If you currently invest with Wealthfront, you have the option to get a great interest rate by keeping your money in Wealthfront’s Cash Account.
Wealthfront has joined other robo-advisors looking to find a foothold in cash management, which was typically dominated by banks and credit unions. These new rob-advisor accounts typically offer attractive APYs or an easy way to spend cash as a way to lure new and existing customers further into the companies’ ecosystems.
The Wealthfront Cash Account currently pays APY on deposits. Interest accrues daily and is credited to your account monthly.
This account doesn’t work like a traditional savings account. Instead, Wealthfront takes the money you deposit and sweeps it to one of four unaffiliated participating banks. These banks hold your money and pay Wealthfront interest.
Wealthfront keeps a small portion of the interest for themselves and gives the rest to you. Since the money is in a bank account, there is no market risk that your money will decrease in value.
Your deposits are FDIC insured up to $1,000,000 or $2,000,000 if your account is a joint account.
The cash is only FDIC insured while it is in a bank account at one of the unaffiliated banks. When you initially deposit money into your Wealthfront Cash Account, it takes one to three business days to sweep the funds from Wealthfront to the unaffiliated bank.
Wealthfront does state that customers are responsible for monitoring how much of their cash is swept to each of the unaffiliated banking institutions to make sure that the balance in each unaffiliated bank does not exceed the FDIC insurance limits. Currently, banks include:
Accessing your money is easy, even though it is swept into these unaffiliated bank accounts. Simply log in to your Wealthfront account and request the money. Withdrawals will take one to three business days to arrive at your bank account.
Unlimited free transfers
The Wealthfront Cash Account offers unlimited free transfers, which can take one to three business days to reach your bank account when making withdrawal.
Unfortunately, you can’t transfer money to or from your Wealthfront Investment Account at this time.
Low minimum opening
There is only a $1 initial opening deposit with no further deposit requirements.
Features to come
Right now, there aren’t many other features, but Wealthfront is considering adding:
- debit cards
- ATM access
- direct deposit
- mobile check deposit
- bill pay
That said, they don’t have a timeline or order for which these features can be expected.
As far as fees go, you are not charged any advisory, withdrawal, or other fees for the cash account. The usual 0.25% investment advisory fee does not apply to the balance in your cash account.
To make things even better, the minimum to open an account is only $1 and there aren’t any additional deposit requirements beyond that.
Can’t transfer between Wealthfront
Unfortunately, you can’t transfer money between your Wealthfront Cash Account and your Wealthfront Investment Account at this time, but they do hope to add this feature in the near future.
Additionally, you can’t open a Wealthfront Cash Account if you do not have a Wealthfront Investment Account.
However, you can join their waitlist and Wealthfront will let you know when they’re accepting everyone.
Anytime a company advertises no fees, you likely start to get suspicious and wonder how exactly they make their money if it’s not through fees.
Wealthfront receives a fee from each participating bank, which ranges from 0.00% to 2.00% on an annualized basis, on the average aggregate daily program deposits on deposit at each bank.
Essentially, Wealthfront makes money by loaning your money to these banks. They give you some of the money back in interest and keep the rest for themselves.
As long as they pay a decent interest rate you’re happy with, this should not be a cause for concern for most customers.
The Wealthfront Cash Account is a great deal compared to most large banks that pay next to no interest on money you keep in your savings account.
If you’re only earning 0.10% APY, this is 3x times better. In these cases, you should seriously consider opening a Wealthfront Cash Account if you already have a Wealthfront Investment Account.
However, if you currently have your money sitting in a high yield savings account such as Discover Bank or HSBC that earns close to the same interest rate, it may not be worth moving your money to get a tiny increase in interest.
|Account Offered||Cash Account||Checking/Savings hybrid||Debit card and account that gives you access to over 19,000 fee-free ATMs around the U.S.|
|Minimum Account Balance Required||$1||None||None|
|Open an account||Open an account with Wealthfront||Open an account with SoFi||Open an account with Stash|
SoFi—best known for their student loan refinancing—also offers a checking account.
SoFi’s bank account is a “hybrid” checking and savings account that has no account fees and ATM reimbursement for every single ATM out there.
Stash is better known as the fintech company that allows users to invest small amounts of money. And you can investment with as little as just one cent – so there’s really nothing stopping anybody from getting started.
When you can get an account, you’ll have access to a debit card and checking account. There are no fees for this account, access to thousands of ATMs, and cash back at certain venders that’s automatically deposited into your Stash investment account.
Compared to traditional banks, Wealthfront has significantly more perks. Wealthfront’s Cash Account offers a great APY, no fees, and unlimited transfers.
You’ll need to be a Wealthfront investor to open an account, but if you are, there’s no harm in doing so.
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