In July of 1994, the U.S saw the birth of banking and credit card giant Capital One in Richmond, Virginia. Today, the bank continues to operate out of Virginia and has assets totaling over $390 billion and offers a wide variety of online banking products. One of the most attractive products the company offers is its certificates of deposit (CDs). Compared to all banks (including online banks and traditional banks), Capital One CDs offer competitive APY rates, no minimum deposits and quick access to interest earnings with no penalties.
Capital One at a glance
|Bank||Minimum Deposit||1-Year APY||3-Year APY||Penalty|
|Capital One||$0||0.50%||0.80%||90 days of interest on 12-month CDs; 180 days of interest on 36-month CDs|
What we like about Capital One
There’s a lot to like about Capital One CD rates. First, and arguably the most important, is the attractive APY rates at or over the 1% mark for all CDs a year or more in terms of length. This includes the ever-popular Capital One 360 CD with a current APY rate of 0.90% for four years. Second, unlike at many traditional banks, there is a $0 account minimum to open a Capital One CD. This means that even the newest or smallest of investors can cash in on these great rates.
Additionally, early withdrawal penalties are much lower than the industry, especially on longer CD investments. While this hopefully won’t matter to anyone, it’s good to know you can keep more of your earnings if you have a sudden need to access your funds before the maturity date.
Things to consider
Probably the biggest drawback of investing in a Capital One CD is that you won’t have access to the face-to-face personal service you get through traditional banks. CD investments are very straightforward; however, some people just enjoy handling these types of investments in person. However, Capital One does offer extensive customer service options, but the company does not have branch locations.
What you need to know
Capital One CD rates are available with term lengths from six months out to 60 months. Compared to the industry, both ends of the spectrum are shortened. Other banks will let you get CDs as short as one month and as far out as 120 months. APY rates start at 0.25% for six-month CDs, peak at 1.00% for 60-month CDs. Compared to all other banks, this is on pace with the industry leaders.
One aspect that is different from many other banks is Capital One does not show any favoritism to investors with more money to invest. The same high rates are available whether you put in $1 or $100,000 into your CD.
There are no fees or penalties other than the early withdrawal penalty for opening or maintaining a Capital One CD. There is also no requirement to be an existing Capital One customer to gain access to the CD investments.
Early withdrawal penalties
Ideally, you’ll invest in a CD and never need to touch your money until maturity. However, if you do have to access it, you will incur a penalty no matter what bank or credit union you have the CD through. The penalties are not always the same, though. Capital One has some of the lowest early withdrawal penalties in the industry, especially on longer-term CDs.
For Capital One CDs less than or equal to a year, the maximum penalty is 90 days of interest. For any CD longer than a year, the maximum penalty is 180 days of interest. Most other banks have a third tier of penalties carrying a maximum of 365 days of interest but not with Capital One.
For example, if you take out a 60-month CD (five years) and have to withdraw your money after 48 months (four years), you will only be penalized up to 180 days of interest. Your principal will be untouched, and you will still walk away with a hefty portion of your interest earnings. Most other banks would charge you 365 days of interest for this.
Other CD products
Currently, Capital One only has one type of CD you can use as a standard investment or include in your traditional or Roth IRA accounts. All APY rates are based solely on term length, and there are no additional perks for investors bringing larger dollar amounts to the table.
As of now, Capital One doesn’t have any specialty rate guarantees attached to its CD products. However, whatever rate you secure when you open your account is locked in for the full term of the CD. Capital One cannot change the rate for any reason as the APY is guaranteed with a certificate of deposit.
How do I pick the best CD?
The first action you need to take before picking the best CD is to check off the necessity boxes. Find a CD that is FDIC or NCUA insured providing the term lengths you’re looking for and a minimum deposit fitting your financial plan. From there, compare the CDs based on APY rates to find where you can make the most money on your investments.
If you are worried you may need to access your funds early, consider looking at the early withdrawal penalties. If you’re more than likely going to need to access your money early, you may want to look into a savings account that’s more liquid instead of a CD.
The bottom line
Capital One CDs check all the boxes when it comes to a healthy wish list for the best CD rates. The CDs have no fees, no account minimums to open, competitive APY rates, lower early withdrawal penalties and flexible term lengths to choose from. The highest rates are available regardless of how much money you invest, which should be a welcome sign to newer or smaller-level investors.
The most likely drawback to a Capital One CD is you won’t be able to walk into a branch location to open your account. It will all have to be done online. But if you’re okay with embracing technology and using an online bank that’s been around for over two decades, you can cash in on some seriously attractive APY rates.