Dive Brief:
- Wealth management app Betterment has lowered the interest rate for its new high-yield savings account from 2.69% to 2.44%. The decrease, which comes just two weeks after the company announced the new account, follows the Federal Reserve's announcement that it will lower the interest rate for the first time in a decade.
- Wealthfront, another robo-adviser, which also debuted its own high-yield account in March, also lowered its rate from 2.57% to 2.32%.
- Despite the drops, Betterment and Wealthfront, as well as digital banks, are still offering some of the industry's highest interest rates for savings accounts.
Dive Insight:
Although Betterment's headline-grabbing 2.69% yield was the industry's highest when it was first announced last month, the rate was promotional and only meant to apply to cash deposited through 2019 before dropping to 2.43%.
Betterment and Wealthfront, which aren't banks, are able to offer their high-yield savings accounts through partnerships with financial institutions where the federally insured deposits are held.
Digital bank Green Dot also turned heads last week when it announced an industry-leading savings account with a 3% annual yield rate on savings of up to $10,000. Green Dot's rate is 30 times the national average, according to Bankrate.com.
Michael Keeslar, Green Dot's general manager of consumer products, told Banking Dive its branchless model eliminates the overhead associated with traditional banks, making its 3% yield sustainable and intended to be permanent.
Before the Fed's rate drop July 31, Green Dot's founder and CEO, Steve Streit, told CNBC he didn't expect that a cut would affect the new product.
"If rates were lowered precipitously quarter after quarter, we may have to look at it," Streit said. "But there's certainly nothing in the near term that we're worried about."
