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Investors have a wide breadth of options for savings and investing. Certificates of deposit (CDs) are one of the more popular ways to safeguard your cash while earning interest.
CDs are similar to a savings account in that your funds are protected from volatility and risk found in other investments like the stock market. And like a savings account, money invested in a CD can earn interest and grow your portfolio. Plus, there is often no minimum deposit.
However, unlike a savings account, you must commit your money for a certain length of time to earn interest, typically from 1 to 10 years, which is usually a bit higher than on savings accounts. Because of this, you likely won’t be able to make any withdrawals or transactions on that CD without facing a fee.
Capital One 360, the savings division of Capital One, is among the many banks offering CDs. Here, we explore how Capital One 360 CDs work, why they might be a good alternative to a traditional savings account, and how they compare to other CDs.
Capital One Overview
Found in 1988, McLean, Virginia-based Capital One is now one of the most recognizable banking brands across the U.S. It’s a Fortune 500 company and one of the largest banks in the U.S., serving 45 million customers. In the U.S., Capital One has branches primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia, and Washington D.C.
Capital One operates primarily in three divisions: 1) credits cards, which comprise the majority of the its revenue; 2) commercial banking, which includes property loans; and 3) consumer banking, which offers products like checking and savings accounts, auto loans, and high-interest CDs.
Capital One’s CDs
|Term Length||Annual Percentage Yield (APY)|
Capital One offers CDs in a variety of term lengths and competitive interest rates. The term lengths range from 6 to 60 months. The longer the term you choose, the higher the annual percentage yield (APY).
In general, CD rates are higher than rates on traditional savings accounts, so help investors reach savings goals more quickly. With Capital One’s CDs, there is no minimum deposit required, and interest is accrued daily and compounds monthly. These funds are FDIC-insured.
Capital One customers can open up to 50 Capital One CDs at a time. They have access to online and mobile features that allow them to easily check their accounts and make transactions.
Customers who need to make an early withdrawal do face a penalty. For CDs that have term lengths of 12 months or less, the penalty is three months of interest. For CDs with longer terms, the penalty is six months of interest.
Capital One CD Rates
There are many advantages to taking out a CD with Capital One. When compared to the national average, Capital One CDs have competitive rates.
The average five-year CD from Capital One is 3.0% APY with no minimum balance required. In comparison, the average five-year CD from Discover is 2.85% APY with a $2,500 minimum balance.
Customers are guaranteed a 10-day rate lock-in while waiting for the funds. You can choose to have the interest paid out monthly, annually, or at the end-of-term.
Capital One offers limited branch access, so their CDs will be ideal for someone that is comfortable managing their money online. And though Capital One does offers competitive rates, you might find better rates if you shop around.
Overall, Capital One CDs are a good choice for customers who want a no-risk investment option that can earn interest. There is no minimum deposit so even customers with limited resources can start saving with this investment vehicle now.
Capital One CD rates are higher than many of its competitors, and because they are FDIC-insured, you know your money will be safe.
However, again, there are penalties for withdrawing your money early, so you should only open a CD if you believe you can leave your money in for the entire term length.
But the average Capital One CD will earn more in interest than the interest on a traditional savings account. So, if your money is just sitting in a savings account, a Capital One 360 CD may be a good option to help you earn a bit more.
Author: Jeff Gitlen