How Bank Customers Expecting 4.35% in Interest Got Close to 0%
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What happened when Capital One customers expected rising savings rates?
Here's your Money Briefing for Friday, January 26th. I'm J.R. Whelan for The Wall Street Journal. When the Federal Reserve started raising interest rates in 2022, savings rates also began to climb, with some banks currently offering rates in excess of 5%. But some customers at one national bank feel they've been left behind.
We heard from a number of people with savings accounts at Capital One who essentially opened years ago these online savings accounts that claim to have a really high rate. And then they looked and they learned often years or months after that they were actually earning very little.
So how did this happen? We'll talk to Wall Street Journal reporter Rachel Louise Enzine after the break.
Savings rates have risen over the past few years, but at Capital One, some savings accounts earn a much lower interest rate than others. Wall Street Journal reporter Rachel Louise Enzine joins me. Rachel, why have banks raised their savings rates over the past two years?
Why did banks, including Capital One, raise savings rates starting in 2022?
Banks raise their savings rates in line with the Federal Reserve's actions. The Federal Reserve has undertaken some of the most aggressive rate hikes in recent years. And for all banks, it's a balancing act. They want to pay their customers enough interest that they'll stick around, but they don't want to pay their customers any more interest than they have to. So in general, the banks increase rates alongside the Federal Reserve.
And those rates have come up substantially. Why are some people with savings accounts at Capital One upset?
We heard from a number of people with savings accounts at Capital One who essentially opened years ago these online savings accounts that claim to have a really high rate. And they thought that that was still the case, that with the Fed raising rates, they were going to get an even higher rate. The rate would increase alongside those rate hikes. And then they looked and they learned often years or months after they started missing out that they were actually earning very little.
So their accounts had lower rates.
How did Capital One’s account lineup create a gap between old and new savings rates?
Did other accounts have higher rates?
Yes. So essentially what happened was in 2019, basically this is a time when no bank account is paying a very significant rate. Capital One introduced a new savings account and basically said, this is our main savings account now. We're going to be paying a very good rate on it. And all of the people who had savings accounts before that time were capped in their older accounts. Then 2022 comes, the Federal Reserve starts raising rates, and Capital One only increases rates on the new accounts. So essentially people with the old account were stuck with a really low interest rate.
The ones who've been there all along kind of got left behind?
When and how did customers discover they were earning much less interest?
Yeah, yeah. I mean, some of these people have been customers for years and years.
When did they figure out they were getting a much lower savings rate than was being advertised?
People started figuring out once they started kind of looking for interest in their bank account. Some people were looking and you were like, wow, I'm really not getting anything. I wonder why that is. But in general, in the last year and a half, you have finally been able to actually earn a significant amount of interest on your savings account for the first time really since before the financial crisis. And folks looked at their statements and eventually some people figured this out.
Was any of this made clear or detailed in fine print that there would be this difference in discrepancy in rates between types of accounts?
The bank said that they marketed the new account really widely. If you go to the bank's website, you can only find information for the new account, which does pay a really high rate, 4.35% right now, which is, you know, one of the highest rates of any bigger bank. But the people who have the old accounts with the very low rates say that no one ever contacted them to tell them, hey, we have this new account. It's going to be paying way more. You should move your money over.
The accounts getting the higher rate and the accounts getting the lower rate, did the same rules apply in terms of how much money to have, minimum balance, and everything?
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Chapters
7 chapters
1
What happened when Capital One customers expected rising savings rates?
0:03–1:27
2
Why did banks, including Capital One, raise savings rates starting in 2022?
1:27–2:35
3
How did Capital One’s account lineup create a gap between old and new savings rates?
2:35–3:21
4
When and how did customers discover they were earning much less interest?
3:21–4:45
5
Were the lower-rate legacy accounts clearly disclosed on Capital One’s site or statements?
4:45–7:30
6
What responses and remedies have customers pursued and how has Capital One replied?
7:30–7:46
7
How can savers check their accounts and avoid getting left behind by rate changes?
7:46–7:50
Speakers
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