What’s in Your Wallet? A Lot Less Interest — Unless You Notice This 1 Word

What’s in Your Wallet? A Lot Less Interest — Unless You Notice This 1 Word
Photo by letitbe / Shutterstock.com

Turns out, Capital One is in fact anything but a-typical.

Unless you are dead, you’ve seen the ads on TV for Capital One. A coffee shop in a bank? Capital One is anything but typical, we are told. And then the actor (Jeremy Brandt) tells us over and over, “One of the nation’s best interest rates!”

True, but only if you are willing to play Cap One’s word games. See, there’s a “Capital One 360 Savings” account and the new “Capital One 360 Performance Savings.” Note that extra word “Performance” in there. Don’t miss it! It’s worth a lot of money.

Longtime Cap One 360 customers, many inherited from the bank’s acquisition of ING Direct back in 2012, are defaulted into the non-performance account with a paltry 1% rate that’s not competitive at all. But new customers, and very clever account holders who notice the single-word difference, get nearly double the rate (1.9%) from that “Performance Savings” account.

This way, Cap One gets to have its cake and eat it, too. It can relegate loyal customers and their cash to a bargain-basement rate while attracting new money with a higher rate.

One wonders when this year’s crop of new account holders will be forced to hop-scotch into a “Capital One Performance Plus 360 Savings” account.

The difference is significant for consumers who want to keep their money in insured savings accounts rather than risk it in other investments, a reasonable strategy during turbulent times. Keeping customers in the old, low-rate account saves Capital One about $200 for every $20,000 in deposits — and costs consumers that amount.

Capital One isn’t alone with this strategy. In fact, it’s a time-tested business formula that sounds unfair on its face: Give great deals to new customers while treating your loyal customers badly, assuming they are too lazy to protest. Teaser rates. Introductory pricing. Etc.

It might seem unfair, a “gotcha,” but I don’t believe there’s anything illegal about it. And according to Ken Tumin at DepositAccounts.com, it’s not that unusual, either.

“This has been a pretty common practice by online banks. They create new accounts with higher rates rather than increasing the rates of their current accounts. And they don’t automatically move customers into the new higher-rate accounts. Customers who don’t take action will end up earning less,” he said.

Still, Cap One consumers are not amused by the change.

“Looks like Capital One is playing the ‘you must open a new account to get competitive rates’ game,” wrote one on DespositAccounts.com.

“I feel banks sometimes create new account types in hopes the people are lazy and keep their money in the old account that earns less. While they can advertise the higher rates of the new account,” wrote another on Bogleheads.org.

High-yield online savings accounts are attracting a bit more attention at the moment because Fed rate cuts have led to falling interest rates, and consumers have become more rate-sensitive. That makes this a good time for Cap One to introduce a “new” savings account, another DepositAccounts.com user noted.

“Leave it to Capital One to make this change when rates are starting to move back down. Still, it puts them on a level playing field with (other banks),” the user wrote.

Capital One did not immediately respond to a request for comment.

Tumin said Capital One’s change-your-account game has been going on for a while. Back in 2016, as rates on the “traditional” 360 savings account were dropping toward 1%, it launched a “360 Money Market Account” product with higher rates.

That account worked just like the savings account, but required a $10,000 deposit. This, too, had the effect of lowering rates for “lazy” consumers who stuck with their old Cap One accounts; it also created a set of consumers who could afford to park $10,000 in an account and not touch it.

The new Performance Savings account does away with that minimum requirement, which makes it more broadly available.

Tumin has a clear warning for consumers:

“Savers have to always check the competition. They can’t depend on their bank.”

The good news for old Cap One account holders earning sub-par interest: Opening a new Performance 360 account really does take less than five minutes.

Those five minutes are worth about $100 in free money every year for every $10,000 saved, so that’s a $1,200-an-hour pay rate — more if you save more. So, play their game, and open a new account. Or, find another bank with even higher rates.

More from Bob Sullivan:

What’s your take on this news? Sound off in a comment below or on the Money Talks News Facebook page.

Earn more interest on your savings

Are you earning as much interest on your savings as you could be? Grow your savings faster with banks offering rates that are significantly higher than the national average. Find the best rates and start earning more interest on your savings by using the Money Talks News savings account and CD comparison tool.

Read Next
Grow Your Savings in 2020 With These 5 Tricks
Grow Your Savings in 2020 With These 5 Tricks

Saving money doesn’t have to be painful. Here are some ways to game yourself into stashing more cash.

8 Things I Always Buy at Target
8 Things I Always Buy at Target

I grew up shopping at the original Target store and am a lifelong fan. Here are my favorite purchases.

This Grocery Store Is Cheaper Than Even Walmart
This Grocery Store Is Cheaper Than Even Walmart

One grocery chain is likely to save you more money than any other.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Comments

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.