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Written by Edward Canty on September 9, 2020
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Betterment Cash Reserve Review 2020: Best Online Savings Account?

Betterment Cash Reserve
  • Pricing
  • Minimum Opening Balance
  • Fees
  • Banking Features
4.5

Summary

This is a great online savings account from a well known robo-advisor which is Betterment. They have done away with unnecessary fees and made this highly accessible with a minimum opening balance of just $10. The APY is better than average.

Pros

Better than average APY

$10 minimum

FDIC insured up to $1,000,000

No transfer limits or monthly fees

Joint accounts offered

Cons

No branch locations

No ATM withdrawals

No mobile check deposit

Investors have countless options when deciding where to put their money. Online savings account to provide a high-interest alternative to the traditional bank account and are growing in popularity. With the rise of online banking, the in-person banking at branches is becoming largely irrelevant.

As savvy savers know, every dollar counts. Even the difference of 0.05% can make a huge difference over the long run. When comparing different online savings accounts, Betterment Cash Reserve is one you have likely come across.

Betterment is a robo-advisor that is providing users with an opportunity to sign up for a new savings account called Betterment Cash Reserve. It has some really promising features and a higher than average APY.

In this article, we will review Betterment Cash Reserve, a new savings account earning a high APY, check the rate here.

RateAs Of
0.40%9/10/2020

Betterment Everyday Savings Review

Summary: Betterment Cash Reserve Online Savings Account

  • Higher APY than most traditional savings accounts pay
  • No monthly fees or minimum balance requirements
  • Unlimited transfers in and out of the account
  • FDIC insured up to $1,000,000*
  • No branches available to do banking in person
  • No check deposit (for their checking account)
  • Direct integration with the Betterment robo-advisor and checking account
  • $10 minimum to open an account
FeatureExplanation
Minimum$0 ($10 Minimum Transfer)
APYCheck Link Below
FDIC InsuranceUp To $1,000,000
Transfer LimitsNone
Monthly FeesNone
Account Security2 Factor Authentication
Withdraw Time1 To 2 Days
Joint AccountsYes - Save With A Spouse/Partner

What Is Betterment?

Betterment is an online financial advisor where you can invest, save, and plan for your financial goals. Investors can choose from a variety of portfolios based on your risk and goals. With Betterment, you have a one-stop-shop for your financial life.

Depending on your plan, you can have access to financial advisors, including CFP® professionals. Investors also have access to tax-loss harvesting tools, advice packages, and Betterment Cash Reserve savings accounts. Check out our full review of Betterment here.

Want to find the best robo-advisor for you?

We put together a free comparison table that analyzes all of the top robo-advisors available today.
This guide will help you compare the features and benefits of each side by side.
Get The Guide

Betterment Cash Reserve Savings Account

Betterment Cash Reserve Savings is now offering one of the highest interest rates on savings accounts in the banking industry. These savings accounts and checking accounts are available now as well as a Betterment debit card.

After dominating the robo-advisor game, Betterment has branched out into other financial services. This, most recently, includes venturing into online banking. Betterment now offers competitive checking and savings accounts.

Betterment Cash Reserve was previously called Betterment Smart Saver. This program was eliminated in 2020 and rolled into the Betterment Cash Reserve platform.

Betterment Cash Reserve Savings Account

  • One of the highest rates in the country
  • FDIC-insured up to $1,000,000*
  • No minimum balance ($10 minimum to open)
  • No fees
  • Unlimited withdrawals (compared to a limit of six withdrawals per month with most savings accounts)

Betterment Checking Account

  • ATM fees reimbursed worldwide
  • No account or overdraft fees
  • $0 minimum balance
  • FDIC insured up to $250,000
  • Free debit card

Betterment Cash Reserve Features

Cash Analysis

The cash analysis feature will determine the minimum amount of cash you require in your bank account to fund your ongoing expenses. By analyzing your expenses, the cash analysis will determine if you have too much or too little cash in your bank account.

This way, investors are getting the most out of their money and not letting a large amount of cash sitting idle in a low interest-bearing account. Smart investors put cash in higher interest rate accounts where they can earn reasonable interest and not let their savings rot away from inflation.

Betterment investing app

Two Way Sweep

The two-way sweep works directly with cash analysis. Any excess cash in your account will be sent to your checking account you link with Betterment.

If cash analysis sees that you are running low, it will automatically send cash to your bank account to replenish your funds. You can also manually set minimum amounts for your bank account balance.

You can also set up sweeping in the other direction. For example, if Betterment notices your checking account has significantly more cash in it than usual they'll automatically pull it into your Cash Reserve account to make sure you're earning interest on your money.

There are no fees for these transfers or any transfers in or out of your Cash Reserve account.

Zero Fees

Betterment Cash Reserve savings and checking accounts have no fees for its users. There are also no overdraft fees or minimum account balances. This means investors are genuinely making the most out of every dollar saved.

Bucket Your Savings

Within your Cash Reserve account, you're able to easily create buckets for your savings goals within your account. This allows you to easily set aside and keep track of cash that you'd like to earmark for specific purposes.

For example, you can section off a portion of your account for a travel fund, some for an emergency fund, and some for paying down debt all within one account. This is a feature you're not likely to find within other savings accounts at big banks.

Seamless Integration

The checking, investing, and savings account all work in tandem together. The investing account is used for growing your money while the savings account is used for your emergency fund. The checking account, on the other hand, is used for day to day spending. By using all three together, you can keep track of your entire financial life in one place.

Why Use Betterment Cash Reserve Savings?

Everyone always tells us that holding too much cash in our bank account is not the right decision. But why is this? The main reason being inflation.

Inflation will slowly decay your savings each year, it has averaged 1.5% to 2.0% annually over the past 30 years.

This means the purchasing power of our savings is decreasing each year by 1.5% to 2.0%. Our $100 saved today will only buy $98 worth of goods in one year. Over time this can really add up and take a toll on all the hard-earned money we’ve saved.

Just as compound interest works in our favor, inflation can have a negative compounding effect on our savings. For example, cumulative inflation from 1913 to 2013 was 2,275%. This means prices increased almost 23 times. Yikes…

Investing is the tool we use to combat inflation. If we can earn a return equal to or greater than the inflation rate, then we have won the battle. Unfortunately, interest rates on bank savings accounts have been extremely low for the past few decades. A bank account interest rate at 0.06% has no shot in beating a 2% inflation rate.

Importance Of An Emergency Fund

Emergency funds are extremely important to hedge against the uncertainties in life. Emergency funds should keep you afloat in times of uncertainty and act as a buffer to a portfolio.

The amount you have in one depends on lifestyle. An emergency fund should be funded to sustain your current lifestyle for a maximum of 6-12 months.

This 6-12 month period is necessary to regain a financial basis. Find a new job if you have been laid off, for example.

The reasons for an emergency fund are endless. Bottom line, it is a necessity.

Betterment Cash Reserve Savings vs Betterment Smart Saver

As mentioned earlier, Betterment Cash Reserve replaced an older feature called Betterment Smart Saver. There are a few differences between the old Betterment platform called Smart Saver and the new savings platform. The differences include:

  • It comes with a high APY (check it here)
  • It's FDIC insured up to $1 million* compared to Smart Saver which had no FDIC insurance
  • Smart Saver held your money in short term bonds and only offered SIPC insurance

Frequently Asked Questions

Is Betterment A Bank?

No, Betterment is an online financial service provider that works with program banks to hold your money.

How Does The Federal Funds Rate Impact Online Savings Rates?

The federal funds rate is the rate at which banks loan each other money on an overnight basis. This affects savings rates because as the federal funds rate decreases, banks will pay less on deposits made into savings accounts.

What Is FDIC Insurance?

FDIC Insurance utilizes bank reserves to insure depositors a certain amount of money in case of a bank run. The FDIC was adopted after the Great Depression when a run on banks destroyed the economy and led to an economic disaster.

How Are They Able To Offer $1M FDIC Insurance?

Betterment can offer $1M in FDIC insurance because they are housing your money in 4 different third party banks. Betterment is not operating these banks themselves. However, it is not guaranteed that your money will be spread across these 4 banks proportionately. Typically each bank will insure $250,000 of cash per person. Betterment aims to use 4 banks to maximize FDIC insurance, but it is not guaranteed.

Does Betterment Offer Joint Accounts?

Currently, Betterment offer both joint cash reserve accounts and joint checking accounts. These accounts come with $2M in FDIC insurance which is separate from the $1M FDIC insurance for individual accounts. Joint accounts are geared towards spouses or parents and children. However, anyone can open a joint account together.

Is Betterment Cash Reserve Safe?

With FDIC insurance up to $1M, your account is covered for 4x as much as the typical bank. That's because Betterment has 4 program banks that all hold a portion of your money. A Cash Reserve account is as safe as any other savings account due to the FDIC coverage present.

Can You Lose Money With Betterment Cash Reserve?

No. Because your money is not invested, you do not run the risk of your account losing value over time. Betterment guarantees their interest rate will be paid and there is no risk of loss due to market volatility. However, if you keep over $1M in your Cash Reserve account, FDIC coverage may not cover your full account balance in the event of a bank run.

Can You Withdraw Money From Betterment Cash Reserve Anytime?

Yes. Technically Cash Reserve is not classified as a savings account and therefore has no limit to the number of withdrawals you can make each month. You're able to make as many transfers as you want each month without running into any restrictions or fees.

Is Betterment Cash Reserve Good For Retirement?

A high-yield account like Cash Reserve can be part of an effective retirement strategy. However, for longer time horizons you'll likely want to look to Betterment's robo-advisor offering. This will provide you with exposure to investments with higher return potential than Cash Reserve.

Traditional Bank Account Alternatives

Currently, there are few options to obtain a reasonable yield on our cash. Let’s review some of the alternative options to a bank savings account.

Online Banks

There are a few online banks that are offering above-average interest rates right now. Many times these accounts will have minimum balance requirements. Ally Bank is a popular online savings account. These banks can afford to pay significantly higher interest rates than the big banks because their expenses and overhead are much lower.

Money Market Accounts

Over the past few years, short-term interest rates have risen considerably. As a result, certain money market accounts are now yielding very low rates. Be cautious, depending on the fund, you may have a minimum deposit to invest. These accounts typically provide savers with higher-than-average interest rates along with FDIC coverage.

CDs (Certificate of Deposit)

CDs have always been an option to park your short-term cash. The one downside is that CDs often have low liquidity, meaning it can be difficult to sell your investment and receive your cash. Currently, most CDs are offering a range of interest rates right now ranging from 0.5% to 1% depending on their maturity. However, investors should be cautious as CDs can come with early redemption fees for early withdrawals.

*$1,000,000 in FDIC insurance is a goal and not a guarantee. Betterment uses 4 member banks to hold cash deposits. Each bank covers $250,000 in FDIC insurance, but it is not guaranteed your account will be spread across these 4 banks proportionately.

Keep Reading:

Betterment Everyday Savings
Article written by Edward Canty
Ed is a financial planner and personal finance enthusiast. At his day job, Ed helps clients plan for retirement, manage their investments, and navigate their tax situation. In his free time, Ed enjoys golfing, traveling, and wrenching on his old BMW.

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