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Thought some of you here might find this interesting. I was reading Bogleheads this morning and stumbled upon a post talking about Wealthfront’s new Cash Account. This is an actual savings account that is giving 2.57% APY.
My initial reaction was skepticism. If you remember, Robinhood received a huge backlash after they launched their 3% APY savings account that wasn’t FDIC insured and wasn’t really a savings account.
It appears that Wealthfront has learned from Robinhood’s mistakes. One of the main selling points is that Wealthfront Cash is FDIC insured up to $1 million. It makes it tempting to move my savings.
Here’s a quick look at how Wealthfront compares to some other high-yield savings accounts.
| ALLY | MARCUS | WEALTHFRONT | |
|---|---|---|---|
| Annual percentage yield (APY) | 2.10% | 2.15% | 2.57% |
| Minimum deposit | $0 | $0 | $1 |
| Service fees | $0 | $0 | $1 |
| FDIC insurance amount | $250,000 | $250,000 | $1,000,000 |
| Monthly withdrawal limit | 6 | 6 | Unlimited |
| Mobile app | Yes | No | Yes |
The major risk, I suppose is that Wealthfront is still a startup that has yet to turn a profit. Also, I suppose we’ll see if the FDIC has anything to say in the next few days.
If you’re interested in Wealthfront, sign-up from the link below. We’ll both get up to $5,000 in managed services. That’s no fees for investments up to $5,000.
It does seem like Wealthfront learned from Robinhood’s mistakes. At face-value this does seem like an excellent deal.
Trying to play devil’s advocate here. Wealthfront has yet to turn a profit and doesn’t have nearly the assets under management that other financial institutions have. What happens if Weathfront goes under?
Assuming that this is truly FDIC insured—I’d say that it seems rather unlikely that the company goes under and you lose your money.
The likely scenario is that this rate is just a marketing stunt and that they drop to around 2% by the end of the year. You’ll get 2.57% for 6 months then they will start dropping the APY.
Ally, Marcus, AmEx and Capital One cut their rates this month to around 2%. This is anticipation for the Fed cutting rates in the coming months.
I agree. There doesn’t appear to be a ton of risk here other than that Wealthfront will drop the rates.
In time, we’ll see.
Ah, that’s a good point! Then again, they could keep it that high and leave it as a marketing expense.
For what it’s worth, it looks like Wealthfront is prepping to cut it’s Cash Account rate. Makes sense considering the quarter-point cut yesterday.
However, this is inline with what I expect the high-yield savings accounts to do.
Looks like you were right. It’s September and Wealthfront has reduced the APY to 2.07%.
To be fair that was probably accelerated by back to back rate cuts. My Ally account went from around 2.2% to 1.9% in a few months.