Are Betterment deposit accounts worth it?
Betterment is an online-only financial services provider offering investing, checking and savings accounts. 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 advisor. By June 2020, the company expanded its services to include a checking account and a Cash Reserve account similar to a savings account.
Up to 0.40% APY on Cash Reserve
No monthly fees for deposit accounts
No minimum balance for deposit accounts
No physical branches
Checking is not full featured yet
No check deposits
No bill-pay services
Limited phone support for West Coast customers
Betterment investment customers with a high amount of capital who want to earn interest on their uninvested cash will find the Cash Reserve account appealing. Betterment's deposit accounts would be a good fit for people who want to:
- Manage savings, checking, 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.
- Cash account
- Checking account
- Online account management experience
- Customer service
Betterment Cash Reserve
Betterment 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.
The Betterment 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.
- Cross River Bank
- HSBC Bank USA, N.A.
- State Street Bank and Trust Company
- 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 launched in April, 2020 and includes a tap-enabled debit card. 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
- Mobile check deposit
- Direct deposit
The account offers many of the perks you get with online banking: low fees and now minimum deposits, primarily.
However, you can’t make wire transfers to your account, deposit cash via ATM or set up bill pay. If you want to pay bills automatically, you’ll have to go to each company billing you and set up payments through your account with them.
Your Betterment debit card has a 1% foreign transaction fee for which you’ll receive a reimbursement.
Other Financial Products From Betterment
- 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 (email@example.com) and phone (718-400-6898) between 9 a.m. and 6 p.m. Eastern Time, but only Monday through Friday.
Deposits from an external bank account to your Cash Reserve and checking accounts 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.
The Bottom Line
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.
You’ll 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, and your checking account is limited. 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.