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Capital One's New Rewards Money Market Account


Capital One Direct Banking
Capital One direct banking has added a new money market account called Rewards Money Market. It looks basically the same as the High Yield Money Market (HYMM) except you receive a lower rate in return for earning rewards. The current yield is 4.66% APY vs. 5.00% APY for the HYMM. You earn 1 mile of rewards for every $20 of your average balance for the month. There's also a 2,500 miles bonus with a $500 opening deposit.

The reward miles appears the same as you would earn with Capital One's No Hassle Miles Rewards credit card. With that credit card you earn 1.25 miles for each dollar spent on purchases.

Is the reduced rate worth the miles?

In the reward redemption terms, the following is specified:
12,500 miles are required for tickets up to $150.00; 25,000 miles are required for tickets from $150.01 up to $350.00; 50,000 miles are required for tickets from $350.01 up to $600.00. For tickets over $600.00 in value, the required number of miles will be determined by multiplying the cost of the ticket by 100 (ex. $768 ticket requires 76,800 miles). The number of miles required to redeem for non-air travel redemptions will vary by rewards product and are subject to change at any time without notice.

If you can redeem 12,500 miles for a $150 ticket, that would be about 83 miles per dollar. Accumulating 12,500 miles in one year would require about $20,833 in savings held in the account for one year. So if you earn $150 extra for maintaining $20,833 over one year, that effectively adds 0.72% to the interest rate. Adding this to 4.66% APY gives a yield of 5.38% APY. If you redeem a higher amount such as 76,800 miles for $768, that would result in a 0.60% bump to the interest rate. Adding this to 4.66% APY gives a yield of 5.26% APY. The 2,500 miles bonus is worth between $25 and $30.

I would guess redeeming the miles for things other than tickets would result in a lower payout and less bump to the effective interest rate.


So it appears you could effectively earn up to 5.38% APY on this Rewards Money Market Account. Plus, if your initial deposit is at least $500, you'll earn miles effectively worth up to $30.

Like the High Yield Money Market account, the Rewards Money Market has several nice features:
  • no monthly fees or minimum balance requirements
  • free checks
  • ATM card
  • ACH transfer system

Capital One also offers a Business Money Market Account with similar features but with a slightly lower yield.

Costco members can earn higher rates on a special Capital One money market account and receive a one-time $50 bonus. Please see my August post for more info.

People in Central Texas can get a special 5% checking account from Cap One, although this might not last much longer. Please see my Capital One checking post for more info.

Capital One is FDIC insured (Certificate # 4297).

Thanks to the reader Ben who mentioned this new money market account in the finding deals post.

  Tags: money market accounts, Capital One Direct Banking, savings account

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Comment #1 by Anonymous posted on
Sorry. I left my comment too soon. I have now read the previous post and got my answer. Please remove the post if you can.

Comment #2 by Anonymous posted on
Actually, Banking Guy, this deal is even better when you consider that the air miles are not taxed but the interest you earn from any online bank account is.
This account certainly makes sense if you already use a Capital One air miles credit card.

Comment #3 by Anonymous posted on
I am wondering if anyone else has opened a Capital One rewards MMA?I am a new member. Capital One debited my checking account on Tuesday and I still have not received credit for my debit (today is Thursday -- evening). Where does the money go? Is Capital One making money on the delay of our deposit money????

Comment #4 by boutchak (anonymous) posted on
It says in the description:

"With your Rewards Money Market account, you always have the option to redeem your miles for money—so go ahead and cash in."

I could not find the exact rules for this option. Does anyone know more?

Comment #7 by Anonymous posted on
how do I get to my money market reward redemption center