When it comes to savings accounts, robo-advisors are no different from brick-and-mortar or online banks. The annual percentage yields their customers earn on savings accounts are also falling, and the devil is in the details.
Take Betterment, which promoted a 2.69% APY rate when it introduced its Everyday Savings account in late July for consumers who also signed up for its checking account waitlist and 2.43% for those who didn’t. Those rates are now 2.4% and 2.15%, respectively, because interest rates have been falling.
As Betterment notes on its website, the APY on Everyday Savings accounts “is a variable rate that can fluctuate daily, based on the Federal Funds Rate and terms offered by banks participating in Savings [and] … “may change at any time without notice.”
The Everyday Savings website on Wednesday showed a slightly lower APY for those who sign up for the checking account waitlist, of 2.39%, but a link in the first footnote notes that the APY is typically updated every business day by 5 p.m. ET and the rate on Aug. 21 was 2.4%.
(Related: Betterment Moves Into Banking)
Also in the fine print is another link explaining that the higher APY for those who sign up for the checking account waitlist is due to a 0.25% promotional rate increase “that extends at least for the duration of 2019 until every individual on the waitlist has an opportunity to access.” The APY itself does not extend through the end of the year, only the additional 0.25% rate above the APY, a spokeswoman explained.
Despite the decline in rates, Betterment’s savings account APY remains higher than those of other robo-advisors and most traditional banks, in part because it uses a network of banks for the account, rather than a single institution.
Wealthfront’s saving account has an APY of 2.32%, down from 2.57% previously and Personal Capital’s savings account has an APY of 2.05%. All are well above the national interest rate of 0.9% for savings accounts during week of Aug. 19, according to the FDIC and very competitive with the rates paid by the top 1% of banks with the highest savings account APYs. (Approximately 40 banks, most online, are paying above 2% but many require minimums of $1,000 or more to qualify for the higher rate, according to Depositaccounts.com.)
Robo-advisors are evolving in ways beyond the introduction of high-interest savings accounts along with checking accounts, debit cards and budgeting and spending capabilities.