Credit Karma Debuts High-Yield Savings Product
If you’ve ever wanted to check your credit score for free online, there’s a great chance you’ve encountered Credit Karma. Started in 2007, the site has not only become a leader in the space but has also grown into one of the largest FinTech operations in the U.S. with a valuation of more than $4 billion. Now the company is trying something new, rolling out a high-yield savings product to its millions of U.S.-based users.
Credit Karma Savings will allow customers to earn up to 2.03% APY (as of October 28, 2019) on savings. While the company is partnering directly with MVB Bank for the offering, it says it will be able to offer the highest APY possible by working with a network of more than 800 banks. Indeed the current 2.03% figure is near the highest available for similar products — although, with the Federal Reserve expected to cut interest rates again later this week, there’s a good chance we’ll see another shakeup in the coming days. Also notable is that Credit Karma says deposits will be FDIC insured up to $5 million instead of the typical $250,000. This would imply that funds are being swept into at least 20 different partner bank accounts.
Explaining the idea behind the new account option, Credit Karma founder and CEO Ken Lin said in a statement, “We spent the first 12 years focusing on helping Americans manage their debt. With more than 100 million members around the globe, it made sense for us to jump across the balance sheet with Credit Karma Savings.” He went on to say, “We want to make savings accessible to every American in the same way we have with credit scores. We look forward to helping our members grow their money with Credit Karma Savings.”
According to Credit Karma, current customers will be able to open a Savings account in just four clicks. Additionally they’ll be able to set up recurring transfers and view a graph of how those deposits will add up over time. Commenting on those aspects of the account, the product’s general manager Jagjit Chawla explained, “The thought of opening a new account or downloading another app can feel overwhelming — and we know inertia is one of the biggest barriers to financial progress. When we built Credit Karma Savings, we wanted to develop a product that made opening a savings account as easy as possible for our members. We’re also making it possible for members to see the power of high-yield savings with our savings simulator, which shows how your money could grow over time.”
This isn’t the first time Credit Karma has ventured outside of their core product. In 2016 the site launched Credit Karma Tax — a free service that allowed customers to prepare and file both their federal and state returns. That feature has continued to expand in recent years, adding support for additional states as well as additional tax filings.
Of course Credit Karma is also only the latest example of a FinTech rolling out banking services. In this year alone, roboadvisors Wealthfront and Betterment have both added savings accounts as has investment tools platform Personal Capital. Furthermore online lender SoFi also unveiled their SoFi Money hybrid savings and checking account back in February while stock trading app Robinhood’s similar Cash Management account is finally set for release “soon.” All this suggests that, even with rates set to drop, this is a trend that will only grow stronger. So who will be the next startup to try their hand at a better banking experience?