Stupid account requires $10,000 for $25 bonus, and I mock them

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Stupid account requires $10,000 for $25 bonus, and I mock them

15 comments — written on July 2nd, 2008

Stupid marketing gimmick alert!

My friend Ian sent this to me today: A Capital One Account that gives you a $25 bonus…if you have $10,000 in it. (Plus, $10,000 minimum required to get the high interest.)

Wow!! Amazing!! Thank you Capital One!!

Listen up. If your bank account’s best incentive is $25 for locking up $10,000, your bank sucks. Not only could that money be invested, the very fact that this bank is trying to trick you into giving you high interest only if you keep $10,000 — if you don’t keep that amount in your account, your interest drops to 2.5% — shows you what kind of bank they are: A Big, Worthless Bank.

In fact, even the fact that they offer this exposes Capital One’s sad attempt at matching great online banks like ING and Emigrant Direct, who offer around 3% with no minimum balances. Pathetic.

Two things to be aware of:
1. If your bank offers you some fantastic rate but has a catch (minimum rate, first 6 months, etc), ignore the offer and ignore the bank
2. Don’t be a moronic rate jumper, who says, “ZOMG! HSBC/ETrade/Capital One is offering 3.25% compared to 3%! I better switch!!” Run the numbers and you’ll realize that, even on a balance of $5,000, that’s about $1 more per month. Find a great bank with no catches, that offers you great customer service, and stick with it — even if another bank offers a .25% higher interest rate.

You may want to read How I set up my financial accounts or check out the savings account I use, ING (great interest rate, simple website, no tricks/gimmicks).

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15 comments

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1

July 2, 2008
Moneymonk

Same here, I have been a loyal ING customer since 2004 and had no worries.

People jump in and out of savings account just like they do the stock market.

I keep it simple, ING and index funds are my main choices when it comes to saving and investing long term
2

July 2, 2008
Igor L

something tells me the next time I see something stupid like this on this website il have to take you off of my google page.

I strongly protest the fact that you suport a company who you are advertising under the name “I Will Teach You To Be Rich”

at first I was hooked when I saw alternative investment advice, things that are not in the mainstream news.

I thought this would be a safehaven where people would share idea’s ask for idea’s and give honost opinions.

Clean up your act or do something… Im just the type that speaks up… most peoiple just stay quite.
3

July 2, 2008
Ramit Sethi

Igor: Thanks for the comment. I’m not sure I understand — what would you rather see? And what exactly are you protesting? (Btw, if you’re looking for “alternative investment advice,” like oil/gas/gold, this is not the right place for you.) But hopefully I can help you out.
4

July 2, 2008
Financial Planner

That’s not a bad rate. Cap One’s rates are some of the best IMO (as long as you meet the minimum). I use FNBO, which has good rates too.

I agree, this looks like a scam to sucker in people with less than 10k who really want the $25, but if you meet the min, it’s not that bad a deal with a good bank.

Try to go to BAC or Chase and get that rate with $10k.
5

July 2, 2008
Tage

I was one of those people who signed up for a WaMu savings plan. The problem was that it locked up my money for awhile, and the good rates were only for a year, but there was a maximum I could put in per month. Funny thing is, I found an online savings account that would pay head over heals more than I would have gotten with the “Savings for Success” account-even after my early exit penalties.

Don’t jump into a plan without running the numbers!
6

July 2, 2008
Mike

Ramit, you really need to spell out your audience on this one, i.e. say this is only applicable to people who have under $10k in their savings. More realistically, a 6 month emergency fund for a family is somewhere in the $40k range (at least that’s the size of our fund). I’m one of those rate-chasers, so I’ve consistently been earning anywhere between 0.65-0.85% higher than my operating money market account at GMAC, which I use to keep about 1 months of expenses in. That’s an extra $300/year in interest, which is definitely worth changing banks every 4-6 months for me. Note my GMAC account is constant — I only move my emergency fund around when there’s a new rate worth switching to.
7

July 2, 2008
Tage

@Igor: I too am wondering what you do not like? You said you liked this site because of its “alternative” investment ideas. Well, many would say that this CapOne account is a great idea, when in fact you can get comparable rates, or more, with a bank with no minimums and no strings attached.
8

July 2, 2008
Devin Reams

The point still remains, why go to BAC or Chase when there are banks dedicated to providing me with a great interest rate?

PS: I can go to WaMu and get that rate… and I do. Without 10 grand in the bank.
9

July 2, 2008
Ramit Sethi

Mike: If you were smart enough to sock away $40k in an emergency fund (which is really impressive, btw), I bet you’re smart enough to spend your time doing something better than earning $300 year — something that will sustainably let you earn much more. You’re only earning $0.82/day doing that!

How about spending the same time optimizing your asset allocation? That step alone is probably worth thousands per year. Or starting a side business? Have you considered reading 5 new books about personal finance, entrepreneurship, psychology, whatever? Or even spending those few hours with your family? I don’t know what you value, but in my eyes, any of those things would produce more value than $300/year…especially for someone who’s so far ahead of everyone else, like you are.

This is just my 2 cents…~1/40th of what you earned today (sorry, couldn’t resist).
10

July 3, 2008
Observer

I think the point of the previous poster is:
since the ING ad is displayed on this blog, then Ramit gets money if someone clicks on the ad. In that case, he is not giving impartial advice, when he knocks another bank in favor of ING. Especially when if he had taken a look, he would’ve seen Cap One offers a different bank account with no minimum required at the same rate as ING.

Same conflict of interest as Wall Street promoting stocks that they benefit from. Makes the reader question the validity of the advice.
11

July 3, 2008
Ramit Sethi

Good call, Observer. And actually, I could advertise Capital One’s services, but I don’t like their bank accounts, so I don’t.

I definitely take your point about credibility. It’s definitely something to consider (and is why I didn’t run ads on this site for 3 years…until late last year).

Thanks for clarifying. Be sure that when I mention a service in one of my posts, I really mean what I say, whether it’s positive or negative.
12

July 4, 2008
Jim

Ramit, I think Mike is saying he earns $300 MORE by rate-jumping than by sticking with one account, not that he only earns that total each year.
13

July 4, 2008
Jim

Ah forget it, thinking that you misunderstood his post made me misunderstand yours. Disregard my previous comment.
14

July 6, 2008
Danny

I notice that Washington Mutual is never mentioned in your banking comparisons. They typically have slightly better interest rates and the only catch I can see with WaMu is that you have to open checking and savings accounts at the same time to avoid fees. Is there something I’m missing?
15

September 30, 2008
Juan Perez

I also have and ING account, but it only yields 3.0 a year. There are other institutions that no only offer no frills accounts, but are liquid and no minimun balance: Washington Mutual (now J.P Morgan’s Chase) pays 4.00 annual yield, 33.3334 higher yield than ING and has a huge advantage over any Savings account, their online savings account is linked to a free checking account, in which you can keep one dollar only, and write checks against it, moving funds from the savings account into the checking first, the checks are free, the transfers are also free, and as all banks, it is FDIC insured up to max allowed by Law. Single person 100K married with two different accounts 100 K each. or if you have children you can also be insured for each one of them for extra 100K up a grand total of 600 Thousand dollars. How does ING compare to this? Very poorly!
Thanks, and God bless you all.
Juan Perez