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

FAQs

How do interest rates work on savings accounts? | Capital One? ›

Here's how to calculate interest earned on a savings account: If you put $20,000 in a simple interest savings account at a rate of 1% monthly interest, you'll earn $200 each month. With a simple interest savings account, you will always be earning 1% of $20,000 even when your balance exceeds the original deposit.

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 4.30% 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.

Capital One Savings Accounts: Key Features

Interest is compounded and credited to the account monthly. The account offers basic convenience features common among major banks, including: Mobile check deposits. Electronic transfers to other accounts.

Simple interest = Principal x Interest rate x Time period

Say you have $1,000 in a savings account with a simple interest rate of 2.00% APY. Using the formula, here's how much you'd earn: 1,000 x 0.02 x 1 = 20. That means you'd earn $20 in a year, leaving you with a new balance of $1,020.

So why does your savings account sometimes have a low savings rate and other times a high savings rate? One reason is the Federal Reserve, called The Fed for short. It sets monetary policy—among other things. And one of the ways it steers the economy through choppy or clear waters is by changing interest rates.

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.

The Capital One 360 Performance Savings™ offers a solid APY of 4.15% with no minimum balance requirements and zero monthly fees. Capital One also offers a Capital One 360 Checking with no fees and access to 40,000-plus fee-free ATMs. It ranked “best overall” on CNBC Select's list of the top no-fee checking accounts.

Your money is safe at Capital One

Capital One customers don't need to purchase or apply for FDIC insurance—coverage up to the FDIC's limit is automatic whenever a deposit account is opened.

How much interest can you earn on $10,000? In a savings account earning 0.01%, your balance after a year would be $10,001. Put that $10,000 in a high-yield savings account for the same amount of time, and you'll earn about $50.

If interest is compounded daily, divide the simple interest rate by 365 and multiply the result by the balance in the account to find the interest earned in one day. Add the daily interest earned to the balance.

Can you get 7% interest savings account? ›

Which bank gives 7% interest on a savings account? Right now, only one financial institution is paying at least 7% APY: Landmark Credit Union. Landmark pays 7.50% on its Premium Checking Account — however, there are some major caveats to consider.

Your savings account interest could compound daily, monthly, quarterly, or annually. Suppose you deposit $5,000 into a savings account, don't deposit or withdraw any more money, and the interest rate doesn't change.

Cons. Cardholders of the Mango Prepaid Mastercard^® (issued by Metropolitan Commercial Bank) have access to a savings feature where they can earn up to 6.00% APY on balances up to $2,500 by meeting two requirements: Make a minimum deposit of $25 and have that minimum balance at the end of the month.

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.

The interest rate on your savings account is influenced by what the Federal Reserve does. The Federal Reserve has been raising the federal funds rate to combat inflation.

Interest rates on high-yield savings accounts are variable and can change at any time. More specifically, rates typically change after a Federal Reserve committee meets to adjust the federal funds rate. The account's annual percentage yield (APY) determines how much interest you earn on your money each year.

Cardholders of the Mango Prepaid Mastercard^® (issued by Metropolitan Commercial Bank) have access to a savings feature where they can earn up to 6.00% APY on balances up to $2,500 by meeting two requirements: Make a minimum deposit of $25 and have that minimum balance at the end of the month.

Rate information:

If your daily balance is less than $10,000, you'll earn 0.7971 % on your entire account balance, which adds up to an annual percentage yield of 0.80% . If your daily balance is $10,000 or more, you'll earn 0.7971 % interest on your entire account balance, with an annual percentage yield of 0.80% .