Capital One 360 CD Rates Review
Capital One 360 is the banking arm of well-known credit card lender, Capital One. It operates a country-wide chain of banks and ATMs and offers online banking services. Among those services is high-yield certificates of deposit (CDs).
CD Rates Are Better Than Many Major Banks
A CD is a type of bank account that is much like a savings account. You store money in a CD with the goal of earning interest. What makes it different from a savings account is that you cannot make any transactions on a CD once it is open. No withdrawals or deposits are allowed until the CD’s term ends.
If you absolutely must take your money out of the CD before its term ends, you’ll have to pay an early withdrawal penalty. You’ll also have to withdraw the CD’s full balance, even if you only need a bit of cash. That lack of flexibility means that you’ll have to plan carefully when opening a CD. Make sure that you can afford to lock your money away for the full term of the CD. Consider keeping some cash in an emergency fund so you don’t have to tap your CD funds if an unexpected expense pops up.
In exchange for accepting that restriction, CDs pay a higher interest rate than a savings account does. That makes CDs attractive for consumers who want to keep their money safe while earning a little bit more return. CDs are 100% safe because they are insured by the FDIC. Even if the bank your CD is at closes, you’ll be reimbursed for the full balance, up to $250,000.
Higher rates than savings accounts
The longer you’re willing to lock up your money, the higher your interest rate will be. Capital One 360 offers CDs with terms ranging from 6 months to 60 months.
While Capital One’s rates are higher than many brick-and-mortar banks’, they tend to be lower than the rates offered other online banks. This is likely because Capital One has to pay the expense of operating physical branches. Online banks can take advantage of economies of scale by centralizing their business.
In general, Capital One 360’s underperformance in rates is higher with shorter term CDs. As the term increases, the gap between Capital One 360 and the best rates available becomes much smaller.
Tip: Find out how much interest you'll earn with a CD calculator.
Early Withdrawal Penalties
As mentioned, the reason CDs offer better interest rates than savings accounts is the restrictions on withdrawing your money. The reason is that banks use deposits from their customers to fund their other activities.
When you deposit money in a CD or other bank account, the bank will lend some of that money to people looking for mortgages or car loans. In effect, you are lending your money to the bank and the bank is paying you interest in return. The bank makes a profit by charging more interest on its loans than it pays on deposits.
Because you can ask the bank to return your money to you at any time, the bank needs to keep some cash on hand. If you break your agreement with the bank and ask to withdraw from your CD before its term ends, it can cause issues with the bank’s cash reserves. That’s why banks penalize customers who withdraw from CDs early.
Capital One 360 CD Early Withdrawal Penalties
|CD Term||Early Withdrawal Penalty|
|12 months or less||3 months of interest|
|More than 12 months||6 months of interest|
This penalty charge can cause you to withdraw less than you deposited, but only if you withdraw from the CD before your earned interest can cover the full penalty.
Minimum Deposit Requirements
Many banks require customers to deposit at least a minimum amount to open a CD. If the bank isn’t getting enough money out of the deal, it might not be worth the paperwork and time to manage the CD. Often, the minimum deposit can be as high as a $1,000 or more! What sets Capital One 360 apart from other banks is that there is no minimum deposit to open a CD. That makes it a great bank for your first CD if you cannot meet the minimums imposed by other banks.
CDs offer safe, steady returns, but much lower returns than what the stock market might provide. Still, they can be part of a balanced retirement portfolio, so many people open CDs in the Individual Retirement Accounts (IRAs). That lets them safe returns offered by CDs and the tax benefits of an IRA at the same time.
Capital One offers IRA CDs with the same terms as non-IRA CDs, making it easy to start saving for retirement.
Your Options When the CD Matures
CDs have a certain period of time, known as their term, during which you’re not allowed to withdraw your money without penalty. When that term ends, the CD is said to have matured. When a CD matures, you’re allowed to make changes to it, depositing or withdrawing money.
Capital One 360 will notify you a bit more than a month in advance of your CD maturing. You can then provide instructions on what you’d like to do with the money when the CD reaches maturity. If you don’t provide instructions before the CD matures, there is a 10-day grace period during which you are also allowed to make changes.
If you take no action, the CD will renew for the same term, at whatever the current interest rate offered for that term is. That means it’s incredibly important to plan what you want to do with your CD funds before the maturity date. If you miss your chance to make changes, you’ll be forced to pay an early withdrawal penalty.
How Does It Compare?
If you’re thinking about opening a CD, but don’t know if Capital One 360 is the right bank for you, consider these alternatives.
Synchrony Bank CDs
Synchrony Bank is an online bank that offers a variety of banking services. What sets Synchrony Bank apart is that it offers tiered interest rates based on the balance of your CD. There are three rate tiers that you can qualify for, with larger balances earning more interest.
Synchrony Bank offers CDs with terms ranging from 3 to 60 months, with a minimum deposit of $2,000. People looking to deposit a lot of money into a CD so they can qualify for the highest rate available.
Goldman Sachs Bank USA CDs
Goldman Sachs Bank USA offers CDs with slightly longer terms than Capital One 360s, ranging from 6 months to 6 full years. Its rates are very good, topping the market for certain terms.
The main draw of Goldman Sachs is its low minimum deposit, just $500, but Capital One 360’s complete lack of minimums beats it out. What separates Goldman Sachs from Capital One is that you get a 10-day CD rate guarantee. If rates go up in the 10 days after you open the CD, your CD’s interest rate will be increased to match it automatically.
Ally Bank CDs
Ally is a popular online bank that offers a full suite of banking services to its customers. Ally offers three different types of CD, the High Yield CD, the Raise Your Rate CD, and the No Penalty CD.
The High Yield CD is a basic CD that offers standard CD terms and interest rates. Ally is one of the leaders in the CD interest rate market, and it beats out Capital One for all term lengths. You can get Ally High Yield CDs with terms ranging from 3 months to 5 years.
The Raise Your Rate CD can come with a 2-year term or a 4-year term. If you get a 2-year CD, and interest rates increase during the CD’s term, you have the opportunity to increase the rate of your CD one time. If you have a 4-year CD, you can request two increases over the CD’s term.
The No Penalty CD is exactly what it says on the tin. You can withdraw your money without incurring a fee. The biggest restriction is that the only term available is 11 months.
Ally’s No Penalty CD is the only one to have tiered interest rates based on your CD’s balance. Higher balances earn more interest.
Is It Worth Opening Capital One 360 CDs?
CDs give consumers a no-risk way to earn some extra return on money that would have sat unused in a savings account anyway. Because all CDs from FDIC insured banks are equally safe, you should find the CD with the best interest rate.
Capital One 360’s CDs are great for consumers with only a bit of cash. The lack of a minimum balance requirement means you can open a CD no matter how much cash you have. The downside is that Capital One’s interest rates are only slightly above-average, so if you can meet the minimum elsewhere, you could earn more.