, but after spending an hour waiting in the queue trying to set up just one time deposit, I just gave up in disgust and figured it wasn’t worth the hassle for 0.2% extra on my money. Besides, I don’t have enough money to make it worth any kind of hassle anyway :)

According to the reps I spoke with, HSBC will be raising the interest rate as other banks raise their rates to keep it very competitive compared with high street banks, so that makes the floating rate aspect of the time deposit less critical too.

HSBC direct also have an excellent English language website and phone service for managing your account. By ‘excellent’, I mean excellent. This aspect alone is worth the 0.2% difference.

A final note on bank transfers. If you transfer over 30k TWD at one time between any bank accounts in Taiwan, you’ll need to take in your ARC or ID card and possibly also your passport. That’s the law. Worth knowing in advance.

Oh, and the free money? Well if you sell your friend’s souls to HSBC by filling out their details on a form to be contacted about HSBC Direct, apparently they’ll give you a bonus $25-30 or something like that per person. I don’t recommend it, though, since your friends may reasonably question your neutrality in recommending HSBC Direct to them, if you’re prepared to sell them out for a poxy 25 kuai.

Anyway: I love the service, and HSBC Direct have in-branch staff specifically to deal with any HSBC Direct issues you may have. I strongly recommend HSBC Direct for your short-medium term savings. Further, unlike the local Taiwanese banks that went out of business last month (really!), HSBC have been around for hundreds of years, comply with international banking standards, have sensible lending criteria and a solid loan book, plenty of assets, and operate globally. All of which suggests that any systematic regional financial problems won’t have much effect on them as it might on other banks – making them a relatively safe haven.

Link: HSBC Direct

Amusing sidenote: It’s almost worth asking about getting a normal HSBC account in the branch, just to see their face go into a weird embarrassed smile. They will politely explain how much money you’re going to need to get that account: $3 million TWD in loose change, never mind your actual investments. Seriously, chaps. Wowsers.