Personal Capital offers an array of products to those aspiring to build their wealth. Their free budgeting and tracking tools make it possible for you to link banking accounts and investment accounts to get an overall snapshot of your net worth. It also offers a wealth management service for a fee. It’s latest product, Personal Capital Cash, aims to replace your traditional savings account with a higher yield and higher FDIC coverage. In this review, we’ll dig in to see if Personal Capital Cash meets that goal.
|Personal Capital Cash Pros||Personal Capital Cash Cons|
Personal Capital Cash account features
The Personal Capital Cash account is a variation on the cash management account, as it allows you to access your money without the restrictions on a traditional savings account. The account’s advertised APY is 1.55%. However, if you are a Personal Capital advisory client with a Personal Capital Cash account, your APY will jump up to 2.10% as of August 2019.
Regardless of which APY you qualify for, Personal Capital has set up a unique structure that allows you to get $1,500,000 in FDIC insurance coverage even though coverage normally maxes out at $250,000 per deposit account. That’s because Personal Capital is not a bank; instead, it works with UMB Bank, which distributes your money to its different member banks. When one member bank account reaches FDIC limits, another account with a different member bank will be opened for you. This is done up to six times, giving you the $1,500,000 limit.
You won’t notice any of this on your end; it will all appear as one balance within your Personal Capital Cash account. To access the money within your account, you must use Personal Capital’s platform. From there, you’ll be able to schedule deposits or withdrawals through ACH transfers.
It’s important to note that regularly scheduled transfers cannot be made. You have to manually approve each transfer via Personal Capital’s platform. That means you cannot assign a certain percentage or dollar amount from your paycheck directly into your Personal Capital Cash account, which is possible with many other cash management accounts. Instead, you’ll have to funnel the money through your connected checking account first.
Personal Capital Cash vs. online savings accounts
The fact that the only way you can access your money is through ACH transfers puts Personal Capital Cash on par with many online savings accounts. There are no minimum balance requirements which is also a feature of many of the top online savings accounts.
Personal Capital Cash differs in that you can make unlimited transactions from this account, while financial institutions offering traditional savings accounts cap most withdrawals at six per month. It also stands out because its FDIC insurance maxes out at $1,500,000, while most savings accounts are covered up to the legal amount of $250,000.
However, when you look at the rates currently offered by Personal Capital Cash, you start to see some downsides. While its rates could be considered competitive, they’re far from the best on the market. And none of the top online savings accounts have any minimum balance requirements either, while also offering higher APYs.
|Financial Institution||APY||Minimum opening deposit|
Personal Capital Cash
Goldman Sachs Bank USA
Personal Capital Cash vs. robo-advisor cash management accounts
Personal Capital is not the only robo-advisor to offer a high-yield cash management account option. Both Betterment and Wealthfront offer their own cash management products, although it’s important to remember that not all cash management products work the same way. For example, Betterment’s Everyday Savings product analyses your spending patterns in a linked checking account and automatically transfers funds into savings for you.
Personal Capital Cash
|FDIC-insured cash management account||None||1.55% APY|
Betterment Everyday Savings
|FDIC-insured cash management account||None||1.78% APY|
Wealthfront Cash Account
|FDIC-insured cash management account||None||1.82% APY|
Personal Capital Cash vs. Betterment Everyday Savings
The signature feature of Betterment Everyday Savings account is its two-way sweep. The sweep feature allows you to link your checking account, which will be analyzed to predict your future spending habits. If you have enough in your checking account to meet your projected needs for the next 35 days, any excess funds will be “swept” into your Betterment Everyday Savings account.
If you have an unexpected expense come up or your checking account otherwise falls below a balance which won’t cover your anticipated expenses for the next 21 days, Betterment will transfer funds from your Everyday Savings account to your checking account to prevent you from overdrawing.
In addition, Betterment is planning to launch a checking-like spending account to accompany it’s Everyday Savings account. A promotional APY of 1.78% is available for Everyday Savings customers who join the waitlist for Betterment’s forthcoming Everyday Checking account, which the company plans to launch by the end of 2019. If you sign up for the savings account only, you receive an APY of 1.78%. With the additional features and higher APYs, Betterment’s Everyday Savings account has the potential to be a more useful option for many consumers.
Personal Capital Cash vs. Wealthfront Cash Account
Personal Capital and Wealthfront Cash accounts are a hybrid of a traditional checking and savings accounts. That means they do not fall under Regulation D; you can make as many withdrawals as you’d like without penalty.
Both Personal Capital and Wealthfront only allow you to make withdrawals and deposits through ACH transfers. Behind the scenes, both accounts look very similar, in fact. Wealthfront, like Personal Capital is not a bank, but works with a larger bank to spread your funds out to multiple accounts across partner banks. This allows Wealthfront to provide its clientele with up to $1,000,000 in FDIC insurance coverage, which is four times the typical max.
Personal Capital’s maximum coverage amount is higher, and will allow you to make more than six withdrawals per month. Its APY is markedly lower though, making it less profitable for the consumer.
Who should get a Personal Capital Cash account?
If you have and want to keep a lot of money in a high-yield deposit account, Personal Capital Cash can be a good option. Those who have more than $250,000 in the bank will benefit from the way the company partners with UMB banks to provide more insurance than your typical savings account.
However, those who want to regularly deposit portions of their paycheck directly into their savings or would like to make regularly-scheduled deposits will hit stumbling blocks the platform is not currently set up for this functionality. And if you’re looking for the highest APY, you’ll have to look elsewhere for now. The good news is that we’re living in an age where rates over 2.00% APY on a savings account are no longer a rare phenomenon.