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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.
FDIC/Financial Overview
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
If you deposit a large physical check with them then they may not post it to your account for about a week (unlike most banks that post but make the balance unavailable). They then backdate the deposit when they do post it. I got hit by this when depositing two checks together by mail, and they only posted the first immediately.
Quotes of a few sentences from Capital One's letter are below.
"These changes will take effect 6/19/2010"
"Visibility of Online Transfers: While transfers are in process, they will be visible in your Current Balance in Online Banking"
"You will see your funds in your Capital One Direct Banking account Current Balance when you make a transfer to another financial instutuion using Capital One Online Banking, but the funds will not be available during the two business days it takes for the transaction to process."
"More Interst Earned: While your transfers to another institution are in process and reflected in your Current Balance, they will be earning interest. After all, your money should be working for you as much as possible."
My advice is, it does not pay to have a 0.05% advantage that CapitalOne offers over online banks such as AmericanExpress Bank -- it has never taken AmericanExpress Bank more than 1 business day to effect the ACH transfer and get reflected in my account. Even Ally bank does not take that long. So folks, If I were you, stick with banks like AmericanExpress or Ally. I will certainly do so and will be closing my CapitalOne account!
But, for most people, I'd seriously disagree with the assesssment of Banking Guy, whom I respect highly most of the time, that Capital One bank accounts make for good hub accounts.
The main reason is this: for almost all of Capital One's bank accounts, except for their Internet Checking that only can be opened in their branches, they have a standard FIVE BUSINESS DAY hold on deposits made into their accounts, including ACH deposits. FIVE BUSINESS DAYS, that's a BAD JOKE...
I have a lot of checking accounts with other banks where the deposited funds, including ACHs, are made available the next business day. And I have quite a few others with what used to be the standard three business day hold, including E*Trade. But five business days simply is not warranted. And I'm not talking about unusually large or out of state deposits or such. I'm talking about five days standard hold. It's clearly stated in Capital One's account disclosures...
With most accounts paying 1% or less interest, I don't really care if Capital One starts crediting interest to my account on the day of the deposit or the next day or the next day. But I do care that they deny me access to my own funds for five business days, which usually turns out to be longer because invariably the five-business day period ends up extending over a weekend and into the next week.
I've never understood how one bank can have such a long hold period on ordinary deposits, while another bank can make them available the next business day. As long as Capital One keeps that kind of a policy, I'll never use their bank account for anything much more than a placeholder.
Here's the thing, the online banking has a "self service" section where you can do things like change your address. Where most banks and even Capital One's credit card system have no problem doing this, Capital One Direct Banking Online does something ABSURD! When you change your address on that form it doesn't actually change it, instead it sends a secure email to customer service. You can see this message in your sent messages on the site. Then some person somewhere (Tisha assures me that they are not in India) reads the email and then types in the change! One operator claimed that this was a security measure, but after my neighbor received my balance statements it seems like the end result was the opposite! Now, believe it or not it took me 2 weeks to get the address changed to the correct one. Mostly because in my disbelief I waited until today to call them and kept changing it online. Another operator, not Tisha, told me that they won't accept address changes so close together. The site said no such thing!
In short, Capital One Online Banking SUCKS! Having done ecommerce for nearly 2 decades their system reminds me of practices that were frowned upon even when I was just starting out! A human transposing my address change as a security measure!???!! I've moved most of my money out of their system and will stick with Wells Fargo for now. I will be investigating several other more minor inconsistencies as I prepare my write up on this, including a fax/computer answering the Online Banking phone number, but the summary is, Capital One is LOADED, they even have banking branches now, their technology needs to be held to a higher standard or atleast some standard!