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Capital One Raises Long Term CD Rates to as High as 5.50%

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Capital One Direct Banking
Update 4/23/08: The 7 and 10-year CD rates have fallen.

Capital One Direct Banking just raised their CD rates on terms of over 12 months. The highest yield is now 5.50% APY for terms of 84 and 120 months. The minimum deposit is $5,000. Below is a full list of their CD rates:

Capital One's Certificate of Deposit Rates as of 4/09/2008:

TERM RATE APY
6 months 2.96% 3.00%
12 months 3.20% 3.25%
18 months 3.49% 3.55%
24 months 3.68% 3.75%
30 months 3.92% 4.00%
36 months 3.92% 4.00%
48 months 4.21% 4.30%
60 months 4.40% 4.50%
84 months 5.35% 5.50%
120 months 5.35% 5.50%

One important thing to note about Capital One's CD is their early withdrawal penalty. The full description can be found in their disclosure:
3. On a CD with a term of more than one year:
a) If a withdrawal is made within six months of maturity, the penalty will equal six months' interest on the principal amount withdrawn
b) If a withdrawal is made six months or more before maturity, the penalty will equal the greater of six months' interest or the Economic Replacement Value on the principal amount withdrawn.

So for the long-term CDs, the minimum amount of penalty is 6 months of interest. However, it can be much worse if interest rates rise. Here's one example that they provide of this Economic Replacement Value (ERV):
1. Perhaps you have a 5-year CD and you withdraw $40,000 of principal 27 months early.
2. But rates have risen so that a new CD has an APY 0.50% higher than your original CD.
3. Therefore, the ERV would be $450.

If you open the 4.50% 60-month CD with $40K, and in 33 months, the new 60-month CD yield is 6.50%, the ERV would then be 4 times this amount or $1,800. That would be equal to 12 months of interest. With the potential for inflation to force interest rates higher, this is an important consideration.

It appears Capital One makes it easy to open and fund a CD. They have an online application, and according to the customer service rep, you can link an external account and fund the CD with an ACH transfer. The CSR also said that you can use this link to withdraw funds when the CD matures. If your experience with CapOne CDs haven't been this simple, please leave a comment.

Other CapOne Rate Changes

Unfortuantely, not all of CapOne's rates went up. The yield on their money market account decreased from 3.10% to 3.00% APY, and the Costco version also had a 10-basis-point rate decline (from 3.30% to 3.20% APY). The Online Savings Account yield also went down (from 3.85% to 3.75% APY for balances over $10K). This Online Savings Account looks a lot like Countrywide's savingslink with a top yield for balances over $10K and no minimum balance requirements to avoid fees. The yield is a little less than the 4.05% APY from Countrywide, but it's still very competitive.

According to a recent Forbes article "Capital One has not been plagued with mortgage and credit problems that have harried other lenders." However, the article noted that Capital One Financial was still downgraded. Bankrate.com gives Cap One a 4 out of 5 star rating (sound) based on 12/31/07 data. Capital One Bank is a member FDIC (Certificate # 4297).
  Tags: CD rates, Capital One Direct Banking

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Comments
25 comments.
Comment #1 by Anonymous posted on
Anonymous
It appears that this rate of 5.50% is fair to good considering "averages" over the term offered and historical rates as well.

Would one be better in the stock market or invest in real estate?

What's in your "wallet?"

Thanks.

1
Comment #2 by Anonymous posted on
Anonymous
84 months (7 years) is a long time for for a CD, and who knows if rates will go above the 5.5% during the term. Within the last decade, rates went up to 7 % and even higher. I wish I would have gotten CD's then

1
Comment #3 by Anonymous posted on
Anonymous
The other shoe to drop is said to be credit card companies as more and more people stop paying their credit cards. In any case, in a few years once the shakeout is over you will be able to find safe corporate bonds with higher yields than 5.5%. I wouldn't be looking at a CD that ties up your money for more than a year in my opinion.

1
Comment #4 by Anonymous posted on
Anonymous
The long term "high" rates offered today by COF are a sure sign they expect interest rates to rise in the future. I happen to agree with them.

1
Comment #5 by Anonymous posted on
Anonymous
I opened a MM account with them yesterday. Their online application was not working so well based on my experience. I got errors the first time when filling out my application. The second time I tried and I finished my application, but it doesn't allow me to set up ACH. This morning I received an email from them saying that my application is not completed. I called them up this morning, talked to one agent, one custom support, and one financial specialist. They finally confirmed that my application is completed and my account should be opened by this Friday. If their services are good, I might slowly open a few CD with them. Thanks!

1
Comment #6 by Anonymous posted on
Anonymous
I have no complaints with Capital One. Interest earnings on my CDs are always paid on time by way of ACH into my checking Acct. at my local bank.

And, back in early November I called Capital One to notify them that I would be cashing out a CD that was about to mature. They offered me a half of a percent above their advertized rates at that time if I would roll it over into a new CD. Great, I accepted their offer.

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Comment #7 by CD Rates Blog (anonymous) posted on
CD Rates Blog
We've helped multiple clients set-up CDs and haven't had too much trouble. It sometimes takes a little while to get through to someone, but they seem pretty effecient.

Although rates will turn around at some point, the question is when and how high will they go. Generally, the Fed leaves the rates low for a time and then slowly raises them.

I recommend doing some of your own forcasting to see how different rate scenarois play out. If their rate still holds up, put some funds there.

As someone pointed out the rate holds up pretty will when you look at historical averages. The data in our database shows a 5.405% average for 5-year CDs since 1993.

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Comment #8 by Anonymous posted on
Anonymous
I'm tempted, but 7 years sure seems like a long time and my finances aren't looking too good for awhile. Of course, I said the same thing about the Pentagon 3 year deals and know I'm kicking myself for not investing more.

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Comment #9 by ctgottapee (anonymous) posted on
ctgottapee
away around some of the 6 month interest penatly is to open several cds in increments of the min so you can break some if needed.

while one needs to look at the possible future, it is future risk compared to the guranteed return of a non value now, and the loss of not investing in that return now compared to keeping it in other lower rate products.

also i would say the high rates on this account probably have little to do with their future long term rate predictions as much as they just need long term money to shore up some mortgage backing

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Comment #10 by Anonymous posted on
Anonymous
Capital One sacks 750 staff in UK
US credit card firm Capital One is sacking 750 staff at its operations in Nottingham, UK, and is shifting most of the jobs to offshore locations. Capital One will cut call centre, account servicing and support job positions.

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Comment #11 by Anonymous posted on
Anonymous
Marriott International Inc. and Capital One Financial Corp. made DiversityInc magazine's annual list of the 50 most diverse companies in the country.

Bethesda-based Marriott International ranked No. 11 and McLean-based Capital One was No. 46.

More than 350 companies participated in the annual survey, and for the fourth consecutive year, Marriott was the highest ranked company in the lodging industry.

"With operations all over the world, we serve very diverse markets," said Jimmie Paschall, senior vice president for external affairs and global diversity officer for Marriott, in a statement. "We understand the value of diversity at every level ... from our senior leadership to our on-property employees."

Earlier this year, Marriott also was named one of the top 10 companies for executive women by the National Association for Female Executives, and one of the 50 best companies for supplier diversity, by Hispanic Enterprise magazine.

Capital One made its way onto the list for the first time this year.

"Our goal has been to develop a corporate culture where each associate feels valued, supported and connected, so that every associate is able to contribute to the success of Capital One," said Rob Keeling, vice president of diversity for Capital One. "Our commitment to diversity and inclusion goes well beyond the walls of our offices. Our associates are actively engaged in our communities through volunteering and mentoring in diverse organizations."

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Comment #12 by Anonymous posted on
Anonymous
Its Starting...

Capital One Financial Corp. (COF:Capital One Financial Corporation
News, chart, profile, more
Last: 49.43-1.20-2.37%

10:07am 04/10/2008

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Financials
Sponsored by:
COF 49.43, -1.20, -2.4%) disclosed Thursday that the net charge-off rate for its managed portfolio, or the rate of bad loans, rose to 4.11% in March, compared with 3.79% in February.
The McLean, Va., credit card issuer said in a Securities and Exchange Commission filing that in terms of dollars, net charge-offs for the managed portfolio totaled $508.1 million for March.
Capital One said its 30-days-or-more delinquency rate for its managed portfolio was 3.56%, or $5.27 billion, for March. For February, that rate was 3.56%, or $5.32 billion.
The company's shares closed Wednesday down $2.88, or 5.4%, at $50.63.

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Comment #13 by Anonymous posted on
Anonymous
After 2 days of aggravation and numerous phone calls trying to resolve their mistakes on my online savings and new CD's, I strongly suggest you go to another bank. The CSR's at Capital One are MORONS.

1
Comment #14 by Anonymous posted on
Anonymous
I had over 200k in a mm with Capital One for years. I ended up moving almost everything to a higher paying bank and left about 1700.oo in the Cap One account for emergencies. I sorta forgot about the account and the next thing you know my money is being put into escheatment by Capital One. Many calls to Capital One and my State Unclaimed Funds Division ensued. Capital One said they sent the money to my State and couldn't release it to me. My State said they never received it. My State said they did not receive it until a year later! That's when I finally was able to claim the money and get it sent to me from my State. Somebody had that money interest free for an entire year, and considering all the conflicting info I received from the CSRs at Capital One and the headaches I went through with those people, I would tend to believe it was them. After all that B.S. I went through to get my money back, these retards still send me ad mail trying to get me as a customer again. After my hair-pulling experience, I advise people to stay far away from Capital One.

1
Comment #15 by Anonymous posted on
Anonymous
I'm the person who posted above about my money going into escheatment. I forgot to add that I never even got one phone call from those cheats about what they were doing to my money. Not one!

1
Comment #16 by Anonymous posted on
Anonymous
Capital one sucks...keep away from them.
1) I got errors when I open an MM account online
2) Finally I opened my account without errors. It took at least 3 days to see the fund in my MM account but they withdrew my fund 2 days earlier.
3) I would like to open a CD account with them, but their processes are two slow. So, I transfered my fund to my countrywide account. It only took 2 days to verify and transfered fund to my capitalone MM Account.
4) I opened a CD in Capital one (using the information as my MM account)
5) I called in and asked to fund my CD account using fund in my MM account
6) You can't fund you CD account until you sign and return your signauture card which they will send in the mail but you never know when it arrives.
7) It took me more than 2 weeks and several calls to fund my CD account without success.
8) Just F*** them and took my money back to Patelco CU.

1
Comment #17 by Anonymous posted on
Anonymous
Penalties for early withdrawal
You may not withdraw principal from your account before the account's maturity date. If we allow early withdrawal, you will be assessed a penalty for early withdrawal as described below:
1. On a CD with a term of less than six months, the penalty will equal one month's interest on the principal amount withdrawn
2. On a CD with a term of six months to one year, the penalty will equal three months' interest on the principal amount withdrawn
3. On a CD with a term of more than one year:
a) If a withdrawal is made within six months of maturity, the penalty will equal six months' interest on the principal amount withdrawn
b) If a withdrawal is made six months or more before maturity, the penalty will equal the greater of six months' interest or the Economic Replacement Value (see below for definition) on the principal amount withdrawn.

Economic Replacement Value (ERV)
The Economic Replacement Value is an estimate of the interest cost to us if we were to replace a CD that is withdrawn early with another CD having a term that is comparable to the remaining term of the original CD. If interest rates have risen, then the cost of the new CD will be higher.

FOR EXAMPLE (this example does not reflect your actual CD terms):
1. Perhaps you have a 5-year CD and you withdraw $40,000 of principal 27 months early.
2. But rates have risen so that a new CD has an APY 0.50% higher than your original CD.
3. Therefore, the ERV would be $450.00.

This represents an estimate of Capital One’s interest cost if it were to replace the money you withdrew with a comparable CD. The term offered by Capital One that is closest to (but not greater than) the remaining term of your CD would be 24 months or two years in this example. In other words:
1. Perhaps your original 5-year CD had an APY of 2.00%.
2. But rates have risen and the 24-month replacement CD offered by Capital One for new accounts of the same CD type had an APY of 2.50% at the time of your early withdrawal.
3. Therefore, Capital One’s interest cost in replacing the $40,000 principal you withdrew early would be an additional 0.50% APY. This comes to an additional $200 per year on the $40,000 you withdrew early. Over 2.25 years (time left to maturity), this adds up to $450.00.

You can now use this example to calculate ERV in the following way:

STEP 1:
Subtract the APY on your CD from the APY offered for new accounts of the same CD type by Capital One on the date of your early withdrawal. Make sure to choose an APY for a CD term that is closest to (but not greater than) the number of years remaining until your CD matures.

If there is more than one APY offered for the relevant CD term and product, use the lowest APY offered for new accounts of the same CD type.

Original CD APY = 2.00%
Current APY for a 24-month CD (for this example only) = 2.50%
2.50% - 2.00% = 0.50%

STEP 2:
Multiply the result from Step 1 by the amount of principal you withdrew to calculate the annual interest differential.

$40,000 x 0.50% = $200

STEP 3:
Multiply the result from Step 2 by the amount of time left until your CD matures (in years) to calculate the ERV.

27 months to maturity = 2.25 years (27 ÷ 12 = 2.25)
$200 x 2.25 = $450.00

REMEMBER: This example is for illustrative purposes only. The terms in the example are not specific to your CD. The actual calculation of ERV will depend on the current APY offered on new accounts for the same type of CD. The ERV will also depend on the APY, term and principal amount of your CD.

1
Comment #18 by Bozo (anonymous) posted on
Bozo
To: All
Re: A reversal in CD rates

Yup, you knew it would happen. Didn't take long before the long-term rates hit 5%+ again. I still say if you have a long-term ladder, and can average above 5% (while taking out 4%), it's a no-brainer. The disadvantage to this CapOne is the $100K jumbo amount. Not real sure why they don't use $50K or even $25K, since most folks don't run around with $100K CDs in their ladders (mine are around $50K, plus or minus).

Yours,

Bozo

PS: But, then, 5.5% is OK for a smaller CD, if you can handle the longer term.

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Comment #19 by Anonymous posted on
Anonymous
The services and the processes are really terrible at capital1. Not recommend at all!

1
Comment #20 by Anonymous posted on
Anonymous
I had an identity theft problem with CapitalOne that took almost two years to resolve. They were unreasonable, impossible to reach, and accused me of stealing my own money even though the FBI had identified the perpetrators. I finally had to sue them in federal court. This is the worst bank I've ever dealt with in a long life of lots of banking. I don't care what their interest rates are. I would never deposit funds there again.

1
Comment #21 by Anonymous posted on
Anonymous
Right now, Capital One has some of the best longer term rates for CDs to be had. But, I should warn, opening new CDs with them can be a real challenge...

I just tried/did (I think) open two new CDs with them. Easy, I figured, using their online application process. But here's what happened...

Did the online app and wanted to fund the CDs via external ACH transfer, which they allow. Set up the first CD and entered my outside bank info. Went to do the second CD and their system refused, saying I couldn't do the second one until the trial deposits from the other application had been verified.

Waited 3 days for the first set of trial deposits to show up. Then called back Cap One. Said..I want to proceed. They said, cannot because their system had yet to generate the new CD account # for my first CD. So they said, wait 3 more days for us to email you the new account # for the first CD. Then, after that, you can repeat the whole process for the 2nd CD.

And, all of that was important because they were not going to lock in any rate until "the application has been completed" -- meaning you got thru all the trial deposits and account # issuing process.

Finally, I gave up in disgust, and after long talks with a pretty decent CSR on the phone, dropped all the online stuff and she opened two new CDs over the phone which I then funded in one day via two wire transfers from my external bank, and paid $15 to my external for each. But at least I locked in my CD rates on the same day at the original rate I had been expecting.

Bottom line: their online application/funding process is horrible. They originally wanted me to mail them a paper check, which I didn't want to do in part because I figured it would be slower. Turns out, trying to fund with them via ACH is FAR slower than anything else.

1
Comment #22 by Anonymous posted on
Anonymous
I recently opened an 18-month CD with Capital One. I attempted to fund it via ACH transfer from my Countrywide SavingsLink account, but Capital One was unable to make any trial deposits. I found this maddening, since I already had my Countrywide account linked to my Capital One savings account. Capital One told me to fund the CD by mailing in a check, but I'm not going to do that. If a bank wants my money, they'll take it on my terms and not make me jump through hoops.

1
Comment #23 by Anonymous posted on
Anonymous
I went into a CapitalOne bank on a Saturday almost a year ago (early 2008) to get a 6 month CD (at 5%). I wound up waiting in the lobby for an HOUR. I sat there until after closing time. I finally got so frustrated (and hungry) that I just left, and of course because they were closed, the door locked behind me. What lousy customer service! The following Monday, a small local bank had a 5 month term CD deal, also at 5%. I went there instead. Wonderful and personal customer service! Go with the small local bank if you can.

1
Comment #24 by Anonymous posted on
Anonymous
I've had only bad experiences with Capital One Bank and I strongly advise that people stay away from this bank. Not only there is too much headache to give your money to Capital One as listed in above posts, but also it's too difficult and time-consuming to get your money back when you do not wish to do business with Capital One any more. The bank's management team is full of incompetent managers who don't seem to think that customers are always right. They just simply don't care about customers' concerns and they ignore customers' requests to speak with them. With such "excellent" customer services, no wonder why recently Capital One Bank has had to give away $50 bonus to lure new customers in.

1
Comment #25 by Anonymous posted on
Anonymous
This bank is not forthcoming on its policies regarding Online Saving accounts. I opened their Costco Online Savings and transferred a large amount into this from my major bank checking account. After a week we (they and I) concluded that the transfer didn't "take". I then made a smaller transfer, which appeared in my Cap1 savings after about a week. OK, that worked so I transferred a large amount. After another week that showed up (meanwhile it did not show as "pending transfers' even after three days). Now I want to transfer some of those funds back but am told no can do. Minimum of 10 days hold (never mind they had my money) "to insure that the funds are 'good'." Also no withdrawals during the first 30 days of the account opening. They could not explain why. I'm out of there!

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