Why Your Online Bank Might Have Decreased Their APY This Week

In case you didn’t hear, earlier this week the Federal Reserve made big news by cutting interest rates for the first time in more than a decade. While this might seem like the kind of top-level economic news that doesn’t affect most people’s wallets, that’s far from the case. In fact, in just the few days since the announcement, those who bank online have likely already seen changes.

The morning after the Fed’s move, I got an e-mail from SoFi Money explaining “As SoFi Money’s interest rate is linked to the Fed funds rate, the annual percentage yield paid on your account will be changing from 2.25% APY to 2.00% APY, effective August 1, 2019.” Meanwhile, Discover quietly lowered their APY from 2.10% to 2% since last I checked and Marcus by Goldman Sachs, which must have seen the writing on the wall, also dipped to 2.15% from 2.25% back in June.

Although a decrease in interest rate can be disappointing for those looking to get the most out of their risk-free funds, it’s important to keep in mind that a quarter-percent drop won’t make a huge impact. In their e-mail, SoFi noted that the change would result in customers earning about $2.77 less over the course of a year (accounting for monthly compounding) for each $1,000 you have saved with them. I should also note that the 2% APY remains far higher than most traditional banks and is still among the top for online banks. That said, roboadvisor Wealthfront does offer 2.32% APY — down from 2.57% pre-Fed — for their cash management account, while rival Betterment has a promotional offer for a 2.69% APY when you open one of their new savings accounts and join the waitlist for their upcoming checking feature.

Of course, the lowered rate could also mean good things for your finances if you have debt or are looking to borrow. That’s because interest rates on credit cards and loans could fall following the Fed’s move. Thus, depending on when you purchased your home, it may be a good time to refinance your mortgage — but, as a renter, I can’t really speak to this experience.

Ultimately, the Fed’s quarter-point rate cut might not have the largest impact on your financial life but there may be some notable changes nonetheless. For depositors, chances are you’ll be earning a bit less in interest than you have been in recent months. As for those looking for a loan, if you’ve started your lender research prior to this Wednesday, it may be worth doubling back for a second look.

Author

Kyle Burbank

Kyle is a freelance writer and author whose first book, "The E-Ticket Life" is now available on Amazon. In addition to his weekly "Money at 30" column on Dyer News, he is also the editorial director and a writer for the Disney fan site LaughingPlace.com and the founder of Money@30.com.

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