Cash App has announced a new high-yield savings feature that lets its Cash Card users earn an interest rate of 4.50%. The announcement was made Feb. 15, 2024, on X (formerly Twitter). The catch is that to earn the high yield, users will need to receive direct deposits of at least $300 each month.
What to know about Cash App’s savings feature
The savings balance acts as a sub-feature within the Cash App balance. To access the savings feature, users will have to sign up for the Cash Card, which is Cash App’s free debit card.The minimum to open the savings feature is $1. There are no monthly maintenance fees. You must receive direct deposits of at least $300 each month to earn the 4.50% rate.You can set up savings goals with specific dollar targets. You can also build up your savings balance with Cash Card roundups. With this option, you round up your spending transactions to the nearest dollar and save the difference.There is no monthly limit on the number of transfers you can make between your savings balance and your Cash app balance, or with an externally linked account. Cash App is a financial platform, not a bank. As a Cash App card user, your spending and savings balances are FDIC-insured through Cash App’s partner bank, Wells Fargo. Interest on the savings balance is paid by Wells Fargo.
Why you should care
The average savings account interest rate as of February 2024 is only 0.46%, according to the Federal Deposit Insurance Corp. Cash App’s savings yield, however, is competitive with some of the best high-yield savings accounts available. Putting your money in a high-yield product that earns 4.50% can help your savings grow much faster over time. Here’s an example:According to a compound interest calculator, if you have a $1,000 balance in an account that earns 4.50%, you would earn just under $47 in interest after a year. That same $1,000 in a basic savings account that earns only 0.5%, for example, would earn only about $5 in that same time frame. Neither amount makes you instantly rich, but the extra money adds up over time.With Cash App, you can have the convenience of a mobile money-transfer app linked to high-yield savings. Cash App’s competitor, Apple, also offers a high-yield savings product through its mobile app, but users have to open an Apple credit card to access it. Cash App’s offering is a nice option if you don’t want to open another credit card or are concerned that your credit card application would be denied.If you’ve had trouble opening a bank account, you may be missing out on the benefit of the high savings rates offered by some banks. But with Cash App, you don’t need to link an external bank account to fund your spending or savings account. Instead, you can add money through direct deposit or cash deposits at participating retailers. (There is a $1 fee for each cash deposit.) So if you don’t have a traditional bank relationship, this feature is a way to access a high yield on your savings.
What to look out for
To earn any interest on your savings with Cash App, you’ll need to be at least 18 and have a Cash App card on a personal account, not a business account.If you don’t meet the $300 direct deposit requirement (from your paycheck or tax returns, for example), you’ll earn a much lower rate of 1.5%.You’ll still need your spending Cash App balance to send money to friends or buy stocks or cryptocurrency. The savings balance is not meant for spending or ATM withdrawals.
More about Cash App
The Cash App interest rate can change at any time. (This is typical with savings accounts.) Cash App is one of the more well-known money transfer apps. You can read more about it in our Cash App review.
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Margarette Burnette writes for NerdWallet. Email: mburnette@nerdwallet.com. Twitter: @Margarette.
The article Cash App’s New High-Yield Savings Earns 4.50% originally appeared on NerdWallet.
