A lawsuit has been filed by customers of CapitalOne Bank alleging that the bank engaged in deceptive tactics with its 360 Savings customer base in 2022 and 2023. The plaintiffs assert that when CapitalOne began offering the 360 Performance Savings account as interest rates began increasing in 2022 and then into 2023, it did not notify its existing customers that a higher rate from a similar sounding product was available. Full details of the lawsuit are available on Yahoo! here.

The lawsuit may be of interest to any customer who lost significant amounts of interest by failing to switch from a 360 Savings account to a 360 Performance Savings account in 2022 when the latter began being offered, as the Plaintiffs attorneys are presumably intending to obtain the complete list of account holders and then seek class action status.

However, as a former attorney, I would suggest that those customers not to get too excited about their prospects for any recovery.

As the Yahoo! article points out, offering a higher rate to one customer than to another is engaged in frequently, and has been also been a practice of BrioDirect and UFB Direct. Popular Direct, Vio Bank and VirtualBank are other online banks that have engaged in this process over the 2022 - 2023 time period. Salem Five Bank has engaged in this practice for years. To boot, many banks, including Capital One, will extend better rates to their online customers than they do to branch customers. Bank can offer higher (or lower) rates to customers who are members of an affinity organization (like AARP), or to those buying brokered products (like those customers purchasing a brokered CD or arriving through a deposit consolidators like Raisin. In short, banks have the right to segment their markets and do not need to offer all customers the same rate.  It may not be good business, but it is well within their legal rights.

Since this case is not going to be successful on the basis of a contractual obligation (i.e., a violation of the terms and conditions), it is going to need to depend on some sort of affirmative and active intent on the part of CapitalOne to deceive its customers. Stranger things have happened in courts and in the process of discovery, but it seems like a difficult burden for the plaintiffs to meet. Statements were made available to customers online and by mail monthly that fully disclosed the rate and the interest earned. Even a cursory review should have made clear to customers that they were not earning the 3% or 4% Performance rate. The product is also differentiated by the use of the word Performance.

The law does not guarantee you the right to earn the highest savings or money market rate that is available, even from a bank that you may feel good about and may have been working with for decades.  Rather, you need to constantly review your statements are be aware of the interest rates that you are earning in all of your accounts. Fortunately, it is easy to check sites like BestCashCow - and competing sites like RatesAndInfo.com - to be sure that you are getting the most competitive savings and money market rates in the market.

Compare savings rates here.

Compare CD rates here.

We are receiving multiple emails every day from BestCashCow's readers who are furious about the pace of falling savings rates, money market rates and short-term CD rates. While we are the most comprehensive and up-to-date source of these rates, we are not setting Fed policy or even having input into the rates at a single bank. So, we are sorry that you opened an account at HSBC when they were offering 1.60% APY two weeks ago only to learn that you were earning 1.01% APY by the time that you had it funded. But, as you are no doubt aware if you are paying attention to the news (not FOX news, but real news), there are people who are dealing with much greater hardships right now.

Here is what you can do with your cash going forward to try to protect yourself from savings rates that look poised to fall below 1%.

First, look at No Penalty CDs. We’ve recommended No Penalty CDs for years. They are a no lose situation since they lock in a rate of return, and allow you to cancel without a penalty anytime after one week. Today, they are being offered by at least 6 banks: Ally, Marcus, Purepoint, CIT, CitizensAccess and CFG Bank. An individual can protect their interest on up to $1.50 million in cash over the next years without going over FDIC limits. A couple can protect up to $3 million. See the rates on No Penalty CD and other special CD products here.

Second, consider 1-Year CDs. Rates are probably going lower as we lead up to the election. A 1.35% one-year CD is not attractive, but it is still better than zero. And, remember that as rates come down, so too do the penalties for early withdrawals as they are ordinarily set in terms of three-months or six-months interest. Some local banks and credit unions may be offering higher rates. You should check those as well.

Third, avoid the temptation to chase much higher rates in products where the return is not guaranteed. Anyone who ever invested in stocks like Teva, CenturyLink, GE or Kodak will tell you that dividend chasing is a fool’s game. And, chasing structured instruments that could yield high returns but could also yield zero while impairing your liquidity is also a fool’s game.

Fourth, recognize where we are. The Fed Funds rate is at zero and it could be there for a while. Earning over 1% on your money is still over 1% more than zero. And, it is important to keep your asset base growing. The same folks who were excited about online savings accounts earning 2.50% last year when Morgan Stanley or Bank of America were offering 1.50% should recognize that the same online savings accounts are still offering spreads just as worthwhile to pursue.

Fifth, think about earning AAdvantage miles through a Bask Bank account. If you believe that you are ever going to be traveling again, then this is a good time to open an account that pays you miles instead of interest. I wrote about Bask Bank several times here and here readers in the comment sections engaged in exercises of trying to determine the value before reaching the conclusion that the account was attractive when savings and CD alternatives were much higher. Now that those rates have come down and Bask Bank’s offer remains the same until June 30, the opportunity is even more attractive. $100,000 deposited for 1 year earns 100,000 miles. BestCashCow conservatively values these miles at 1.90 cents each, but I can still find redemptions in business class seats to Hawaii and Europe where the value is well over 6 cents a point. And, if you act before June 30, you will still be eligible for an additional 46,000 AAdvantage miles on the $100,000 balance over the next year in the form of a sign-up bonus, a feedback bonus and a balance bonus. An additional benefit is found in the fact that Bask Bank’s 1099 will only report the miles at 0.42 cents each.

Learn more about Bask Bank's AAdvantage Miles-earning account here.

Times are tough and may get tougher, but save on!

The US Federal Reserve concluded its first 2-day Fed Open Markets Committee meeting of 2024 holding interest rates at the current 5.25 to 5.50% target, as expected. The Fed funds target rate has been at this level since July 2023.

There has been substantial improvement in curbing inflation, but there remains concern that the decline may not be anchored and could reverse.With the economy and the consumer so strong, there remains a risk of price - wage spiral inflation where consumers continue to drive up the price of goods and services.

So, it appears that the Fed is certainly finished raising rates and the Fed statement no longer includes "policy firming" language about possible additional rate increases.

Yet, at the same time, the Fed is not prepared to outline any time frame for its first rate cut of this cycle.  The committee's statement saying that it will not reducing the Fed funds rate until it is certain that inflation is headed back to its 2% target.

We began 2024 with 85% of market participants expecting the first rate cut in March.Prior to today's announcement, only 50% of market participants were expecting such a cut. During Chairman Jay Powell's press conference today, he said that he would not bet on a cut in March. Rate cuts however are likely coming at the FOMC's May or June meeting.