It was only a few weeks ago that roboadvisor platform Wealthfront increased the annual percentage yield (APY) for their Cash Account to an industry-leading 2.51%. However, with other institutions subsequently besting them, the company recently shot back by raising their rates another six basis points to 2.57%. While the hike is more symbolic than anything, it does succeed in bringing attention to the account — including some of its current shortcomings.
Bankrate notes that Wealthfront’s move comes after Salem Five Direct increased its interest rate to 2.51% only to be edged out by Vio Bank’s 2.52%. Although .01% probably isn’t making a huge difference to the earnings of accountholders, Wealthfront explained in a statement, “We have been overwhelmed by the response to the launch of our high-interest cash account and we want to make choosing our cash account a no-brainer and eliminate the need to comparison shop.” Funny enough, while competition between Wealthfront and others seems to be driving paid interest rates up, the popular Marcus by Goldman Sachs actually lowered its APY from 2.25% to 2.15% just last week.
Of course, Wealthfront Cash isn’t like most bank accounts — even those of the online variety. Instead of offering a full banking experience, Wealthfront’s accounts currently have limited functionality. Not only are they currently lacking debit card or checking access but oddly the company doesn’t even support transfers between your Wealthfront brokerage and your Cash account at this time. That said, they do allow for unlimited transfers between any external accounts and your Cash Account and, thanks to partnerships with four banks that Wealthfront sweeps funds into, they advertise that your money is FDIC insured up to $1 million. Luckily, if you don’t have seven-figures to deposit, you can still open an account with as little as $1.
Obviously I’m not one to turn my nose up at raising paid savings interest, but I do wish this boost in APY came with an increase in features as well. Although Wealthfront says that things like debit cards, checks, and more are on the way, until they are in place, it’s hard for me to get too excited about this particular account. Personally, despite Wealthfront’s higher APY, I’d recommend options such as SoFi Money (currently 2.25% APY) that offer easier access to the funds along with a few other perks. But, if you’re just looking for a risk-free place to stash your cash that you know will pay you handsomely, Wealthfront Cash may be a great option for you.