As DA reader, pgroove_fan, noted in a Forum post over the weekend, Comenity Direct, an online division of Comenity Capital Bank, raised the rates on all its deposit products. While the 1-year CD saw the smallest increase (20 bps), it continues to be the most competitive CD in Comenity Direct’s product line.
The 3-year, 4-year, and 5-year CDs gained 30 bps, with the 2-year adding 40 bps.
Any Comenity Direct CD can be opened with a minimum $1.5k deposit. As stated on the Certificates of Deposit page, “Maximum deposit balance limit of $10 million per account holder."
CD interest is credited on a monthly basis and can be withdrawn at any time throughout the term. Automatic monthly transfers to a linked external account or to another Comenity Direct account can be done by setting up a recurring transfer.
Comenity Direct does not allow partial withdrawals, only early closures, which are subject to the following Early Withdrawal Penalty:
For terms 12 months to 3 years, the penalty is 180 days simple interest.
For terms 4 years and up, the penalty is 365 days simple interest.
According to the Truth-in-Savings for Certificates document, there is no language allowing the bank to deny a early closure request.
You are not permitted to withdraw a portion of your principal at any time prior to maturity. You may withdraw the entire principal amount prior to maturity, but you will be charged an early withdrawal penalty. The principal, however, may be withdrawn prior to maturity without a penalty if you die or if there is a judicial or administrative determination that you are legally incompetent.
Funding and Accessing Maturing Funds
Funding a CD (minimum $1.5k) can be done by check, ACH or wire transfer, or transfer from another Comenity Direct account.
As stated in the Truth-in-Savings disclosure,
Account owners are subject to a maximum deposit balance across all Accounts (which includes, Online Savings and CD Accounts) of $10,000,000 per Account owner for individual Accounts and $5,000,000 per Account owner for joint Accounts, for a maximum deposit balance limit of $10,000,000 per Account owner.
There is a 10-day grace period before a CD will be automatically renewed. Maturing funds can be distributed by check, ACH or wire transfer, or transfer to a Comenity Direct Online Savings account.
The Deposit Account Terms document provides a great deal of useful information about the ins-and-outs of Comenity Direct transactions.
High-Yield Savings Account
The High-Yield Savings Account’s (HYSA) previous 0.55% APY had been in effect since March 2021 before it was increased to 0.60% APY in early February. Following the recent rate increase, the HYSA now has the highest rate (0.75% APY) offered by a nationally available savings account. The minimum opening deposit is $100, but the 0.75% APY applies to all balances between $1 and $10 million.
Funding and Accessing
Deposits made to the HYSA can be done by check, ACH, wire transfer, or transfered from another Comenity Direct account. There is no limit on the number of external accounts that can be linked. The average hold time for an ACH transfer is between 1-3 business days, with hold times for larger amounts (six figures plus) being slightly longer.
This is a standard online savings account with no ATM/debit card; any withdrawals must be made through ACH or wire. There are no dollar limits on ACH transfers, either on withdrawals initiated through the Comenity Direct or initiated by an external bank. There is no excessive transaction fee for withdrawals in excess of the standard six withdrawals per statement cycle, because withdrawals beyond the six are not permitted. If you do attempt to make a seventh withdrawal, Comenity Direct may “deny and/or reject the transfer, and we may close your Account.”
While a Comenity Direct account is fee-free (including free monthly maintenance, ACH transfer, online statements, and incoming wire transfers), there are three fees which can be charged:
- $5 per request for paper statements
- $15 per request for paper check withdrawal
- $25 per request for outgoing wires
Unlimited payable-on-death (POD) beneficiaries are allowed. Social Security numbers are NOT required for beneficiaries and percentages can be designated. Charities/non-profits cannot be named as a beneficiary, but trusts can be named.
The Deposit Account Terms document provides a great deal of useful information about the ins-and-outs of Comenity Direct transactions for all accounts.
Headquartered in Draper, Utah, Comenity Direct offers accounts to U.S. citizens or resident aliens, 18 years or older, who have a valid Social Security number and a current street address in the U.S. (no PO Boxes allowed).
Only individuals may open a Comenity Direct sole or joint ownership account. Custodial accounts and trust accounts are not permitted, but as mentioned above, trusts can be named as a beneficiary.
As an internet division of Comenity Capital Bank, Comenity Direct has no brick-and-mortar branches. Opening an account can only be done online.
As an online brand of Comenity Capital Bank, Comenity Direct operates under Comenity Capital Bank’s FDIC Certificate and shares its financial history.
Comenity Direct/Comenity Capital Bank has an overall health grade of "A+" at DepositAccounts.com, with a Texas Ratio of 7.90% (excellent) based on September 30, 2021 data. In the past year, the Bank increased its total non-brokered deposits by $1.71 billion, an excellent annual growth rate of 57.97%. Please refer to our financial overview of Comenity Direct/Comenity Capital Bank (FDIC Certificate # 57570) for more details.
While Comenity Direct is the newest member of the Comenity family, Comenity Bank and Comenity Capital Bank have 30 years of experience of providing financial services. Comenity is best known for its private-label and co-branded credit cards at more than 100 retailers.
The two banks are subsidiaries of Alliance Data Systems Corporation. According to Wikipedia, Alliance Data Card Services, a publicly traded provider of loyalty and marketing services,
maintains two banks to manage the funding and receivables for its clients' credit programs. In September 2012, the banks rebranded their names from WFNNB (World Financial Network [National] Bank) and WFCB (World Financial Capital Bank) to both operate under the Comenity name, as Comenity Bank and Comenity Capital Bank, respectively.
Alliance Data’s 2021 Q4 credit card earnings were strong, as stated in a January 27, 2022 press release.
Credit sales remained strong in the fourth quarter reflecting improved holiday shopping and consumer activity. In-store credit transactions increased year-over-year as consumers continued to shop across all channels. Millennial and Gen. Z spending and transaction activity exceeded prepandemic levels in the quarter.
This may be why we're seeing these higher deposit rates: it’s a way to fund their growing credit card balances. It might also explain the recent deposit rate increases at AMEX, Discover, Capital One, Synchrony, and Barclays, all of which are credit card banks.
Several details of the Alliance Data Systems and its two banks are described in Alliance Data’s 2020 Annual Report. It explains why Alliance Data Systems is not a bank holding company and the reason for how the banks are structured:
Because Comenity Bank is deemed a credit card bank and Comenity Capital Bank is an industrial bank within the meaning of the Bank Holding Company Act, we are not subject to regulation as a bank holding company
The Annual Report also includes interesting details about limitations imposed on the banks to comply with regulation related to this banking structure:
Comenity Bank will not be a "bank" as defined under the Bank Holding Company Act so long as it remains in compliance with the following requirements:
- it does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties;
- it does not accept any savings or time deposits of less than $100,000, except for deposits pledged as collateral for its extensions of credit;
Comenity Capital Bank will not be a "bank" as defined under the Bank Holding Company Act so long as it remains an industrial bank in compliance with the following requirements:
- it does not accept demand deposits that the depositor may withdraw by check or similar means for payment to third parties.
Since Comenity Direct is under Comenity Capital Bank, it can accept deposits under $100k. Both Comenity Capital Bank and Comenity Bank cannot offer checking accounts.
How the 1-Year CD Compares
When compared to similar length-of-term CDs tracked by DepositAccounts.com which are available nationwide and have minimum deposit requirements of $10k or less, no banks or credit unions currently offer a higher rate available on the Comenity Direct 1-year CD. The following table compares the Comenity Direct 1-Year CD to the two highest-rate CDs from other banks and the two highest-rate CDs from credit unions.
To search for the best CD rates, both nationwide and state specific, please refer to our CD Rates Table page.
How High Yield Savings Account Compares
When compared to nationally available Savings Accounts tracked by DepositAccounts.com, which are not limited by a small balance cap, Comenity Direct’s High Yield Savings Account APY currently ranks first. (Note, there is only one Money Market Accounts and two Checking Accounts with higher rates.)
The above information and rates are accurate as of 3/7/2022.
To search for the best rates, either nationwide or state-specific, please refer to DA’s Savings Account Rates page.