5 things to know about Wealthfront’s cash account

|
Wealthfront

If you’re looking for a high-interest place to stash some short-term cash, the Wealthfront cash account might be the perfect solution for you.

In this article, we’ll take a look at what exactly the Wealthfront cash account is, what kind of interest rate it has and how much FDIC protection it offers.

Here’s what you need to know about Wealthfront’s cash account

The Wealthfront cash account is a high-interest, no-fee online savings account from an atypical player in the financial industry.

Since launching in February 2019, this product has already attracted more than $1 billion in deposits and paid out more than $10 million in interest, according to a company blog.

Now, you may not be immediately familiar with the Wealthfront name. But as long as you have FDIC insurance on your money — which the financial technology company does offer — you shouldn’t let that dissuade you from considering them as a place to put your money.

“As long as the accounts are arranged where you have FDIC insurance, those are great,” money expert Clark Howard says. “[The high interest rate is] a way to attract people to their other services, but you don’t have to use the other services.”

Here’s what else you need to know about the Wealthfront cash account…

Advertisement

1. There are no fees and you get a high interest rate

As of September 2019, Wealthfront is paying 2.07% APY on its cash account. That’s one of the higher interest rates in the market at this time.

While that rate is subject to change, it’s not a promotional teaser rate with a limited lifespan.

“The Wealthfront APY is not a short-term promotional rate and applies to all accounts and balances,” the company notes online. “We’re committed to passing along as much of the interest rate as we possibly can.”

Meanwhile, the cash account comes with zero fees of any kind and free unlimited transfers of money. Here are a few other highlights to note:

Advertisement
  • $1 minimum to open an account
  • Interest accrues daily and compounds monthly
  • Access your money within one to three business days

2. Your money isn’t at risk in the stock market

Wealthfront is best known as a roboadvisor service for beginning investors. It uses artificial intelligence and algorithms to build a portfolio for you based on your age and risk tolerance level.

But here’s the nice thing: The money in your cash account is isolated from the volatility of the stock market. It’s simply a high-yield savings account.

So as long as you don’t touch it, your account balance can only go up each month. That’s not something you can say for money you put at risk in the stock market, which is subject to wild swings both up and down.

3. Wealthfront offers 4 times the usual FDIC insurance

All FDIC insured bank accounts will protect your deposits up to $250,000. But Wealthfront offers FDIC insurance on up to $1 million in deposits — four times the usual level of protection!

How do they do it? Simple. If you deposit more than $250,000 to your account, they just spread the excess above $250K out to unaffiliated partner banks to give you that extra insurance. You still get the same interest rate, along with the extra protection.

You can get the full details of how this program works in the Cash Sweep Program Disclosure Statement on the Wealthfront website.

4. New features are on tap for the Wealthfront cash account

A few of the current shortcomings of the Wealthfront cash account are that you can’t deposit or write checks from the account and there’s no ATM access.

But the company says it’s actively working to address those and other issues in future versions of the cash account.

“In no particular order, some of the features we’re considering include debit card, ATM access, direct deposit, bill pay, checks, and mobile check deposit,” Wealthfront writes online.

5. Wealthfront isn’t the only option for high interest

The average interest rate on savings accounts nationwide is only 0.09%, according to the FDIC. Wealthfront pays more than 20 times that national average. But they’re far from the only one offering such a high rate of interest.

Advertisement

Other fin-tech players like Betterment and SoFi Money offer similar or even higher rates of interest. And then there are the online banks. Most online banks pay 2% APY or more on your deposits.

One place not to look when you want to stash your cash? The nation’s big banks! They’ll fee you to death and offer pitiful interest rates to savers.

Final thought

Earning more interest on your money is easy thanks to a lot of new options like the Wealthfront cash account and others in the marketplace.

But if you’re not really sure about this cash account or others, the online banks are still a good place to keep your money. Our guide to the best online banks has current interest rates for more than half a dozen great options.

More money stories on Clark.com

Advertisement
  • Show Comments Hide Comments