Wealthfront Raises Cash Account APY to 2.51%
Consumers seeking greater reward for their savings may just have another option. Last week the robo-advisor platform Wealthfront announced that it was increasing the interest rate on its Cash Account to 2.51% — up from 2.29%. According to Bankrate, that makes the offering the “top-yielding account nationwide.” By comparison, other top contenders such as Marcus by Goldman Sachs and Synchrony currently offer 2.25% APY.
Although Wealthfront isn’t a bank, it is partnering with banks that will hold deposits made through Wealthfront. As a result, funds will be FDIC insured. In fact, the company says that it will be able to offer up to $1 milion in FDIC insurance since funds will be swept into accounts at one of four partner banks. This is similar to a set-up by another FinTech firm SoFi, which offers FDIC insurance on up to $1.5 million in funds deposited to their SoFi Money accounts.
Another aspect of their Cash Account that Wealthfront says separates it from the competition is that it allows for free unlimited transfers. Meanwhile many online institutions limit transactions to six per statement cycle. As for the downsides, Wealthfront doesn’t currently offer a debit card, ATM card, or checks for accessing funds. Interestingly the company also does not currently provide a way for customers to transfer funds from their Cash Account to their Wealthfront investment account, although their site suggets such a feature will be coming “Soon!”
In a blog post announcing the change, Wealthfront spoke to why they were upping the amount of interest customers could earn, writing, “We fundamentally believe that your money should be making money for you, not your bank, and we’ve built our entire business around this belief.” They continued, “As our service scales, we benefit from cost savings that we’ll always pass on to you. When rates improve, that’s yours too. You’ve trusted us with over $1 billion dollars, which is the kind of growth that lets us turn the cash karma back around to you.”
By itself, Wealthfront’s hiked up APY may not mean much to most consumers. Similarly, until planned expansions such as checking features are added, the Cash Account is unlikely to draw many non-customers in. However the larger potential of Wealthfront’s move could be an increase in competition, leading other institutions to increase interest as a way to draw deposits. We’ll have to wait and see if that turns out to be the case but, in the meantime, it’s clear that those looking to earn more on their savings have plenty of options online even if brick-and-mortar banks continue to offer the same old low-yield savings.