Credit Karma's high-yield savings account will earn you 20 times more than a typical bank
- Credit Karma Savings is Credit Karma's new high-yield savings account product that offers a 1.75% APY as of December 2019.
- These accounts feature a simple application process, no minimum balance requirements, and no fees.
- Credit Karma also says that it will leverage its 800+ bank partner network to optimize the rates members receive over time.
- Open a Credit Karma Savings account today to take advantage of this interest rate »
Credit Karma is a consumer technology company that provides credit score information and advice for free. Its service is immensely popular, now totaling over 100 million members who love getting free access to their TransUnion and Equifax credit scores and reports.
And Credit Karma is now moving into the high-yield savings account market. It recently launched a product called Credit Karma Savings that could help you earn a lot more in interest on your cash. Here's what you need to know.
What is Credit Karma Savings?Credit Karma Savings is a high-yield savings account that currently comes with a 1.75% APY as of December 2019. That rate is over 20 times higher than the national average for a typical savings account.
Credit Karma says it will never charge any fees on your high-yield savings account, and there is no minimum account balance.
In addition to offering attractive rates, Credit Karma says it has simplified the application process. You will need a Credit Karma account in order to sign up. But if you already have one, it only takes a few taps to open your account.
Simply navigate to the Credit Karma Savings page and click "Start Saving."
After you've logged in, Credit Karma will ask you to confirm your Social Security number. This is pretty par for the course for opening a savings account, but it still bears mentioning.
Next, Credit Karma will send you a text message or call you with a special security code.
After you enter your unique code, you're ready to connect your bank account.
Depending on the bank that you use, you may be able to connect your account by simply providing your online banking credentials. That was the case for me.
And then you're done! Your Credit Karma Savings account is created and you're ready to make your first funds transfer.
In all, the application process took me four minutes. That's pretty impressive.
How Credit Karma Savings optimizes your savings rate
Trying to choose the best high-yield savings account can feel like a losing cause. Banks raise and lower their rates constantly, and it can be hard to keep up.
But Credit Karma promises to leverage technology to make sure you always have one of the best rates available.
To do that, it monitors the savings account interest rates of over 800 banks in its partner network. Each month, it optimizes its rates by moving customers' funds to the network banks that are paying the highest yields. If the interest rate changes in a given month, Credit Karma Savings members will see the new rate on the first of the month.
But that all takes place behind the scenes. From the customer's perspective, you'll be managing your money straight from the Credit Karma app.
Is your money safe in a Credit Karma Savings account?
It should be noted that Credit Karma isn't a bank and it has no intention of entering the banking industry. But don't worry, your money will still be insured by the FDIC up to $5 million.
That's because your funds will initially be deposited with MVB Bank, which is providing the Credit Karma Savings banking services.Your money could also be moved to one of Credit Karma's other network banks (to earn you a better rate), but it will always be FDIC insured.
How Credit Karma Savings compares to other high-yield accounts
Recently, several fintech companies have announced high-yield cash accounts. Wealthfront, Betterment, and SoFi have all entered the space, initially offering rates well above 2.0%.
But after a few Fed rate cuts, each of these companies has lowered its APY rates as well. As of today, Credit Karma's rate is in the middle of the pack among these four companies:
- Credit Karma: 1.75%
- Betterment: 1.85%
- Wealthfront: 1.82%
- SoFi: 1.60%
But fintech companies aren't the only ones offering high-yield accounts. Several banks offer competitive rates, too, some of which are still above the 2.0% mark.
For example, Vio Bank savings accounts currently have a 2.07% APY, and HSBC Direct savings accounts have a 2.05% APY.
Keep in mind that some banks will require a certain balance to earn the highest APY, and you'll want to stay away from banks that charge monthly maintenance fees or minimum balance fees.
There's a lot to love about Credit Karma Savings
Credit Karma Savings may be a new product, but it already has a lot going for it:
- The application process is simple (especially if you're already a Credit Karma member)
- The company doesn't charge any fees or require a minimum balance
- The APY is competitive
- It promises to continually monitor over 800 banks for you to make sure you don't miss out on positive rate changes
Plus, you get a company that has a 12-year reputation for using technology in smart ways to improve the financial health of its members.
No, Credit Karma's interest rate isn't drastically higher than everyone else's. But in a way, that makes me feel more confident that it could remain stable over time.If you already have a high-yield savings account, there probably aren't enough extra perks offered to convince you to switch. But for everyone else, Credit Karma Savings could be a strong choice.
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