Capital One Is First Major Online Bank To Offer CD With 5% APY
Today, Capital One increased the rate of its 11-month 360 CD from 4.10% to 5.00% APY, becoming the first major online bank to offer a 5% APY direct CD in this rate cycle. Credit unions and other smaller banks have reached this milestone, but the major online banks have been lagging.
According to Capital One’s CD special page:
To secure the special rate, select an 11-month term when you open a Capital One 360 CD by 3/14/2023. No promo code required.
There is no minimum deposit. Interest on your account will be compounded and credited on a monthly basis. To review more Capital One 360 CD rates, please refer to the rates section of the DA Capital One page.
Last October, CIT Bank became the first major online bank to offer a CD with a 4.00% APY. Capital One has offered a few competitive CDs in the last year. Last June, it offered a rate-leading 18-month CD. In December, it increased its 60-month CD rate to 4.40% APY. Unfortunately, the 60-month CD rate fell to 4.10% APY last week. I think many savers would have preferred a longer-term 5% CD since market expectations are high that rates will fall in the next year.
Thanks to DA reader, PecEleCT, for the Forum post about this CD Special.
360 Performance Savings Account
Unfortunately, Capital One didn’t reach a milestone with its savings account rate increase. Today’s rate increase of its 360 Performance Savings Account was small, with the rate rising just 10 bps to 3.40% APY. The rate is far below the online savings account rates of many other online banks. Many are now over 4%, and there’s even one with a 5.03% APY (see review).
In 2021, the 360 Performance Savings rate was stuck at 0.40%, which was about 5 bps under the online savings account average rate. It didn’t start moving up until April 2022. While the rate increased in 2022, it remained close to the average online savings account rate.
The 360 Performance Savings account was launched in late 2019. For new accounts, it replaced the 360 Savings Account (which used to be the original ING Direct Orange savings account) and the 360 Money Market Account (which was launched in 2016.) For those who had opened those old accounts, it’s definitely time to move any funds in those accounts into the 360 Performance Savings account or higher-rate accounts at other banks. Capital One has kept the rates on those old accounts low. Currently, the 360 Savings Account earns only 0.30% APY, and the 360 Money Market Account earns only 0.80% APY.
The 360 Performance Savings account is a typical online savings account with no minimum balance requirements and no monthly maintenance fees. For more details, please refer to my 2019 review of the 360 Performance Savings account.
Important Capital One 360 CD Features
Capital One used to offer IRA 360 CDs, but they are no longer available.
Capital One 360 CDs have no minimum opening deposit requirement, “however, your Certificate of Deposit account may not exceed $1,000,000.”
At the bottom of Capital One’s Online CDs page, is the FAQ section. Three of the most useful ones include:
Do CDs pay monthly?
Capital One 360 CD interest is accrued daily and is compounded and credited to your CD account monthly. You can choose to receive CD interest disbursements on a monthly or yearly basis (on the anniversary date of the account opening) based on the schedule that works best for you. You can also choose to receive interest payments by transfer to another Capital One account or by transfer to an external linked account. You can change the account that receives the disbursement at any time.
Can I withdraw my money before the CD term is over?
You can always decide to withdraw your money early. However, like with any CD account, there is a penalty for withdrawal prior to the end of your CD term. For 12 month CD accounts (or less), the penalty for withdrawing early is 3 months of interest. For CD accounts longer than 12 months, the penalty for withdrawing early is 6 months of interest. You also cannot make a partial withdrawal during your CD term.
Can I add beneficiaries to a 360 CD savings account?
Yes. You can assign up to 10 individuals as Payable on Death beneficiaries, which means that while you’re alive, the beneficiaries won’t have access to anything in the certificate of deposit (CD) account. The only exception is that you cannot assign beneficiaries for a Trust account, where the trustee controls funds for another party. Assigning beneficiaries can give you peace of mind and can result in increased FDIC coverage for your CD accounts up to allowable limits. Learn about the two ways to manage beneficiaries for your accounts.
Capital One 360 CD’s Early Withdrawal
Partial early withdrawals of the principal is not allowed. This is described in the Capital One Certificate of Deposit Disclosure:
Withdrawals: We will not permit partial withdrawals of principal during the term of the account. Withdrawal of the full account balance is permitted at maturity and during the grace period.
This almost sounds like they won’t allow an early withdrawal of principal, but it only disallows partial early withdrawals of principal. A full early withdrawal of principal (which will close the CD) is allowed, subject to the early withdrawal penalty. The Disclosure’s early withdrawal penalty details are as follows:
Early Withdrawal Penalty: If you redeem a Certificate of Deposit (CD) prior to maturity, you will incur an early withdrawal penalty.
- For a CD with a twelve (12) month or shorter term, the penalty is three (3) months interest, regardless of when you redeem the account prior to maturity.
- For a CD with a term greater than twelve (12) months, the penalty is six (6) months of interest regardless of when you redeem the account prior to maturity.
- If any Certificate of Deposit owner dies or is declared legally incompetent, the Certificate of Deposit can be redeemed early, without penalty.
Depending on how early you redeem your CD, the penalty for early redemption may be greater than the interest you have earned on your account.
Process of Closing a 360 CD Early
Six years ago, I wrote about Capital One 360’s online CD management system. You used to be able to close a CD early using the online system. You didn’t need to call a customer service representative. The online system used to provide you with the early redemption value and allow you to close the CD early and move the funds immediately to your Capital One liquid account. That’s no longer the case.
I’m not sure when it changed, but Capital One’s online account management system no longer allows you to close a CD early. Instead, it instructs you to call.
The current online CD management system does allow you to do a few things without contacting a customer service representative. You can change your maturity options so that when a CD matures, the CD can either automatically renew or it can be closed with the funds transferred to a linked external account or one of your liquid Capital One accounts. You can also choose to have interest paid out either monthly or annually to one of your Capital One liquid accounts or to one of your linked external accounts. This can only be done within 20 days after the account has been opened or renewed. You can change the account that receives the interest at any time.
POD Beneficiary Designations Are Now Possible
After many years of customer complaints, Capital One changed its beneficiary policy for 360 deposit accounts in the summer of 2018, although not without some issues. My July 2018 blog post describes the initial changes (and problems), while the subsequent December 2018 blog post discusses the addition of an online system for adding and managing beneficiaries. You can still add, edit and remove beneficiaries using the online system.
Up to 10 beneficiaries per account can now be designated, with Social Security numbers required for all beneficiaries. (There is one exception: beneficiaries cannot be assigned to a Trust account.) Once beneficiaries are named, the bank account will be referred to as a "Payable on Death" (POD) account.
When I was reviewing Capital One in 2021, I tried to contact Capital One customer service in several ways. In summary, I was disappointed. Capital One offers an automated online chat service called Eno. I asked if IRA CDs were available, and it responded by saying “Hmm, I didn't quite understand. Can you try asking a different way? That helps me learn!” I re-phrased the question in a few other ways, but it didn’t help.
When I called Capital One, you first had to go through their messaging system. It wasn’t easy to connect to a human. Once I was finally connected, the customer service representative didn’t seem to have much experience. He struggled to answer questions like the existence of IRA CDs. When I asked about opening a 360 CD at a branch, he just referred me to a branch phone number. When I called that number, I wasn’t able to connect with anyone at the branch.
Availability and Account Opening
Headquartered in McLean, Virginia, Capital One offers its 360 savings products online or at one of its branch locations. Any U.S. citizen or lawful permanent resident, 18 years or older, with a U.S. physical address or a military address (APO or FPO) and a valid Social Security number, can open an account at Capital One.
According to an FAQ on opening CDs, “you can open a Capital One 360 CD online or at one of our locations.” However, a reader emailed me last October about what happened when her aunt tried to open a CD at a Capital One physical branch location. The reader’s aunt found out that the Capital One CD opening process at a branch isn’t a traditional account opening process. Instead, a Capital One associate guides the customer to a tablet, and essentially, the customer must open the CD online. For those uncomfortable opening accounts online, this will likely be a disappointment.
Capital One’s 360 CD Disclosure describes how your CD can be funded when opened online:
You "link" your Capital One account to a personal (non-business) checking or savings account at another U.S. chartered bank ("Linked Account") to fund your CD account. Or you can transfer money from an eligible Capital One checking or savings account to fund your CD.
In the online application, Capital One provides this instruction regarding opening a joint account:
First, you'll need to open an individual account. Then, you can add the other person as a joint account holder online.
Capital One has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 3.47% (excellent), based on June 30, 2022 data. In the past year, Capital One has increased its total non-brokered deposits by $10.11 billion, an excellent annual growth rate of 3.38%. Please refer to our financial overview of Capital One (FDIC Certificate # 4297) for more details.
Capital One acquired the internet bank, ING Direct, in 2012 and shortly afterward, ING Direct was transformed into Capital One 360. Operating as a subsidiary of Capital One Financial Corporation for about four years, Capital One 360 was absorbed in Capital One in 2017. Although Capital One 360 no longer exists as a separate entity, the Capital One 360 products are still available from Capital One.
Capital One Financial Corporation is a financial holding company with the subsidiary Capital One, N.A. On October 3, 2022, Capital One Bank (USA), N.A. merged with and into Capital One, N.A. There is now just one bank, Capital One, N.A., that is under Capital One Financial Corporation. According to Capital One’s fourth quarter 2022 earnings report, Capital One has $333.0 billion in deposits and $455.2 billion in assets as of December 31, 2022. Capital One, N.A. has branches located primarily in the District of Columbia, Louisiana, Maryland, New Jersey, New York, Texas and Virginia.
How the 11-Month 360 CD Compares
When compared to similar length-of-term CDs tracked by DepositAccounts.com that are available nationally and have minimum deposit requirements of $10k or less, no banks or credit unions have a higher rate than offered on Capital One 360 11-month CD. The following table compares the 360 11-month CD to the two highest-rate CDs from other banks, the two highest-rate CDs from other major online banks and the two highest-rate CDs from credit unions.
The above information and rates are accurate as of 2/2/2023.
To look for the best CD rates, both nationwide and state specific, please refer to our CD Rates Table page.
Side note: All the Stock Market guys and their refusal to accept the reality that rates are not going down in 2023 is always amusing. I guess they think the Fed is playing games, when in reality they are doing what they have been saying they are going to do.
This is a great time to have some liquid cash to take advantage of these high rates!
And today's report showed that wages are in fact moderating with the monthly increase coming in at 0.3%, as expected, compared to 0.4% last month. I think the Fed is going to be more focused on that than on the absolute level of employment.
As always if you look at the details of the jobs that were added, you get the real story. And most of the jobs were created in industries that typically are on the lower end of the wage scale. Real wages have fallen significantly over the past two years, and wage increases are still behind inflation. As inflation is moderating, so are the wage increases, so I think the Fed may in fact view this report as another signpost along the way pointing in the direction they are looking for and a reason to continue moderating their own rate increases. I'm not so sure that this one job's report is going to lead to a change of policy. They know that the effect of their increases takes time to work its way through the economy so they will undoubtedly take a pause at some point to see how effective it has been. I'm not sure this will have as much effect on their plan as some are predicting.
With the Biden administration's abysmal track record on reporting job numbers, and the State of the Union about to take place for which Biden has zero accomplishments to boast about and is desperate for anything to say, I think my comment is well grounded in reality.
"Biden second-quarter job numbers off by 1 million, Philadelphia Federal Reserve Bank says"
also, Jonathan Ping (MYMONEYBLOG) writes:
I don’t know what the future holds for interest rates, up or down, but right now it is a top rate for a CD where you are locked in for about a year. For comparison:
1-year Treasury bill rates currently around 4.65% (interest exempt from state/local income taxes).
NavyFed and Langley FCU have 5.00% APY on a 15-month CD.
11-month No Penalty CD from CIT Bank at 4.10% APY.