How do interest rates work on savings accounts? | Capital One (2024)

FAQs

How does a Capital One interest savings account work? ›

No minimum deposit is needed to open an account. While some banks have tiered savings rates, based on your balance, Capital One applies the same 4.25% APY to all balances. That means you still get the same relatively high rate whether you save a little or save a lot in your account.

Simple interest is expressed in annual percentage yield (APY) and is calculated based on your principal balance (the amount you deposit in the savings account). For example, if you put $10,000 into a savings account with a 1% APY, you would earn interest of $100 annually (1% of $10,000).

Capital One adds up each day's balance and divides the total by the number of days in the billing period. Capital One also sets a daily periodic rate, which is the Annual Percentage Rate (APR) divided by 365. To calculate the interest, Capital One multiplies the average daily balance and the daily periodic rate.

Top perks. 4.25% APY: If you're opening a high-yield savings account, it's likely because you're looking to get better returns on your savings. The Capital One 360 Performance Savings is up there in the ranks of the best online savings accounts due to its higher-than-average APY on all balances.

Your money is safe at Capital One

Capital One, N.A., is a member of the Federal Deposit Insurance Corporation (FDIC), an independent federal agency. The FDIC insures balances up to $250,000 held in various types of consumer and business deposit accounts.

Compounding and crediting - Interest on your account will be compounded and credited on a monthly basis.

Most banks advertise their interest rates in the form of APY, or Annual Percentage Yield, which is a percentage reflecting how much total interest you can earn on an account per year. However, most savings accounts calculate and pay interest monthly instead of annually.

The IRS treats interest earned on a savings account as earned income, meaning it can be taxed. So, if you received $125 in interest on a high-yield savings account in 2023, you're required to pay taxes on that interest when you file your federal tax return for the 2023 tax year.

Depending on your card, things like missing payments, making late credit card payments, going over your credit limit or failing to make the minimum payment might trigger an APR increase.

How to avoid interest on Capital One? ›

The time between the end of your billing cycle and your credit card statement due date is known as a grace period. It can help you avoid interest charges if you pay your balance in full on or before your bill's due date.

Grow your personal savings with a high-yield savings rate— 4.25% APY.

At a basic economic level, the interest rate set on savings account deposits is determined by the relationship between how much banks value receiving extra deposits and how much savers value the services of a savings account.

Currently, no banks are offering 7% interest on savings accounts, but some do offer a 7% APY on other products. For example, OnPath Federal Credit Union currently offers a 7% APY on average daily checking account balances up to and under $10,000.

As of June 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.

5% APY: With a 5% CD or high-yield savings account, your $50,000 will accumulate $2,500 in interest in one year. 5.25% APY: A 5.25% CD or high-yield savings account will bring you $2,625 in interest within a year.

Capital One's 360 Performance Savings account has no monthly fees. You read that right. This is an online savings account with no fees and no minimum to open or keep the account. That means every dollar you earn is yours to save.

Withdrawals. Make up to 6 free account withdrawals per monthly statement cycle.