Generally, the program banks that participate in Betterment Cash Reserve pay interest rates that are tied to the federal funds rate, which is the rate at which banks can loan money to each other, and is set by the Federal Reserve. The interest rate you receive on Cash Reserve will typically change as a result of the Federal Reserve changing its target federal funds rate.
Since the launch of our cash account on July 23rd, 2019, the Federal Reserve has decreased the target federal fund rate 5 times. Once on July 31st, 2019 by 0.25%, a second time on September 18th, 2019 by 0.25%, a third time on October 30th, 2019 by 0.25%, a fourth time on March 3rd, 2020 by .50% and a fifth time on March 16th, 2020 by 1.00%.
The two most recent and largest drops were due to COVID-19 impacting the market.
When the federal funds target rate changes, the rate we can offer through Cash Reserve can also change.
Some banks may have APY's that have not yet reflected the changes in interest rates. Ultimately, the prevailing interest rate environment impacts all banks, and we expect that rates at these banks will also lower as time goes on.