The Wealthfront Cash Account is a checking and savings account hybrid. In my previous video, I detailed why you should not get the Wealthfront Cash Account. However, things changed, and I got it anyway, and I’m here to tell you why in this video.
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**Wealthfront Cash Account Review
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As I detailed in my Wealthfront Cash Account Review video, the Wealthfront Cash Account (a.k.a. the Wealthfront money account) is more like a very limited online savings account than a checking account (at least right now).
The Wealthfront Cash Account, as of the date of this video, does not allow you to withdraw from ATMs, use direct deposit, pay bills out of your account, 5 day limits on withdrawals, or operate it like a normal checking account from Chase Bank, Ally, or SoFi.
Despite all of this, and despite the fact that there are much better all-in-one checking and savings accounts out there in 2019 like SoFi Money, you may still want to get the Wealthfront Cash Account for one simple reason: Wealthfront Cash Account’s interest rate is 2.57%.
When I first made the Wealthfront Cash Account Review video, Wealthfront’s interest rate was in line with its competitors.
However, since then, interest rates have dropped in anticipation of the Federal Reserve lowering interest rates. You have seen Marcus by Goldman Sachs and Ally lower its rates to 2.15% and 2.1% respectively.
Meanwhile, Wealthfront’s Cash Account interest rate was raised to 2.57%.
This means that there is now a spread of 0.47% between Wealthfront and Ally. That 0.47% spread is more than the entire interest rate of Chase, Bank of America, Wells Fargo, and even Charles Schwab’s checking account.
Why is having a high FDIC insured bank account interest rate that important? Let’s run through an example.
Say you had $15,000 in savings that you could not afford to lose.
(1) If you put it at Chase or Wells Fargo, you would get: $1.50 in a year.
(2) Bank of America: $4.50
(3) Ally: $315
(4) Wealthfront: $385.50 or over $1 per day. Literally almost make more in a day at Wealthfront than with Chase or Wells in a YEAR.
Wealthfront is free to use. There are no fees on the Wealthfront Cash Account. There is no Wealthfront robo advisor management account fee on the Wealthfront Cash Account.
By comparison, most brick and mortar banks like Chase, Wells Fargo, and Bank of America charge you money or make you keep a minimum amount of money in the account (at near zero percent interest).
Executives from Wealthfront have indiciated that the 2.57% interest rate is not a teaser rate and that it is here to stay. There may be some truth in that. Wealthfront states that automation and lack of physical branches keep costs down. Ally’s original pitch was exactly that.
As I detail in my other videos, your deposits into Wealthfront are swept into FDIC-insured banks. Once swept, they get the exact same protection as Marcus by Goldman Sachs, Ally, Chase, Wells, Bank of America, and any other FDIC-insured bank. This means that your cash is as safe in Wealthfront as any other FDIC insured bank, so you should get always look for the greatest interest rate since it is a true apples to apples comparison.
Now, as I mentioned before, the Wealthfront Cash Account has significant downsides. Today, it is a terrible checking account substitute. I recommend SoFi Money for a flexible and free checking account substitute.
Also, Wealthfront’s Cash Account is going to be the first thing most people experience when looking into Wealthfront. Wealthfront’s main business is charging clients 0.25% on all assets under management to manage their money. Watch out for this push.
So, here is the key takeaway: If you treat the Wealthfront Cash Account like a savings account, and recognize that you have limits on being able to withdraw money, and realize that it is being used to lure you into the Wealthfront robo-advisor money management account, you will benefit from an FDIC-insured 2.57% interest rate on your money.
What do you think? Is it worth getting? Tell me in the comments below. Don’t forget to like the video!
Marcus by Goldman Sachs