Where you store your money matters. A few weeks ago, I discussed a few ways to help you save up $1,000. Saving money doesn’t sound very exciting, but it’s one of the most important things you can do to improve your finances.
When I started this blog debt payoff was my main priority and really didn’t save much because most of my extra money went toward debt. Paying off debt feels great but now my priorities have shifted a bit and I’m more interested in saving and investing as well.
Last year, I saved $5,000 in my emergency fund and this year I’m investing more in my Roth IRA with Betterment. Saving money for unexpected expenses is crucial in terms of helping you avoid getting back into debt in the future. Plus, you probably don’t want your net worth to be at $0 when you do pay off your debt.
The issue I’ve had with savings account at traditional banks is that they suck. The interest rate is super low so I used to earn pennies per year after being financially responsible and keeping my money in a savings account.
Plus, some brick and mortar banks have minimum balance requirements for savings accounts or require you to meet a minimum deposit threshold in order to open an account.
I like my current bank and I’ve always been pretty loyal to them, but when I first started getting serious about saving money, their response to me was the straw that broke the camel’s back.
They told me that I had to deposit at least $200 to open an account and if I didn’t have that much to start off, I could just open another checking account and “treat it” as a savings account. What does “treat it” as a savings account mean do you ask?
It basically means to fork over my option to earn interest on the money I worked so hard to keep. Savings accounts are a great option to store your money to build up your emergency fund or for long-term goals or expenses. But the major perk of saving your money should be so you can earn interest on it.
Many brick and mortar banks have ridiculous fees and terms along with super low rates like .02% which is basically nothing.
I’d been thinking about switching to an online savings account for a while and the conversation with my bank motivated me to make the switch to CapitalOne 360.
I’ve been with CapitalOne 360 for more than two years and I’m happy to say that I’m never going back to saving my money with a traditional brick and mortar bank. Here’s why.
1. Earning More Interest
CapitalOne 360 has an interest rate of 0.75% for their savings account which knocks most other traditional banks out of the water. It’s a very competitive rate and since their 0.75% APY is 8 times more than the national average and it’s calculated interest is calculated daily and accrued monthly.
The interest rate is variable so it is subject to change, but it’s been the same the whole time I’ve had an account with Capital One 360. Thanks to the high-interest rate, my balance increases every month without me having to do anything.
I don’t have a huge balance currently and I’m sure the more you save, the more interest you’ll earn, but just in the past few months, my emergency fund has earned $10 thanks to interest and that’s money I didn’t have to save myself. It all adds up.
2. No Hidden Fees or Minimum Balance Requirement
The next reason why I love CapitalOne 360 and many other online banks is because there are no hidden fees or minimum balance requirements. You don’t need to worry about maintaining a minimum balance each month in order to avoid a maintenance fee like most months. Some of my accounts with CapitalOne 360 have really low balances after I withdraw the money to use it for something and I’m glad I don’t have to worry about being charged a fee for not having a lot of money in my account.
There’s also no other hidden fees to worry about and I can deposit money conveniently from my phone. If you’d prefer to bank from home, you’ll love CapitalOne 360 because you can access your account 24/7 since everything is online and customer service is available by phone 7 days per week.
3. Open Multiple Accounts (Including a Checking Account)
The final reason why I’m never leaving CapitalOne 360 is because there’s no reason to. I can open as many as 25 different accounts for free and I even have a checking account that I use for business expenses.
CapitalOne 360 promotes targeted savings accounts which I’m a fan of because it’s best to separate your savings by goal/purpose. As you can see in the screenshot below, I have a few different accounts I use to house my emergency fund, my 6-month auto insurance payment, FinCon (an annual conference I attend), travel, etc.
I want to open a new account so my husband and I can set aside money for a new car later down the road. Having different savings accounts allows me to stay organized when working toward my financial goals.
The checking account I have with CapitalOne 360 is just an added bonus because it comes with a debit card and I have access to 38,000 fee-free Allpoint® ATMs and 2,000 Capital One® ATMs so I can avoid ATM fees.
If you don’t want a checking account with CapitalOne 360 and you just want to save, you can still withdraw your money by connecting an external checking account so you can transfer money to yourself when you need it.
What I Don’t Like About CapitalOne 360
CapitalOne 360 is a great option and while there are many benefits I love about my online accounts, it would be unfair to mention some of the drawbacks that should be considered as well.
- The interest rate is not the highest – CapitalOne 360 has a very competitive interest rate but it’s not the best by any means. Other online banks like Ally and GE Capital Bank have higher interest rates for their savings account that are around 1.00%. I actually tried applying for an account with Ally before I started using CapitalOne 360 and I had to take extra steps to verify my identity which created extra steps for me to take and it seemed like they didn’t want to approve me for some reason so I moved on. If you are chasing the highest interest rate for your savings account, you should certainly weigh your options with other banks but be sure to thoroughly do your research as they may have more fee, hidden fees or other drawbacks as opposed to the high APY.
- It can take some time to get your money – If you need your money quickly, transferring it from your CapitalOne 360 account to your external bank account could take a few days which could pose an issue. I don’t really withdraw from my emergency fund but when it comes to my other savings accounts I always plan ahead and allow enough time for the money to transfer over. It takes about 2 business days for money from my online savings account to transfer to my external checking account with my traditional bank, but the time frame really just depends on your bank. If you have a CapitalOne 360 checking account, you can withdraw money instantly by transferring from your savings to checking account then using your debit card withdraw the funds from an ATM.
- Customer service is not 24/7 – This doesn’t really bother me much because I don’t need a bank with super flexible customer service hours, but it is important to keep in mind if you feel the need to talk to someone at the bank at 2 a.m. and there’s not a live person available.
Overall, CapitalOne 360 is a pretty solid option if you are looking for an online bank with a competitive savings account interest rate that will offer you a higher return on your money. Online banking is just so much more flexible and while there is no minimum deposit requirement to open an account with CapitalOne 360, they currently have an offer where you can earn a $25 bonus if you open a checking or savings account and deposit $250.
Have you ever heard of CapitalOne 360? What do you think of online banking?
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