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Updated on Tuesday, January 28, 2020
Credit Karma is the latest fintech company to jump on the mobile banking bandwagon. The company is offering a free high-yield savings account, which is somewhat of a departure from the product it’s most famous for: providing consumers with access to free credit checks.
Credit Karma Savings offers a generous 0.40% APY, and the company says it will leverage technology to keep its rates competitive. Credit Karma is partnering with a network of banks to hold your deposits and gain Federal Deposit Insurance Corporation (FDIC) insurance.
What is Credit Karma Savings?
Credit Karma Savings is a high-yield savings account that is accessible through the company’s app. Credit Karma claims it will take consumers just “four clicks” to get started.
Once signed up, deposits will collect an APY of 0.40%. That’s 22 times more than the current national average of 0.09% for savings accounts. Credit Karma says it will leverage technology to keep that rate moving competitively, so that consumers won’t have to monitor rates themselves to ensure they’re getting the most for their money.
There are no fees or minimums required to open a Credit Karma Savings account, and deposits up to $5 million are insured by the Federal Deposit Insurance Corporation (FDIC). To achieve this, Credit Karma partnered with MVB Bank to provide banking services, and it will be utilizing a network of over 800 banks to hold deposits.
However, it’s important to note that the amount that is actually insured is dependent on whether you already have a balance in a partner bank and how much that balance is: “Actual insured amounts may be lower or adversely affected based on any balances you hold at a network bank,” Credit Karma said.
Credit Karma Savings vs. other cash management accounts
Credit Karma joins the ranks of other fintech companies that have recently launched high-yield savings accounts or cash management accounts for consumers, all boasting no fees and no minimum balance requirements. Here’s how Credit Karma Savings stacks up against companies with similar products.
|Bank||APY||Number of partner / network banks||Amount FDIC insured|
Credit Karma Savings
|0.40%||1 partner bank with network of 800+ banks||$5 million|
|0.25%||7 program banks||$1.5 million|
|0.40%||11 program banks||$1 million|
|0.35%||9 program banks||$1 million|
Savings accounts with higher interest rates than Credit Karma Savings
Credit Karma Savings’ 0.40% APY is certainly nothing to sneeze at, especially when looking at other fintech companies that offer similar high-yield accounts for stashing your cash. But other savings accounts—particularly those at online banks—boast even higher rates. Vio Bank, for example, currently has an online high-yield savings account with an impressive APY of 0.66% , while HSBC Direct Savings touts a 0.15% APY.