Capital One Direct Banking Review
Capital One Direct Banking and its savings accounts have several features that give Capital One an advantage over other popular internet banks including ING Direct, HSBC and Dollar Savings Direct. Capital One continues to offer competitive rates on its InterestPlus Online Savings Accounts (1.35% APY as of 5/30/10). Costco members qualify for a rate that's 5 basis points higher. It requires a balance of $2,500 to earn the top rate ($5,000 for the Costco version). There's also a 10% quarterly bonus on interest earned if a $15,000 average monthly balance is maintained. For a 1.40% APY, this increases the effective yield to about 1.54% (1.40% + 0.10*1.40%). There are no monthly fees regardless of the balance.
Another type of account that's available is Capital One's High Yield Money Market. Unlike the InterestPlus account, the money market doesn't require a minimum balance to earn interest ($100 for the Costco version). It also offers limited check writing (free checks) and an ATM card. The only downside compared to the InterestPlus account is lower rates. The rate is currently 1.10% APY (1.30% APY for the Costco version) as of 5/30/10.
Sign-up Bonus for Costco Members
Another perk for Costco members is a new account bonus: $60 for Executive Members and $20 for Gold Star, Business Members. Here's the requirement as described by Capital One:
Received on your first Direct Banking account of any kind opened through the Costco program with at least $5,000 deposited in the first 30 days.
Improving ACH Bank-to-Bank Transfers
In the past, Capital One suffered from slow ACH bank-to-bank transfers with at least a two days in which interest would be lost. Late last year, Capital One improved the speed when you pull funds from an external account. It now takes only 1 business day to complete.
A reader reported that Capital One will be making an improvement to the outbound transfers in June. According to the reader, interest will be credited while the ACH is in progress. It appears outbound transfers will still take 3 business days, but at least you shouldn't be losing out on the interest during this time.
Except for the long outbound transfer time, Capital One's other ACH transfer features are notable. Some of the important features that I was described last year include:
- Allows up to 99 linked external accounts
- High ACH transfer limit per day: $250,000 in or out
- External links are set up online with verification via trial deposits
With these features, it makes for a nice hub account which allows you to manage multiple accounts at other banks. This is where internet banks like ING Direct, HSBC and Dollar Savings Direct fall short.
Capital One has two FDIC charters, and these two have different Bankrate ratings (based on 12/31/09 data):
- Capital One Bank (USA), Glen Allen, VA, Total deposits of $27 billion (as of 3/31/10) FDIC Cert # 33954, Bankrate star rating of 5
- Capital One, N.A., Mclean, VA, Total deposits of $94 billion (as of 3/31/10) FDIC Cert # 4297, Bankrate star rating of 3
Update 8/25/10: Capital One's disclosure now states that the online savings accounts are held at Capital One Bank (USA), N.A.
Other Savings and Money Market Accounts
Banks Mentioned in this Post:
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