Free for 90 days: Sign up now and get 90 days managed free after your first deposit. See offer details

<title>Dismiss</title>
Earning Interest

Betterment Everyday™ Savings Has A Variable APY: What That Means For You

Interest rates change over time, but at Betterment, we are always working hard to help give you one of the best rates possible so you can make the most of your money.

Articles by Adam Grealish

By Adam Grealish
Director of Investing, Betterment  |  Published: July 30, 2019

We’ve built Betterment Everyday™ Savings to make the most of your money.

We work with banks across the U.S. and seek the highest interest rates possible.

Your APY is variable: changes in the Federal Funds Rate will affect the rate we’re able to pass on to you.

Betterment Everyday™ Savings is different from the savings accounts that you might find at traditional banks. Banks typically set rates based on loan demand. If they have significant loan demand, they will pay more for deposits into their bank. The national average savings rate is 0.09% APY**.

We do it differently. We’re not tied to one specific bank, so we have the opportunity to obtain attractive rates in the marketplace. We use our technology and size to efficiently access competitive bank rates—rates you might not have access to as an individual depositor—and we pass on the rates directly to you.

Is that rate guaranteed? No, it’s variable, and that’s by design. The Federal Funds Rate influences interest rates across all banks. As rates change, so will the Betterment Everyday™ Savings rate.

As of 7/10/19, the rate on Savings was 2.43% APY*, and the rate for those who joined our Betterment Everyday™ Checking waitlist was 2.69% APY. Note that both of these rates will change due to the variability of interest rates.

Our objectives are aligned with yours: we want to grow your money.

You can feel confident that Betterment is always working to offer you one of the best interest rates we can find, no matter what the current rate environment may be.

How does Betterment get the best possible rates?

Similar to how we select the best ETFs in each asset class for your portfolio, we work with a number of program banks to provide you with the best possible rates we can find.

Often, these rates are more competitive than what you could get as an individual depositor. When you deposit with Betterment, you become part of a larger community of savers. Banks can more efficiently support our customer base as a group, rather than as individuals.

The overall size of deposits that come from Savings is attractive to banks. They are willing to offer better rates than they might offer to individual depositors as a consequence, and we pass those benefits on to you.

What causes interest rates to change?

No matter where you bank, the prevailing interest rate environment will have an impact on your interest rate.

Interest paid by banks is heavily influenced by the Federal Reserve, which sets the rate at which banks can loan money to each other. This is known as the Federal Funds Rate. It’s the rising tide that raises all rates, and the receding tide that can also bring them all down.

The Federal Reserve sets a target range for the Federal Funds Rate, rather than aiming for a specific number. Because of this, the Federal Funds Rate can change by a small amount from day to day. That means that your interest can also vary by a small amount every day—think 0.01% to 0.03%—as we experience those changes.

Larger changes to the Federal Funds Rate can occur when the Federal Reserve changes its target range. Likewise, when the Federal Reserve changes policies, the Federal Funds Rate will adjust. Your Savings interest rate will fluctuate in response, although it might take a week or more for the changes to be reflected in the rate you receive.

How do interest rate changes affect me?

Let’s take a look at just how the Federal Funds Rate affects rates at traditional banks. The chart below shows the relationship between what happens to the rates at traditional banks when the Federal Funds Rate goes up or down.

Historical Comparison of the Federal Funds Rate and the Average Bank Rate

Graph showing historical federal funds rate and average bank rate

This chart shows the historical Federal Funds Rate in comparison to the historical national average savings rate. Source data: Federal Reserve and FDIC.

The average rate at banks has been nearly flat throughout the period shown above. The wide spread between the two lines on the graph represents the additional amount of interest we’re able pass on to you because of the way our Savings product is set up. Hypothetically, if our Savings product had been around during the time frame shown on the graph, it would have tracked closely with the Federal Funds Rate.

What will future rates look like?

We expect the Federal Funds Rate to drop in the near future. The Federal Reserve has its next policy meeting tomorrow, and it’s expected that they will announce a rate drop.

If the Federal Reserve lowers its target range, the interest rate on Betterment Everyday™ Savings will generally change by a similar amount. You can expect this to impact rates at other banks as well. In fact, some banks have already been lowering their rates in anticipation.

Below, we’ve extended the previous comparison chart to include a forecast for how the Federal Funds Rate might change in the future.

Potential Future Rates With Forecasted Interest Rate Changes

Graph showing potential future rates

This chart shows the hypothetical future Federal Funds Rate in comparison to the hypothetical future national average savings rate, based on one possible path of future changes in the Federal Funds Rate. The forecasted Federal Funds Rate is based on yield curve data as of 7/26/2019. This chart is hypothetical in nature and based on forecasts. Actual interest earned may differ. Source data: Federal Reserve and FDIC.

As you can see in the hypothetical chart above, the announcement of a rate change by the Federal Reserve will cause changes in the interest rate environment. Because Savings tracks closely with the Federal Funds Rate, you can expect that, in the future, our Savings rate will continue to track alongside the Federal Funds Rate as it goes down.

The structure of Betterment Everyday™ Savings is aligned with our customers’ interests to keep our rate highly competitive—even as interest rates decline overall.

We Do What’s Best For You

As your advisor and as a smart money manager, it’s in our DNA to do what’s best for you. We’ve spent the past decade doing what’s best for your investments, and we are excited to partner with you to make the most of your savings.


Betterment Everyday Savings

* The annual percentage yield (“APY”) on the deposit balances in Betterment Everyday Savings (“Savings”) is and represents the weighted average of the APY on deposit balances at the banks participating in Savings (the “Program Banks”) and is current as of . This APY is variable and subject to change daily. Deposit balances are not allocated equally among the participating Program Banks. A minimum deposit of $10 is required, but there is no minimum balance required to be maintained. The APY cited above is a promotional APY available only to customers who join the waiting list for Betterment Everyday Checking. The APY on deposit balances of customers who choose not to join the Betterment Everyday Checking waiting list is less than the promotional rate, and is as of , subject to change daily. Betterment Securities will receive fees in connection with deposit balances earning the non-promotional APY. See current APY. The promotional APY is available through the end of the year and may be extended in Betterment’s sole discretion. The APY available to a customer may be lower if that customer designates a bank or banks as ineligible to receive deposits.

See Betterment’s Form ADV Part II and Terms and Conditions for additional information on the deposit allocation methodology.

 Betterment Everyday Savings (“Savings”) is offered by Betterment LLC. Clients of Betterment LLC may participate in Savings through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Savings, clients’ funds are deposited into one or more banks (“Program Banks“) where the funds earn a variable interest rate and are eligible for FDIC insurance.  Savings provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities with through Betterment LLC and Betterment Securities. Savings should not be viewed as a long-term investment option. 

Funds held in brokerage accounts while in transit to Program Banks are not eligible for FDIC insurance. Funds deposited into Savings are eligible for up to of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 each at  up to four Program Banks). Even if there are more than four Program Banks, Clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above . The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Savings. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Savings may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Savings, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured.  For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC For more information see the full terms and conditions and Betterment LLC’s Form ADV Part II.

** National average savings account is calculated by taking the FDIC’s national average savings account interest rate for deposits under $100,000 of 0.09% (as of 7/29/2019).

Recommended Content

View All Resources
The Difference Between Vanguard and Betterment

The Difference Between Vanguard and Betterment

I’ve been asked a lot in the last few months in the transition from my old role at Vanguard to my new role as Chief Growth Officer at Betterment – what’s the difference between the two companies?

Betterment Everyday™ Savings Has A Variable APY: What That Means For You

Betterment Everyday™ Savings Has A Variable APY: What That Means For You

Interest rates change over time, but at Betterment, we are always working hard to help give you one of the best rates possible so you can make the most of your money.

Understanding The Inverted Yield Curve

Understanding The Inverted Yield Curve

Our economy is about to make history. June of 2019 marked 10 years of expansion of the U.S. economy, which ties with the previous record spanning March 1991 to March 2001.

Explore your first goal

Safety Net

This is a great place to start—an emergency fund for life's unplanned hiccups. A safety net is a conservative portfolio.

Retirement

Whether it's a long way off or just around the corner, we'll help you save for the retirement you deserve.

General Investing

If you want to invest and build wealth over time, then this is the goal for you. This is an excellent goal type for unknown future needs or money you plan to pass to future generations.

<title>Close</title>

Search our site

For more information and disclosures about the Betterment Resource Center, click here. | See our contributors.