Betterment Review

Are Betterment deposit accounts worth it?

Young businessman checks his Betterment account
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Uwe Krejci / Getty Images

Betterment is an online-only financial services provider offering investing and limited bank-like services to consumers. Betterment launched in 2010 with the goal of helping people learn how to reach their retirement goals without the sometimes-prohibitive cost of hiring a financial adviser. By July 2019, the company expanded its services to include a cash reserve account similar to a savings account.

What We Like

  • Up to 0.40% APY on Cash Reserve

  • No monthly fees for Cash Reserve accounts

  • No minimum balance for Cash Reserve accounts

What We Don't Like

  • No physical branches

  • Checking is not full featured yet

  • No check deposits

  • Wire transfer and direct deposit aren’t allowed

  • Limited phone support

Betterment investment customers with a high amount of capital who want to earn interest on their uninvested cash would enjoy using the firm’s cash management options. It would be a good fit for people who want to:

  • Manage savings and investments in one place
  • Make unlimited savings transfers with no additional fees
  • Have a higher FDIC protection on savings
  • Automatically save extra cash from a checking account

While Betterment is better known for its investment offerings, its cash management account gives you more flexibility to manage your finances in a single place. Betterment currently offers a high-yield cash account that’s not a savings account since Betterment is not a bank, but functions like one. Once it becomes available, customers can enjoy a checking account-like service like access to a debit card, no overdraft fees, and check writing services.

Accounts

  • Cash account
  • Checking account

Services

  • Online account management experience
  • Customer service

Betterment Everyday Cash Reserve

Betterment Everyday Cash Reserve is a high-yield cash account with no monthly fees or fees on your balances. There’s no minimum balance requirement, but because of ACH transaction limitations, any transfers you make must be at least $10. You can deposit up to $300,000 in a single transaction.

Since the account isn’t a standard savings account, you won’t have an account number and routing number that you can use for paying bills, wire transfers, or other financial transactions. But that also means you won’t be limited to the six savings account withdrawals per month that federal regulations impose via Regulation D.

The Betterment Everyday Cash Reserve comes with:

  • A high-yield cash account, with deposits earning a variable rate of up to 0.40% APY
  • FDIC insurance covering up to $1,000,000 at program banks
  • Free transfers to Betterment investment accounts
  • No limits on withdrawals
  • No minimum balance
  • No fees

Cash Reserve is provided by Betterment LLC, which is not a bank, and cash transfers to program banks are facilitated by Betterment Securities. The banks that work with Betterment are: 

  • The Bancorp Bank
  • Barclays Bank Delaware
  • Citibank, N.A.
  • ConnectOne Bank
  • East West Bank
  • Georgia Banking Company
  • HSBC Bank USA, N.A.
  • Seaside National Bank & Trust
  • State Street Bank and Trust Company
  • Valley National Bank
  • Wells Fargo Bank, N.A.

Betterment takes the money you put in your Cash Reserve account and deposits it in money market and/or demand deposit accounts at the program banks. The firm’s fine print calls this “acting as your agent”. It’s a way for Betterment to offer you an account very similar to a savings account without being a bank.

You won’t know which banks Betterment uses unless you call support and ask for the information, or wait until your quarterly statement arrives.

In addition to earning interest, the Cash Reserve account offers a savings tool called “Two-Way Sweep.” The tool analyzes your spending for the next 21 to 35 days, decides if you have any extra cash available, and moves it to the Cash Reserve account, where it will presumably earn a higher APY than it would sitting in your checking account. Two-Way Sweep will also move money back to your checking account if it predicts you’ll need it in the next 21 days.

Two-Way Sweep only analyzes your linked checking account. Transfers back to your checking account can take up to five days. If there’s money you don’t want Betterment to transfer, it’s advisable to disable Two-Way Sweep.

Betterment Checking

Betterment Checking launched in April, 2020 and includes a tap enabled debit card. Mobile check deposit and other features are still in the works. Here's what's included:

  • ATM fees reimbursement worldwide
  • No minimum balance
  • No overdraft fees
  • No maintenance fees
  • FDIC insurance on up to $250,000
  • No APY

Your Betterment debit card has a 1% foreign transaction fee for which you’ll receive a reimbursement.

Other Financial Products From Betterment

  • Investing
  • Traditional IRA
  • Roth IRA
  • SEP IRA

The financial services offered under the Betterment umbrella are managed by a variety of entities. Cash Reserve is provided by Betterment LLC, which is not a bank. Betterment Everyday Checking is made available through Betterment Financial LLC, while the associated debit card is provided and issued by nbkc bank, a Kansas-based company and a member of FDIC. Brokerage services are offered by Betterment Securities, a broker-dealer that is a member of the FINRA and the Securities Investor Protection Corporation. Betterment Securities is regulated by the Securities and Exchange Commission.

How to Bank With Betterment

You can sign up for a Cash Reserve account online or via the smartphone app with $0. You can make your first deposit, a minimum of $10, via ACH transfer. Keep in mind that you cannot make mobile or paper check deposits, nor can you make wire transfers to the account.

Betterment Customer Service

Betterment offers a mobile app through which you can access both your Cash Reserve and your investments all in one place. Customer service is available by email (everydaysupport@betternment.com) and phone (718-400-6898) between 9 a.m. and 6 p.m. Eastern Time, but only Monday through Friday.

Deposits from your linked checking account to your Cash Reserve account generally take 1 to 2 business days to complete, depending on the timing of the deposit and any bank holidays. You can also transfer funds from your taxable investing (example) accounts to your Cash Reserve.

You can sign up for a Cash Reserve account online or via the smartphone app with $0. You can make your first deposit (minimum of $10) via ACH transfer.

The Bottom Line

Benefits

Those who currently use Betterment’s investment services may enjoy Cash Reserve. If you have a large amount of cash and need more than the standard $250,000 in FDIC insurance, Betterment places your funds with four different program banks to protect up to $1,000,000 in deposits for individual accounts and $2,000,000 for joint accounts. And unlike traditional savings accounts, there’s no limit on the number of transfers you can make to and from your Cash Reserve account.

Drawbacks

You’ll also find more competitive interest rates among the best high-yield savings accounts. Since Betterment isn’t an actual bank, your account options are limited. For example, the service doesn’t offer certificates of deposit or a money market account. If you foresee a need to talk to a teller in person, Betterment won’t be the best choice for you as the service doesn’t have any physical branches. Even its phone customer service is limited to standard business days and business hours. 

Article Sources

  1. Federal Reserve Bank. "Regulation D Reserve Requirements." Page 1. Accessed April 23, 2020.

  2. Betterment. "Betterment Cash Reserve." Accessed April 23, 2020.

  3. Betterment. "Betterment Everyday Cash Reserve: Program Banks." Accessed April 23, 2020.

  4. Betterment. "Betterment Everyday Cash Reserve Terms and Conditions." Accessed April 23, 2020.

  5. Betterment. "Two-way Sweep Methodology." Accessed April 23, 2020.

  6. Betterment. "Checking Roadmap." Accessed April 23, 2020.