Credit Karma launches high yield savings account
Credit Karma has built a great business providing free credit scores and advice and then charging credit card companies for referrals from potential clients.
Now he’s getting into the game of high yield savings accounts. This week, he launched a savings account that will offer an Annual Percentage Return (APY) of 1.90% in November. The new feature is the first company in the company to offer banking products to its members.
Credit Karma isn’t the first fintech to jump into the high yield savings account game. But its tens of millions of users make the Credit Karma movement meaningful.
âWe spent the first 12 years focusing on helping Americans manage their debt. With over 100 million members worldwide, it made sense for us to jump the balance sheet with Credit Karma Savings, âFounder and CEO Ken Lin said in a press release. âWe want to make savings available to all Americans the same way we did with credit scores. We look forward to helping our members grow their money with Credit Karma Savings.
How it works
Credit Karma has long been a benchmark for consumers for active monitoring of credit reports. The company’s new venture into savings accounts doesn’t mean it turns into a bank, however. Credit Karma is partnering with MVB Bank, Inc., a true West Virginia-based FDIC insured bank, to offer the new account. Members will open and manage their accounts directly from the Credit Karma website and app, but the banks, not Credit Karma, will hold the money.
To be relevant in an already competitive space, Credit Karma’s savings account is fee-free, meaning it won’t charge any monthly service fees, doesn’t require a minimum deposit to open an account, and doesn’t take a share of interest earned. .
A company spokesperson said keeping these accounts widely available at no cost is “just the right thing to do.” When viewing the savings account, members will not see offers for other financial products such as credit cards or personal loans.
The savings account balance will also be displayed on the main dashboard above the member’s free credit score. This main dashboard allows members to switch between Credit Karma’s suite of promoted products, including credit cards, personal loans, and auto loans. (Credit Karma receives payment when members sign up for these products, none of which are actually administered by fintech itself.)
The company claims that anyone, even those who are not currently members of Credit Karma, can open a savings account and can do so in “just four clicks.”
Funds will be FDIC insured up to $ 5 million, compared to the $ 250,000 limit on the amount of insurance a depositor can get from a single bank. The higher amount is possible because a customer’s deposits are spread over a network of banks. (But let’s face it. The difference between $ 250,000 and $ 5 million in insurance will be irrelevant to almost any customer.)
How does it compare to other high yield accounts
Credit Karma, a choice on Forbes Fintech50 List 2019, is not the first leading fintech company to establish itself in the field of deposits. For example, Betterment, Wealthfront, Personal Capital, and SoFi already offer their own versions, all of which give different rates.
The Credit Karma Savings Account has an APY which is just over 21 times the national average, as reported by the FDIC. But that’s not the highest percentage out there. TAB Bank, for example, offers an APY of 2.40% with no minimum deposit and no monthly service fees. Credit Karma says its savings rate âwill move competitivelyâ over time as industry rates fluctuate.
Credit Karma savings account also differs from other more versatile products. Some cash management accounts, including SoFi, offer high APYs with debit cards directly linked to the account. Betterment is also planning to introduce a debit card into its high yield product. Currently, Credit Karma does not offer a debit card with its savings account.
The company claims that while there are competitors offering better rates, Credit Karma has an advantage as a benchmark for a consumer’s overall financial condition.
âWe already have more than 90 million members who already trust us,â said Dana Marineau, Vice-President of Credit Karma and financial lawyer. âThey come to us very regularly for further advice and guidance, and they can see their full financial situation with Credit Karma. So we think that we have a distinct advantage: we make it very easy and very simple, to start saving.
The savings account will offer features to help members see how their balances will increase over time using automated deposits. The company says America is in the middle of a major savings problem – which is true, given that the Fed says many can’t afford a $ 400 emergency – and now is the right one time to help its members plan for a Rainy Day.
âWe think it’s important that there isn’t really a good time to start saving,â says Marineau. âWe just want people to start saving now. “