Dedicated to Deposits: Deals, Data, and Discussion

4.00% 4-Year CD at Capital One Direct - Nationally Available

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Capital One Direct Banking
Capital One Bank has increased the yield on its 4-year CD to 4.00% APY at its Direct Banking operation which is available nationwide. This had been 3.50% APY last weekend. Except for the very-long term CDs, the other rates are much lower (3.25% APY for 3 and 5 years, 3% APY for 2 and 2.5 years). Minimum deposit is $5,000. Note, the Jumbo 4-year CD has the same rate of 4% APY.

Costco members can often get an extra 5 basis points on Capital One CDs, but the Capital One/Costco page does not list a 4-year term.

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withdrawal is made within six months of maturity, the penalty will equal six months' interest on the principal amount withdrawn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the penalty will equal the greater of six months' interest or the Economic Replacement Value on the principal amount withdrawn.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

Here's an example that I did. If you open the 4.00% 48-month CD with $40K, and in 24 months the new 48-month CD yield is 6.00%, the ERV would 0.02*(24/12)*40,000 = $1,600. That equals 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.

Savings Accounts

Like many other internet banks, Capital One has been cutting the rates on its savings and money market accounts. Current rates as of 2/05/09 are:
  • 2.64% APY for $10K+ for the Online Savings Account
  • 2.00% APY for the High Yield Money Market Account
  • 1.75% APY for the Reward Money Market Account
The main downside to this account seems to be Capital One's slow ACH transfer system in which transfers can take at least 3 business days to complete. I have more details in my Capital One Online Savings Account review.

Checking Account Bonus

Capital One is also offering a $100 bonus to open its rewards checking account. Note, this is not a high-yield checking account. Also, it doesn't appear connected to their Direct Banking, so it appears to only be available to Capital One's market area (CT, LA, NJ, NJ and TX). Refer to this BestCashCow post has more details on this promotion.

FDIC and Financial Info

Capital One has two FDIC charters, and these two have different Bankrate ratings (based on 9/30/08 data):
I've been told by a Capital One banking rep that new deposits are held by Capital One, N.A. The FDIC shows Capital One, N.A. to hold most of the deposits, so this seems to be correct.

Other Top Long-Term Certificate of Deposit Rates

If you're looking for a 4-year CD at a strong bank, this 4% CD at Capital One is a good deal. Flagstar Bank which is in weaker financial shape is offering a 4.01% APY on its 48-month internet CD. Like Capital One, Flagstar doesn't have a straightforward early withdrawal penalty (see post).

The best long-term CD deals continue to be at credit unions. Not only are the rates higher, but the early withdrawal penalties are simple 3 or 6 months of interest. Here are the 4-year CD yields from three major credit unions with easy membership:

  • 4.25% APY at Alliant CU, 6mo early withdrawal penalty (my review)
  • 4.15% APY at Pentagon Federal CU, 6mo early withdrawal penalty (my review)
  • 4.00% APY at Mountain America CU, 3mo early withdrawal penalty (my review)

  Tags: CD rates, Capital One Direct Banking

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Comments
8 Comments.
Comment #1 by Sree (anonymous) posted on
Sree
You cant beat Hanmi bank's last month's deal of 4.2%APY with add-on, 3 free withdrawals AND One month early termination fee.

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Comment #2 by Anonymous posted on
Anonymous
Whether or not you think tying up your money for 4 years for 4% depends on whether you think inflation is going to take off in the year or two. With all the tens of trillions of dollars that the government is printing it's hard to believe that inflation won't be a factor long before 4 years.

1
Comment #3 by Anonymous posted on
Anonymous
"tens of trillions" of dollars?
I believe either your source of information or your math is flawed.

1
Comment #4 by Anonymous posted on
Anonymous
I sort of doubt that the very high rates back in the early 1980s are going to be duplicated soon. But if the budget deficit balloons to over a trillion dollars, then there is going to have to be some kind of tough economic pill that future generations are going to have to swallow.

1
Comment #5 by Anonymous posted on
Anonymous
As for Hanmi bank, if you are not a resident of CA, then you cannot open any account with them. So they are even more restrictive than a credit union especially as residency requirements are concerned.

Currently we are able to open online accounts only for customers with a CALIFORNIA ADDRESS

So for the people who live in the other 49 states, Hanmi is a no go. I shop quite a bit in Korean operated grocery stores, but I guess that would not qualify me to open an account.

1
Comment #6 by Anonymous posted on
Anonymous
As for Hanmi bank, if you are not a resident of CA, then you cannot open any account with them. So they are even more restrictive than a credit union especially as residency requirements are concerned.

Currently we are able to open online accounts only for customers with a CALIFORNIA ADDRESS

So for the people who live in the other 49 states, Hanmi is a no go. I shop quite a bit in Korean operated grocery stores, but I guess that would not qualify me to open an account.

1
Comment #7 by Anonymous posted on
Anonymous
Amalgamated Bank in New York City is giving a 3.50% APY for 15-month CD's, good "at least thru 2/18." Required $500 minimum, & opening a no-minimum, no-strings checking account.

1
Comment #8 by Anonymous posted on
Anonymous
Yeah this information is true actually in their website the Capital One said 2 percent in 2 year CD just the same. I'm planning to go on Hamni bank they have a good offer too but the problem I'm not resident of CA. So I just stick on Capital One.

1