What’s in your wallet? A lot less interest, unless you notice this one word…

Screen grab of Capital One commercial at iSpot.tv

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.

Long-time 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” 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 wonder 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.

UPDATE: I asked Tumin for other examples. He provided plenty:

“CIT Bank has a long history of this. (From) my review of CIT Bank’s fifth savings account:  ‘The Savings Builder Account is CIT Bank’s fifth liquid account in its product line, and it appears to be the one that CIT Bank will now focus on and keep competitive. There were no rate increases of the other four liquid accounts, and in fact, their rates have remained the same since the new accounts were introduced.’
“Others online banks that have done this include:
  • Salem Five Direct (instead of creating new accounts, they just create new promotions that don’t apply to existing accounts)
  • Popular Direct (Popular Direct has a history of creating a new savings account with a higher rate to attract new customers and/or new money, leaving the owners of the phased-out accounts stuck with a lower rate.)
  • Emigrant Bank (instead of creating new accounts or promotions, they create new internet banks)

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.com

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.

UPDATE: Capital One spokesperson Laura DiLello told me the new account was launched Sept. 18 and offered this comment: “The 360 Performance Savings is now our primary option for savings account openings.”  She did not answer further questions

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 towards 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,” he said.

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.

About Bob Sullivan 1355 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.

1 Comment

  1. Even better: Leave Capitol One for a different online bank. I started as an ING Direct customer (loved them), and after they were absorbed by Capital One, they stayed compitive for awhile.

    Now I keep accounts at Synchrony, Citizens Access and the new Personal Capital savings account and have the ability to move between them as needed. Right now, I’m pleased with Citizens Access but wouldn’t hesitate to move to one of the others when Interest rates change

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