Dedicated to Deposits: Deals, Data, and Discussion

Capital One Savings Account and CD Review for Costco Members


Capital One Direct Banking
Capital One has expanded its online products for Costco members. I mentioned this in my last weekly summary, but I thought it deserved a new post. Costco members can now apply for most of the online products that Capital One offers to everyone. Costco members get the benefit of higher rates ranging from 5 basis points for CDs to 25 basis points for the Online Savings Account. Another perk is a bonus interest credit for new savings accounts or CDs. Executive Members receive a $60 bonus interest credit and Gold Star and Business Members receive a $20 bonus interest credit.

The Capital One/Costco Online Savings Account has a yield of 3.75% APY for balances over $10K and 2.75% APY for balances under. As I mentioned on Saturday, this is the highest non-promo rate from a bank for a nationwide savings account (if credit unions are included it ties Alliant Credit Union).

This Costco Online savings account seems to have all the same features as Capital One's standard Online Savings Account, except it requires a minimum opening deposit of $5,000. After it is opened, there are no minimum balance requirements or monthly fees.

Capital One has long been offering a Costco Money Market Account with a yield that has always been between 10 and 30 basis points higher than the standard MMA. The current yield is 3.20% APY which is 20 basis points above the standard one. The MMA has the advantage over the savings account of having limited check writing (checks are free) and an ATM card.

In May I did an extensive review of Capital One's standard Online Savings Account. Please refer to that post for the account details. As I mentioned in that post, an important downside seems to be Capital One's slow ACH transfer speeds. Readers have reported that it takes at least 3 business days to complete. The money is pulled from the source account the day after you initiate the transfer, and it won't post until 3 business days later. Interest is lost during this time.

Another potential downside may be the customer service. Several readers have reported various problems in my May post and in this April CD post.

That April CD post also has some important details about Capital One's CDs. The Costco affiliated CDs have rates 5 basis points higher, however, there are fewer available terms. The most competitive rates are for the longer terms which include a 5.05% APY 60-month CD and a 5.35% APY 84-month CD. As I mentioned in that April post, Capital One has a convoluted way to determine the early withdrawal penalty which could result in an above-average early withdrawal penalty.

Capital One has two FDIC entities, however, I've been told that new accounts will be FDIC insured through Capital One, N.A. (FDIC Certificate # 4297). It's a large bank with $104.8 billion in assets and $69.5 billion in deposits based on 3/31/08 data. Capital One's rating at Bankrate has gone down to 3 stars (performing) based on 3/31/08 data. It had been 4 stars based on 12/31/07. The rating at BauerFinancial continues to be 3.5 stars (good) based on 3/31/08 data.

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

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Comment #1 by Anonymous posted on
Beware of Capitol One. They have very poor customer service. They are a very big bank that has lost touch with customers. Just do a Google search and you will find many instances reported by their customers. I was charged $50 for returning 2 of their checks that were past the cash-by date. I was told to return the checks and 2 new checks would be issued. I was never told I would be charged $50.

Comment #2 by Anonymous posted on
I have not had a problem with Capitol One as far a CDs are concerned. Interest earned was always deposited on time each month as I requested by way of ACH to my bank. And last December when my CD was due to mature, I called Capitol One to cash out my CD and they offered me .50% more than their advertised rate if I would renew the CD with them. And of course I accepted.

Comment #3 by gary (anonymous) posted on
I had an existing account with Capital One and applied for the Costco Savings Account online. The process went smoothly, the account was created on the spot (using mostly the information they already had) and I was given the option of a trasfer from my existing account to fund it. When you do this, you can select $1 to $100K as the starting amount. Don't need to do the $5K minimum.

Comment #5 by Anonymous posted on
I signed up for the Costco account and definitely noticed slowness with ACH transfers initiated on the Capital One end. I have experience with a few other online accounts to compare them with.

The comments mentioned about sitting on incoming money for up to three days are definitely correct (they withdraw from an external account the next business day, but proceeds do not show up for two days after that).

A better way to deal with the ACH problem is to initiate transfers externally from another insitution. So far, for an incoming deposit, the funds posted much faster. This was actually suggested by a Capital One CSR, who seemed not overly surprised when I complained about the appearance of sitting on my Capital One initiated deposit for several days.

The CSR I dealt with was extremely defensive about the ACH delay concerns I raised and used a lot of "go back and read your agreement, we're allowed to do that". They seem to work very hard at convincing people *NOT* to make additional deposits there.

If you know all this up front, and accept they're difficult to deal with, getting the great 3.75 current rate can be worth the hassle. But if you've got someone else offering the same rate, I'd go elsewhere. These guys did a great job of annoying me.