Linus is a new blockchain-based savings account that boasts an incredibly high yield. It looks enticing, but there are risks.
One of the biggest: this isn't a true savings account - it's not FDIC insured. You should view this much more like an investment than a savings account.
Bonus Offer: If you open an account, you get a $10 bonus after you make your first deposit. Open an account here >>
- Blockchain-based savings account.
- Increased risk over deposit accounts and not FDIC insured.
- No fees or minimum balance to maintain.
Who Is Linus?
Linus or “Linus Financial LLC” is a high-yield savings account company. What exactly does that mean? Well, they are not a bank or even associated with a bank.
The Founder and CEO is Matt Nemer. Matthew previously worked at Paybear/Savvy.io and was Head of Finance at BTC Inc.
It's best to think of Linus as a blockchain/cryptocurrency based savings account. But given it's not FDIC insured, you should view it more as an investment.
What Do They Offer?
Utilizing Open Finance protocols, Linus provides retail consumers with the opportunity to take advantage of high-yield savings. Currently, that means a 4% APY. The initial deposit is $500 and doesn’t have to be maintained. There are no fees with the service.
How Does It Work?
That is the big question — how is Linus able to pull off a whopping 4% APY on a savings account? None of the big brick and mortar banks can touch that rate. In fact, no savings account can. The current highest yielding savings account is 1.80% APY, offered by CIT Bank.
First, it’s important to understand that Linus is not a savings account. A traditional savings account is a deposit account offered by a bank or a fintech that sits on top of the bank’s offering. Neither of those is the case with Linus. As a Linus customer, you are more like an investor than a depositor. Linus can’t offer any guarantees that your money will be safe. More on that a little later. Let’s talk about the underlying technology that makes Linus possible.
Linus converts your USD into USDC. USDC or USD Coin is a cryptocurrency but not any cryptocurrency. It is a breed known as a stablecoin. A stablecoin is tied to some real asset. For USDC, it is tied to the dollar. One USDC equals $1. So why go to the trouble of doing all of that, and how does it factor in with high-yield savings?
Linus is also utilizing blockchain contracts via Ethereum, which is another cryptocurrency and set of blockchain protocols. Without getting too far into the weeds, Linus is involved with blockchain credit markets. They have left out the details but we can surmise based on the information available.
Once Linus converts your USD to USDC, it becomes available to digital capital markets. Again, the details of these markets haven’t been made available by Linus. Certainly a negative in regards to transparency. Any bank would have to provide those details. But back to the point. People are able to borrow your USDC. Borrowing, of course, pays interest. We can guess that Linus is making the spread (the difference between loan interest rate and the savings rate).
How does Linus avoid loan defaults in these digital credit markets? The particular market(s) Linus is using requires borrowers to put up collateral that is worth more than the loan. Assuming all of that works the way it should, Linus has protected its investment (i.e., the saver’s investment).
To summarize how Linus reduces risk, loans they are involved in are fully collateralized - granted in some form of token or other cryptocurrency. Linus also sets aside a certain undisclosed amount of reserve based on deposits.
Your bank’s debit card can be used to transfer money into your Linus account. You can also use ACH to transfer in and out of your account.
There is no limit to the number of transfers you can do per month. But be aware that your Linus account is not a checking account and shouldn’t be used like one. Money in your Linus account may not be accessible immediately. However, your funds are not locked in your Linus account like that of a CD.
Once you sign up, you will get $10 once you complete your first deposit. Open an account here >>
Are There Any Fees?
No. A minimum balance is not required and transfers are free. However, if you maintain a zero balance for an extended period of time, Linus may close your account.
How Do I Open An Account?
Visit https://www.getlinus.io to open an account.
Is My Money Safe?
There appears to be a higher than average risk of loss using Linus. Linus is not a bank or associated with a bank. It is not FDIC insured. There are a number of risks to consider with Linus:
- Utilization of new technologies to achieve high returns.
- Underlying infrastructure is based on cryptocurrency.
- No FDIC insurance.
Is It Worth It?
The high reward, high-risk mantra, certainly holds with Linus. You aren’t getting that high return as a free lunch. There are real risks, and you could be out some or all of your principal.
The difference between the top-yielding banks at 1.80% and Linus at 4.00% is 2.20%. You’ll have to decide if that extra 2.20% is worth risking your principal over.
See how Linus compares to other alternative savings accounts like Outlet Finance.
- Interest Rates
- Fees and Charges
- Customer Service
- Ease of Use
- Tools and Resources
- Products and Services
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.