You may have heard about the 5.00% APY on Wealthfront’s Cash Account offered through our partner banks and wondered whether this account offers benefits beyond the high APY. The short answer is – yes! It does. The Cash Account has a few key advantages over a standard savings account you should know about.
Wealthfront interest rate vs. savings account interest rate
The first and most obvious difference is our high interest rate. When we launched the Wealthfront Cash Account, we made a commitment to our clients to pass along more of the interest rate than traditional banks because we believe that your money should be making money for you, not for your bank.
As the data shows, we have delivered on our commitment and have a proven track record of passing along as much of the interest rate increases as we can each time the Fed increases rates.
In many cases, our increases were in stark contrast to the rates on savings accounts. Savings account rates have not always gone up each time the federal funds rate changed, which it did ten times since March 2022. Some savings account rates have barely risen at all, especially when you compare them with the APY increases we have made with the Wealthfront Cash Account.
The federal funds rate is the rate at which banks loan money to one another, which is usually a target range set by the Federal Reserve’s Federal Open Market Committee (FOMC). They raised this rate multiple times in 2022 and 2023 to combat inflation, and each rate increase boosts the amount that banks earn when they loan out money you’ve deposited. They’re making more money, so if they aren’t raising your interest rates, they’re keeping more of that money themselves.
Unfortunately, many consumers have come to expect these low interest rates because there has been an established practice of having low rates over many years; they don’t realize they are missing out on better APY options like the Wealthfront Cash Account.
Wealthfront FDIC insurance vs. savings account FDIC insurance
When you hear that Wealthfront is not a bank, it’s very reasonable to ask, “Will the money in my Cash Account be FDIC insured?” Not being a bank allows us to offer you even more FDIC insurance on our cash accounts than a traditional bank because we can partner with multiple banks. Our Cash Account offers up to $8 million in FDIC insurance through our partner banks ($16 million for joint accounts).
FDIC insurance protects the money held in a bank account up to $250,000 per depositor, per FDIC-insured bank, per account ownership category. Wealthfront sweeps your deposits to FDIC-insured partner banks which means you can benefit from more FDIC insurance without the hassle of dealing with multiple banks yourself.
Every partner bank in our program is FDIC insured, and you can see the full list of them here. All of our partner banks undergo an initial risk assessment to join the program and also undergo regular ongoing risk reviews to remain in the program. We sweep your money to up to 32 partner banks, keeping your deposits below the $250,000 threshold at each partner bank up to the limit.
FDIC insurance is an important consideration when deciding where to keep your cash. Bank failures are relatively rare, but they do happen, as seen by recent events. FDIC insurance offers peace of mind; even if a bank does fail, you’re covered. More FDIC insurance matters with high-balance accounts, and having a 5.00% APY on such an account offers a valuable alternative to housing each $250,000 in a separate savings account. You can rest easy knowing that your money has this insurance protection while you’re deciding how to invest or spend your savings on big purchases like a home.
Wealthfront’s free same-day withdrawals vs. savings account withdrawals
Every savings account operates differently, but many charge fees for maintenance, overdrafts, or even transfers; savings accounts usually offer around 6 free transfers and withdrawals each month and charge for additional transfers and withdrawals, partially due to long-standing rules about limiting transfers from savings deposits set by the Federal Reserve. Wealthfront’s Cash Account has no account fees and comes with unlimited transfers, free same-day withdrawals, and withdrawal limits as high as $250,000. Many savings account providers charge excess activity fees when you transfer money too many times in a given month, but the Cash Account allows you to withdraw your cash as many times as you’d like—and it’s easy to set up with the Wealthfront app.
Our Cash Account doesn’t come with requirements like minimum or maximum account sizes, you only need $1 to open the account, and you don’t have to carry a specific balance after that. If a transaction might overdraft your Cash Account, we aim to deny the transaction without a fee, rather than allowing you to spend more than is in the account and then charging you a fee for it.
We work to be as clear and simple with our account structures as possible.
Wealthfront Cash Account makes investing easy and frictionless
Wealthfront’s vision is to make it delightfully easy to build long-term wealth on your own terms. Our Cash Account is thoughtfully integrated with our investment products to make it easy for clients to automatically invest their savings on a recurring basis, and save for their future effortlessly. We offer best-in-class automation features that help you organize your cash with categories, stay motivated through tracking progress on your goals, and invest your money using our various investment account opportunities.
In-app features make it possible to keep your money organized from the moment it arrives in your account. For instance, once your deposit hits your Wealthfront Cash Account, you might allocate some of it for your down payment fund, a medium-term goal, which remains in the Cash Account to take advantage of our 5.00% APY and easy access. You can then set a plan to automatically move some money each month to your investment accounts, like your Taxable Automated Investing Account or your Wealthfront IRA for retirement. Most traditional savings accounts do not offer this opportunity to make investing fast and simple.
Your ideal home for cash
We’re proud whenever we get to announce new features and APY increases because we want our Cash Account to be an ideal home for your cash until you’re ready to invest. We don’t make you trade easy access for a high APY; instead, we offer all the checking features you love, like a debit card and a network of 19,000 free ATMs, to enable you easy access to your savings whenever you want.
We’re always working on new ways to make the Wealthfront Cash Account serve you well.
Disclosure
We’ve partnered with Green Dot Bank. The checking features offered on your Wealthfront Cash account are provided by and the Wealthfront Visa® Debit Card is issued by Green Dot Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Visa is a registered trademark of Visa International Service Association. Checking features for the Cash Account are subject to identity verification by Green Dot Bank and the Wealthfront Visa® Debit Card is optional and must be requested. Wealthfront products and services are not provided by Green Dot Bank. Green Dot Bank operates under the following registered trade names: GO2bank, GoBank and Bonneville Bank. All of these registered trade names are used by, and refer to, a single FDIC-insured bank, Green Dot Bank. Deposits under any of these trade names are deposits with Green Dot Bank and are aggregated for deposit insurance coverage.
Fee-free ATM access applies to in-network ATMs only. For out-of-network ATMs and bank tellers a $2.50 fee will apply, plus any additional fee that the owner or bank may charge. Fees and Eligibility requirements may apply to certain checking features, please see the Deposit Account Agreement for details. Copyright 2023 Green Dot Corporation. All rights reserved.
Cash Account is offered by Wealthfront Brokerage LLC (“Wealthfront Brokerage”), a Member of FINRA/SIPC. Neither Wealthfront Brokerage nor any of its affiliates are a bank, and Cash Account is not a checking or savings account. We convey funds to partner banks who accept and maintain deposits, provide the interest rate, and provide FDIC insurance. Investment management and advisory services–which are not FDIC insured–are provided by Wealthfront Advisers LLC (“Wealthfront Advisers”), an SEC-registered investment adviser, and financial planning tools are provided by Wealthfront Software LLC (“Wealthfront”).
The cash balance in the Cash Account is swept to one or more banks (the “program banks”) where it earns a variable rate of interest and is eligible for FDIC insurance. FDIC insurance is not provided until the funds arrive at the program banks. FDIC insurance coverage is limited to $250,000 per qualified customer account per banking institution. Wealthfront uses more than one program bank to ensure FDIC coverage of up to $8 million for your cash deposits. For more information on FDIC insurance coverage, please visit www.FDIC.gov. Customers are responsible for monitoring their total assets at each of the program banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. The deposits at program banks are not covered by SIPC.
The Annual Percentage Yield (APY) for the Cash Account may change at any time, before or after the Cash Account is opened. The APY for the Wealthfront Cash Account represents the weighted average of the APY on the aggregate deposit balances of all clients at the program banks. Deposit balances are not allocated equally among the participating program banks.
The Wealthfront 529 College Savings Plan (the “Plan”) is administered by the Board of Trustees of the College Savings Plans of Nevada (the “Board”), chaired by the Nevada State Treasurer. Ascensus Broker Dealer Services, Inc. (“ABD”) serves as the Program Manager. Wealthfront Advisers LLC, an SEC-registered investment adviser, serves as the investment adviser to the Plan. Wealthfront Brokerage LLC serves as the distributor and the underwriter of the Plan. Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program.
You also should consult your financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plans’ features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision. Earnings on nonqualified withdrawals are subject to federal income tax and may be subject to a 10 percent federal tax penalty, as well as state and local income taxes. The availability of tax and other benefits may be contingent on meeting other requirements.
For more information about the Plan, download the Plan Description and Participation Agreement or request one by calling 844-995-8437 or emailing support@wealthfront.com. Investment objectives, risks, charges, expenses, and other important information are included in the Plan Description and Participation Agreement; please read and consider it carefully before investing. An investment in the Plan is not insured or guaranteed by the FDIC or any federal or state government or agency. You could lose all or portion of your investment.
The information contained in this communication is provided for general informational purposes only, and should not be construed as investment or tax advice. Nothing in this communication should be construed as tax advice, a solicitation or offer, or recommendation, to buy or sell any security. Any links provided to other server sites are offered as a matter of convenience and are not intended to imply that Wealthfront Advisers, Wealthfront Brokerage or any affiliate endorses, sponsors, promotes and/or is affiliated with the owners of or participants in those sites, or endorses any information contained on those sites, unless expressly stated otherwise.
Wealthfront, Wealthfront Advisers and Wealthfront Brokerage are wholly owned subsidiaries of Wealthfront Corporation.
Copyright 2023 Wealthfront Corporation. All rights reserved.
About the author(s)
Leotie Fukawa is a Product Specialist at Wealthfront and a Certified Financial Planner (CFP). She holds Series 66 and Series 7 licenses from FINRA. View all posts by Leotie Fukawa, CFP
