I started with WealthFront back in July of 2019, and back then, the platform recently released their Cash Accounts. When that started, they offered interest rates of 2.24%, and steadily increased it to as high as 2.57%. A lot of people jumped on the WealthFront bandwagon, moving their funds to the platform.
But due to the economic impact of the pandemic, the federal reserve dramatically cut rates and WealthFront was forced to decrease their interest rates as well. As a result, the platform has steadily decreased their rates.
And a recent update on April 19th finally pushed me to move my savings out of the platform. But during the same time, they release a great update that still made me want to stay with WealthFront, and those two things are what we’re going to talk about in this video.
On April 19th, WealthFront announced that they are decreasing their rates, the lowest it’s ever been, to 0.10% APY. From 2.57 to 0.10, that’s a 96% decrease in 2 years. That goes to show you how big of an impact this pandemic has in the economy.
Not gonna lie though, WealthFront is doing such an amazing job in serving its customers. In March 2020, they decreased their rates to 0.26%, but a month later, was able to increase that rate to 0.35%. That was due to the fact that they found a partner bank willing to pay higher interest rates on the deposits they make.
WealthFront was able hold that rate for 1 year, which is the amount of time their deal with their partner bank lasts. Because of this low rate, I decided to act fast and move my funds to an account that currently gives a higher rate. And the bank that I’ve always been eyeing is Ally Bank.
Currently, Ally offers 0.50% APY on their savings accounts, and that is 0.40% higher than WealthFront. And I’ve already moved my emergency funds and tax money to their platform.
And yes, I am rate-chasing on my savings accounts. But I think it is worth it!
While rate-chasing may not be worth it in the short term, it is, however, worth the effort for me in the long term.
For example, if I kept $10,000 in WealthFront, with a 0.10% APY, for 30 days, the account will only generate $0.82 in interest.
But if I moved the same amount of money, with the same timeframe, to Bank B, but with a 0.50% APY, I could receive $4.10 in interest. That’s a $3.28 difference! Let’s make it even more realistic and consider the time it takes to transfer the money and appear in my new bank, which is around 5 days, I would still make $3.41.
But what if the rate changes next month?
If the rate changes or lowers, then it’s totally okay. It’s only natural that banks lower their rate in order to stay profitable and operating, especially in this environment.
The only time this move will not be worth it is if Ally lowers their rate below 0.10% APY, which I don’t believe Ally will do, at least, in the next couple of months. For the past 2 years, Ally drops their interest rates between 0.10% to 0.20% every month or two. And the last time they dropped it was in mid-December of 2020, from 0.60% to what it is now.
It’s been 3 months now, and they haven’t dropped their rates yet below that level. I’m guesstimating that they probably will decrease it this May, but if they did, it would drop around the same levels they have done in the past.
So, I’m sticking with Ally for now when it comes to both of the savings accounts that I moved.
Am I saying goodbye to WealthFront?
No, not yet. While the rate drop was bad news, they also gave some good news.
WealthFront recently released a new addition to their services, and it’s called Self-Driving Money™.
According to WealthFront, with Self-Driving Money™, your “Cash Account allows you to instantly organize your cash into categories and route your money exactly where you want it, so you can effortlessly manage your finances from end to end.“
Basically, they will automate your money from the point you get your money in to their account up to the point of separating them to different accounts, or categories. You can set conditions and parameters when moving your money around, so that you can be as off-hands as you can be with your finances.
For example, I’ll put $2,000 to their Cash Account and the automation will separate $500 to a Bills category, another $500 to a Savings category, another $500 to Rent, and the last $500 to Student Loans. You can use the categories created by WealthFront or you can also create your own categories with a simple tap.
If you’re like me, who likes automation, this is a great way to make finances stress-free. I like watching my money, but I sometimes dread the time when I have to keep moving them around. At least with this feature, it’s done for me and I can focus on other things instead.
But since I moved both of my funds to Ally, what’ll be the use for this?
I intend to keep my WealthFront account because I’m planning to add other savings categories. I’m saving money for travel, which I MIGHT use next year, and for a used car I’m planning to buy two years down the line. I’m going to test out WealthFront’s latest feature using those separate savings goals, and see where it takes me.