savings Archives - Lend Academy

Credit Sesame Adds to the Ever Growing List of Digital Bank Offerings in the US

Credit Sesame's new savings account pays no interest but rewards consumers if they increase their credit score.

March 10, 2020 By Ryan Lichtenwald Leave a Comment

Credit Sesame launched eight years ago to give consumers insight into their credit scores and provide education around their credit factors. The company is now expanding their product set to include digital banking. They join what seems like a never ending list of digital banks in the US. Interestingly, their closest competitor, Credit Karma which is being acquired by Intuit announced Credit Karma Savings last year.

With Sesame Cash, Credit Sesame hopes to leverage data about a consumer’s credit score to help them with cash management. It is a problem that many face with 84% of Credit Sesame’s approximately 15 million registered users living paycheck to paycheck according to CEO Adrian Nazari who was interviewed by American Banker. Credit Sesame will look at a consumer’s cash balance and repayment ability to make recommendations to lower costs, such as a new credit card or a lower interest rate loan. Unlike most digital banks, Sesame Cash will not pay interest but will instead reward users as they improve their credit score. Users will receive $5 if their VantageScore credit score increases by 10 points in a month or $100 if their score increases by 100 points.

Sesame Cash officially launched today to existing customers and will eventually roll out to the general public. The account is paired with a debit card and has no minimum balances, no monthly fees, no overdraft fees and also allows users to access their paycheck early. More features are to be added soon such as a smart bill pay service and an auto-savings tool which will round up purchases.

Will N26’s Success Story in Europe Replay in the US?

N26 has now surpassed 5 million customers, but it remains to be seen whether their US business will take off

January 23, 2020 By Ryan Lichtenwald Leave a Comment

The digital banking space in Europe has been fascinating to watch. Customers seem much more engaged and willing to move to the various challenger banks that operate in the region. Reuters reports that N26 has crossed the 5 million customer mark, up from 3.5 million last summer. The incredible growth of N26 and of their peers doesn’t seem to be slowing down. N26 which was founded in February of 2013 added more customers in 2019 than in all previous years. Not only are the challenger banks attracting customers, they have also attracted massive amounts of capital. N26 has raised $683 million in total and was last valued at $3.5 billion.

Co-founder and CEO Valentin Stalf shared that growth was strongest in Germany, France and Austria and that Italy and Spain showed promise in achieving similar rates of expansion. While a breakdown of numbers by country wasn’t provided it is safe to assume that the US offering launched last year pales in comparison to their customer base across Europe.

N26’s US offering has little that is unique from the perspective of a US consumer. The N26 offering includes a cashback debit card, no hidden fees, savings ‘Spaces’ and free cash withdrawals. The most compelling feature is the access to your paycheck up to two days early which is also offered by US based companies Chime and Varo. When comparing side by side Varo’s offering is superior, currently offering 1.92% on savings with the potential to earn 2.80% by meeting certain requirements. For savers and those who don’t value the early paycheck access there are plenty of other interesting options for US consumers including SoFi, Marcus and Ally to name a few.

The digital banking space is the hottest area of fintech. It is also the most competitive with dozens of interesting offerings for US consumers. N26 has been incredibly successful at building their brand across Europe but it remains to be seen whether US consumers are going to jump on board. From my perspective they are going to have to beef up their US offering if they’re going to have a chance at the same success they have had in Europe.

Lessons Learned from the Robinhood Debacle

Last week Robinhood announced a 3% yielding checking and savings account, and then backtracked, now they are calling it a cash management account.

December 17, 2018 By Ryan Lichtenwald Leave a Comment

I was excited about Robinhood’s announcement too. The prospect of earning 3% on a savings and checking account was extremely appealing. The interest rate is 95 basis points (or 0.95%) higher than that of Goldman Sachs’ Marcus which continues to rank among the top yielding bank accounts.

Unfortunately, it didn’t take long for the company to backpedal on their announcement, which attracted hundreds of thousands to the waitlist. I checked the site today and secured spot 744,248 for their “Cash Management” offering which was hastily changed from the original name, Robinhood Checking & Savings. Issues arose as many dug into the actual offering, mainly how deposits would be insured. Bank accounts today are protected by the Federal Deposit Insurance Corporation, up to $250,000. Because this was part of a brokerage account, rather than being insured the the FDIC, Robinhood’s offering would be protected by the SIPC or Securities Investor Protection Corporation.

However Robinhood failed to disclose the difference between the SIPC and FDIC. The main difference is that the SIPC protects cash which is slated to purchase securities. According to the SIPC website:

SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. Most customers of failed brokerage firms when assets are missing from customer accounts are protected.

The SIPC goes on to address the limitations of SIPC protection:

It is important to recognize that SIPC protection is not the same as protection for your cash at a Federal Deposit Insurance Corporation (FDIC) insured banking institution because SIPC does not protect the value of any security.

Stephen Harbeck, president and chief executive officer of SIPC was quoted in this Bloomberg article which shared that the company hadn’t approached the SIPC about the offering: [Read more…]

Savings and Deposit Rates in a Rising Rate Environment

As rates rise fixed income investors are looking for places to put cash.

February 21, 2018 By Ryan Lichtenwald 2 Comments

For many years there have been few opportunities for yield which is one of the reasons some investors turned to marketplace lending or real estate. For those looking into safe investments there weren’t any appealing options as savings deposit rates and CD rates at banks haven’t been attractive for years. Since Lend Academy attracts fixed income investors it’s no surprise that they have been watching rates closely.

This thread called Cash Parking on the Lend Academy Forum was created back in December 2016 and since then, forum members have discussed opportunities at banks and credit unions. Forum members have discussed where it makes most sense to have their money and how other investment opportunities like marketplace lending compare.

The discussion caught my eye when one user posted a 3% 5 year CD which happened to be offered by my local credit union. Since these accounts offer FDIC insurance earning 3% guaranteed by the government is a good deal some investor’s eyes. In fact this is the best deal in almost 10 years. I have since been following CD rates and savings deposit rates at various banks over at Bankrate.com which I find is a simple site to use. Another website mentioned on the forum thread is DepositAccounts.com by LendingTree.

Signing Up for a Savings Account at Marcus

Although rates vary from day to day by any given bank, Marcus by Goldman Sachs has been near the top of the list since I began checking. We last did a piece on savings account rates back in June 2017 when Goldman Sachs’ deposit accounts were still branded under GS Bank. Rates are now 30 basis points higher at 1.5% on Marcus accounts. I already hold one savings account at Ally which tends to be competitive with other banks and as I was looking to open up another savings account I decided to test out the newly branded Marcus by Goldman Sachs.

The user experience was about what I expected as the branding around Marcus has always been simple and modern. The signup process was straight forward as they took a minimalistic approach to signup as well as the account homepage. A few screenshots from the process are included below.

Marcus has invested heavily into consumer finance and the newly branded Marcus savings accounts are just one example. Their investment has paid off and it was recently reported that they had $17 billion of deposits. These deposits can be drawn on to fund the personal loans branded under the same name. Since Goldman Sachs acquired GE Capital’s retail deposits, deposits have grown a whopping 90%.

Conclusion

With rates where they currently are it is probably a bit too early to get excited with more rate hikes expected this year. However, a strong case can be made for holding your savings account at one of the banks with current rates in the 1.5% range if your bank’s rates are significantly lower. Current CD rates for 1 year are hovering around 2% while 5 year CD rates at the large institutions are around 2.60%. It’s important to be aware of these options and weigh the risk and rewards of each. For me, I am keeping an eye on CD rates as they approach the mortgage rates on my home and investment properties. If I can earn what I am paying in interest on a mortgage I have the additional benefit of the cash cushion for emergencies.

Have you made any changes as rates have increased? Where are you parking cash? Let us know in the comments section below.

Yahoo Finance Launches New Savings App

Yahoo Finance's new app called Tanda has a unique approach to helping consumers save money.

January 31, 2018 By Ryan Lichtenwald 2 Comments

There are plenty of financial apps on the market today spanning all aspects of personal financial management. There are apps focused on savings, spending, investing, net worth tracking and some of them provide a mixture of these functions. Last week our interest was piqued when Yahoo Finance announced an app called Tanda. Most people wouldn’t consider Yahoo a company on the leading edge of technology and as far as I know their only other businesses in consumer finance would be media through content on finance.yahoo.com.

Tanda is a much different concept than what we’ve seen as far as personal finance apps in the US. It allows users to create or join a group of five or nine to save money together. Each person puts money into a communal pot over time and then can choose when they withdraw the money. The first two people to withdraw money pay a small fee and the last person to withdraw the money receives a small bonus. It is a similar to what is called a ROSCA or a Rotating Credit and Savings Association. ROSCAs are most often used by immigrant groups in the developed world or developing economies.

This type of forced savings makes a lot of sense where people don’t have access to traditional banking. With Yahoo’s app there is an element of trust as Yahoo doesn’t hold any capital and is not a bank. Through the app they are simply an intermediary. Users build up trust scores that allow them to participate in larger pools of money. Yahoo will make money through fees and is hoping to build a large mobile community around the new product.

I decided to check out the app myself and was able to login using my Yahoo email account I created over 13 years ago. There were several open savings circles which I included below. Many savings circles provided a purpose for the pool, such as saving for electronics or travel. Others were for general saving, including one for an emergency fund. One pool had me saving $250 by contributing $62.50 every two weeks. If I was the first person to choose a payout, I’d receive 8% less. If I was the second person to I’d receive 7% less. This means I’d receive $230, or $20 less for being the first one out of the pool. The last person to receive a payout receives a 2% reward ($5).

Conclusion

It is hard to say whether Tanda will become the next viral app. ROSCAs have been a successful way for people to save money, but moving the concept to an app creates some challenges. Yahoo has created something unique and it is going to be interesting to see how users respond. At a time when many Americans struggle to save, I am in favor of any app that helps people save money.

Credit Sesame Adds to the Ever Growing List of Digital Bank Offerings in the US

Credit Sesame's new savings account pays no interest but rewards consumers if they increase their credit score.

Will N26’s Success Story in Europe Replay in the US?

N26 has now surpassed 5 million customers, but it remains to be seen whether their US business will take off

Lessons Learned from the Robinhood Debacle

Last week Robinhood announced a 3% yielding checking and savings account, and then backtracked, now they are calling it a cash management account.

Savings and Deposit Rates in a Rising Rate Environment

As rates rise fixed income investors are looking for places to put cash.

Signing Up for a Savings Account at Marcus

Conclusion

Yahoo Finance Launches New Savings App

Yahoo Finance's new app called Tanda has a unique approach to helping consumers save money.

Conclusion

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