You may have seen the ads - online “tech” companies and non-traditional banks are offering some of the highest yielding savings accounts out there. They are beating out banks that have historically been leaders in the savings space?
How are they able to do it? Should you trust these new companies?
In short, these “young” companies are able to leverage technology to pass on higher savings account yields to you. And yes, you can 100% trust them - your deposits at these companies are protected by the FDIC just like they would be at a normal “brick and mortar” bank.
Credit Karma is the latest tech company to bring you a top yielding savings account. Historically known for helping people navigate their credit, they are now helping people put their money to work as well. We’re partnering with them today to highlight why companies like Credit Karma are great alternative ways to save money. Check out Credit Karma Savings here if you’re curious >>
High-Yields Savings Bank Accounts Vs. Non-Banks
Earlier this year, we started seeing a wave of companies offer savings accounts - at amazing interest rates and terms.
Now we’re seeing more companies offering banking products without any compromise. Such companies are called FinTechs (financial technology companies). For consumers, this seems to be a golden era in financial services.
There are a number of banks now offering 1.00% plus APY savings accounts. The highest rates are offered by online banks. For a while, banks where the only place to receive such high yields. That’s now changing.
Fintechs or robo-advisor firms are getting into the high-yield savings game. These fintechs are not banks. To offer a banking product such as savings or checking, they partner with a regulated U.S. bank. Think of the fintech as a layer on top of the bank that make it incredibly easy to use.
The application process starts on the fintech’s website. Depending on how well the fintech and bank are integrated, you may not ever see the bank’s website. Either way, the application is processed through the bank.
Bank vs. Fintech Company
At the end of the day, is there any reason to open a high-yield savings or checking account with a bank vs. a fintech? Both are FDIC insured but some fintechs offer far more FDIC insurance than the amount provided by a bank. Fintechs are able to do this because they use a pool of banks (called “program banks”) and spread out the $250,000 per depositor limit across those banks. If you have lots of cash on hand, that may be one reason to use a fintech.
Some fintechs are not offering 2.00% plus APY accounts. You can find a number of banks that offer savings far above 2.00% APY. That’s one for banks.
Consolidation is another reason to use a fintech. If you are already using Credit Karma (maybe to track your credit or monitor your transactions), opening a savings account with them means fewer logins and fewer companies to deal with. You’ll be able to more easily and quickly transfer funds between accounts as well.
If the fintech offers brokerage services and no separate savings account, unused cash in the brokerage account will earn a high-yield APY. In this case, you don’t have to open a separate account or fill out another application. The fintech is basically using brokerage account cash as a savings account. Program banks are still used in this case.
List of Fintech Companies Offering High Yields on Cash
Remember, interest rates are always subject to change. Look beyond the rate if you’re considering it to really integrate with an app you already use.
- 1.75% APY savings
- No fees and no minimum required balance
- FDIC-insured up to $5 million
- Partner bank: MVB Bank
- 1.85% APY savings.
- $10 to open savings. No fees and no minimum required balance.
- ATM fees reimbursed worldwide with Checking.
- Up to $1 million on savings and up to $250,000 on Checking.
- Partner bank: Betterment uses a number of program banks to provide up to $1 million in FDIC insurance.
- 1.40% APY checking
- No fees and no minimum required balance
- FDIC-insured up to $250,000
- Partner bank: Evolve Bank & Trust
- 1.55% APY on cash. 1.60% APY for Personal Capital Advisory Service clients.
- No fees and no minimum required balance.
- $1.5 million in FDIC insurance.
- Partner bank: UMB Bank n.a.
- 1.80% APY checking.
- No fees and no minimum required balance.
- FDIC-insured up to $1.25 million.
- Partner bank: Robinhood uses a number of program banks to provide up to $1.25 million in FDIC insurance.
- 1.82% APY on cash.
- No fees and no minimum required balance.
- $1 million in FDIC insurance.
- Partner bank: Wealthfront uses a number of program banks to provide up to $1 million in
FDIC insurance.
The above companies are all fintech companies, so you can also expect a great mobile app experience. Most of them come with free robo-advisory services.
Is My Money Safe?
Yes — while fintechs are not banks and can’t offer FDIC insurance, their program banks do offer FDIC insurance. So, your money is still offered the same protection as a bank - sometimes even more!
Is It Worth It?
Fintechs don’t always have the highest savings yields. A little searching will reveal some online-only banks that offer much better yields. However, if you are the kind of person that likes all of your accounts in one place for convenience, the additional 0.10% or so you might find elsewhere may not be worth the effort.
If you’re already using Credit Karma to track your credit, you might find incredible value to use their savings account as well. Check out Credit Karma Savings here >>
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