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Updated on Thursday, July 11, 2019
Fintech startups are challenging incumbents in every corner of the financial services industry. Robo-advisor Wealthfront is part of this trend, one of many new investing apps that also offer cash management accounts with high APYs and a mix of features offered by traditional bank accounts.
Cash management accounts combine features like easy access to your money and a decent interest rate, typically found separately in checking accounts and savings accounts, respectively. Wealthfront admits that its Cash Account won’t replace your checking account, instead touting it as a place to stash your emergency savings or achieve other savings goals and enjoy a high 0.10% APY, all with the FDIC protections of a traditional bank account.
Wealthfront Cash Account Pros
Wealthfront Cash Account Cons
Let’s take a closer look at how Wealthfront’s Cash Account compares to both traditional bank savings accounts, and similar cash management offerings from other fintech startups, so you can determine whether it’s right for your savings.
Wealthfront Cash Account vs. online savings accounts
Wealthfront markets its Cash Account as a place to deposit savings you plan on spending in the next five years, or as a good place for an emergency fund. For longer-term returns on your money, Wealthfront advocates investing in the stock market using its core robo-advisor functionality. As an additional incentive to do so, Wealthfront allows you to transfer money from your Cash Account into one of the company’s taxable investment accounts. However, there is nothing in Wealthfront‘s terms of service that would discourage you from treating this account like any other online savings account.
Here’s how Wealthfront’s Cash Account stacks up against the highest-earning online savings accounts from our best online savings accounts review:
|Financial Institution||APY||Minimum balance|
|$1 minimum, no monthly fee|
|$100 minimum, no monthly fee|
|$25,000 minimum, no monthly fee|
|Marcus by Goldman Sachs|
|$1 minimum, no monthly fee|
Judged by APY alone, Wealthfront‘s Cash Account emerges as one of the strongest contenders out there, surpassed only by Vio Bank’s online savings account. Like many online savings accounts, there’s a limit to the liquidity of the money placed in Wealthfront‘s Cash Account.
However, there is no option to withdraw funds or make payments from the account via check or ATM card. Your only way to get money into and out of the account is via ACH transfers to and from a separate checking account that’s held in your name. Transfers take one to three business days, and Wealthfront permits an unlimited number of transfers into and out of your Cash Account (with a daily limit of $250,000).
Wealthfront is not a bank, so it has deals with a network of regional banks that are FDIC insured. After you deposit your money in a Cash Account, your funds are swept into multiple accounts with Wealthfront’s bank partners, giving you FDIC insurance coverage up to $1 million (or $2 million if you have a joint Cash Account). This a big advantage that makes the Cash Account an attractive choice for anyone who wants FDIC coverage beyond the $250,000 limit available with a single online savings account.
Wealthfront Cash Account vs. robo-advisor cash management accounts
Many other robo-advisor firms offer cash management accounts. These accounts take varying forms: Some resemble a personal savings account, others have both savings and checking account features, while some are a type of investment account. Below we compare the Wealthfront Cash Account with cash management offerings from robo-advisors Betterment and SoFi.
|Wealthfront Cash Account|
FDIC-insured savings account
|Betterment Smart Saver|
Low-risk bond investments
0.25% annual fee
FDIC-insured checking/savings hybrid account
An average of 0.25% APY
Wealthfront Cash Account vs. Betterment Smart Saver
Betterment‘s Smart Saver account is a low-risk investment account, not a deposit account, so it plays by a different set of rules than Wealthfront‘s Cash Account. For one, as an investment it does not have FDIC coverage. Betterment‘s website claims you could earn returns of 2.14% (which factors in the standard 0.25% Betterment charges for its services) — notice the word “could.” Money placed in the Smart Saver account is invested in a mix of treasuries and corporate bonds—fairly safe investment vehicles—but it still can’t guarantee the 2.14% return in the same way a deposit account can guarantee an APY.
The Smart Saver account does have some bells and whistles that may make it an appealing choice for your savings. These include:
- Smart Sweep: This feature aims to maximize your investing returns by only maintaining as much cash in your linked checking account as you need for day-to-day spending. It works like this: After giving access to your checking account, the app analyses how you spend money. Then it sweeps money above and beyond what you need to pay 35 days of expenses — up to $5,000 per sweep — into the Smart Saver investment account. Likewise, if the app thinks you’ll need more money to cover your expenses, it will sweep money from the Smart Saver investment account into your checking account.
- Tax relief: While you can’t avoid paying taxes entirely, the fact that 80% of the money placed in the Smart Saver investment account will be invested in U.S. Treasury bonds means that some of the earnings from the Smart Saver account won’t be subject to state and local taxes.
Like Wealthfront’s account, there is an inconvenient waiting period to withdraw money from the account — four to five business days, which is longer than Wealthfront‘s one to three business days. This longer period accounts for the fact that your money is invested in bonds, making it less liquid than funds placed with Wealthfront in FDIC-insured deposit accounts.
Wealthfront Cash Account vs. SoFi Money
SoFi Money is a checking and savings hybrid account, meaning you earn both a high yield — 0.25% APY vs. Wealthfront‘s 0.10% APY — and enjoy instant access to your money with a debit card and paper checks.
Similarly to Wealthfront, SoFi Money spreads any funds you deposit across multiple FDIC-insured bank accounts — six in this case — providing up to $1.5 million in FDIC insurance vs. Wealthfront‘s $1 million.
SoFi Money may lag behind Wealthfront in terms of APY, but it makes up for this by providing the utility of both a savings and checking account. You can use your debit card to make purchases and withdraw money from ATMs (there is a daily limit of $610) just like you would with any other checking account. You can read more details on SoFi Money in our review.
Who should get a Wealthfront Cash Account?
If you’re looking for an FDIC insured account that provides one of the highest APY’s available, than the Wealthfront Cash Account may be right for you. However, you won’t have easy access to your funds like you would with a hybrid checking/savings account, such as SoFi Money. However the simplicity of the account, and the promise of additional features in the future such as a debit card and ATM withdrawals, could make it a compelling option for your savings.