Note: As of November 1, 2019, the interest rate on the Wealthfront Cash Account is 1.82% APY. Read more about it here.
Today, the annual percentage yield (APY) on the Wealthfront Cash Account is decreasing from 2.32% to 2.07%. This change comes as a result of the Federal Reserve’s decision to lower the target federal funds rate by 0.25% to 2.00%. While a lower APY isn’t exactly news we’re happy about, this new rate is still 20 times higher than it would in a traditional bank savings account, according to Bankrate.com.
In the clearest terms, here’s what a lower APY on your Wealthfront Cash Account means for your money: a 0.25% rate decrease means that every $1,000 in your account will now earn $2.50 less in annual interest.
So why is the APY on your cash account lower after the Federal Reserve cut rates? As you know, the fed funds rate is the rate at which banks lend each other funds overnight, meaning a rate decrease affects nearly every financial institution and thus consumers directly. The impact isn’t all bad: when the rate goes down, so do mortgage rates. But the rates on high-yield savings accounts and Certificates of Deposit (CDs) go down, too — and so does the rate on the Wealthfront Cash Account.
Unfortunately, there’s nothing we can do to make the Wealthfront Cash Account immune from cuts to the fed funds rate — when the Fed lowers rates, we have to follow suit. But here’s what we can do: we’ll talk to you when things change. We promise to continue keeping you as informed as possible about what’s happening with your money. You already know we believe your money should be making money for you and not your bank, but beyond that, we think you deserve to genuinely understand what’s going on with your money. For example, before the Fed cut rates earlier this year, we told you that if they did, the APY on your Wealthfront Cash Account would go down too. Your ability to grow your money is firmly at the center of everything we do, so we have no reason to keep you in the dark. It’s easy for us to be transparent about what we’re doing and why. (Have more questions about what’s going on with your money? Hit us up.)
And even when rates drop, you’ll still enjoy everything else you love about Wealthfront and your cash account — unlimited free transfers, no fees, and your cash is covered by FDIC insurance for up to $1 million through our partner banks, all within a consolidated financial ecosystem that makes it simple for you to manage your savings and investments without having to log in and out of multiple accounts. Your cash is still growing, and we’re always looking for new ways to pass along more interest to you. The essential differences between us and traditional banks will keep benefitting you, and market fluctuations like this only serve to prove it.
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Cash Account is offered by Wealthfront Brokerage LLC (“Wealthfront Brokerage”), a member of FINRA/SIPC. Neither Wealthfront Brokerage nor its affiliates is a bank. We convey funds to institutions accepting and maintaining deposits. The cash balance in the Cash Account is swept to one or more banks (the “program banks”) where it earns a variable rate of interest and is eligible for FDIC insurance. FDIC insurance is not provided until the funds arrive at the program banks. FDIC insurance coverage is limited to $250,000 per qualified customer account per banking institution. Wealthfront uses more than one program bank to ensure FDIC coverage of up to $1 million for your cash deposits. For more information on FDIC insurance coverage, please visit www.FDIC.gov. Customers are responsible for monitoring their total assets at each of the program banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. The deposits at program banks are not covered by SIPC.
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