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a withdrawal is made within six months of maturity, the penalty will equal six months' interest on the principal amount withdrawn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the penalty will equal the greater of six months' interest or the Economic Replacement Value on the principal amount withdrawn.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).