Wealthfront cash account 2.57% APY

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mathguy3021
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Wealthfront cash account 2.57% APY

Post by mathguy3021 » Sat Jul 20, 2019 11:14 pm

I just opened a wealthfront cash account with $1 million of FDIC insurance on cash deposits and a high 2.57% APY. I will move my entire emergency savings from discover bank to this cash account. I will also move some money from the vanguard federal money market fund in my taxable brokerage account to this cash account. Is wealthfront a safe and reputable place to keep cash for emergencies?

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abuss368
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Re: Wealthfront cash account 2.57% APY

Post by abuss368 » Sat Jul 20, 2019 11:37 pm

Don’t know much about them other than they have grown over the past few years.

Moving our portfolio to Vanguard was the best portfolio decision we ever made.
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ohai
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Re: Wealthfront cash account 2.57% APY

Post by ohai » Sun Jul 21, 2019 12:28 am

You just said that the accounts are FDIC insured. So, I don't see why it is less safe than other places.

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mathguy3021
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Re: Wealthfront cash account 2.57% APY

Post by mathguy3021 » Sun Jul 21, 2019 12:37 am

ohai wrote:
Sun Jul 21, 2019 12:28 am
You just said that the accounts are FDIC insured. So, I don't see why it is less safe than other places.
Wealthfront is technically a brokerage firm so as soon as you transfer money to the cash account, the money is not FDIC insured until it is deposited into one of the FDIC insured banks. I see this short window of time as a slight risk that does not exist with traditional or online banks with FDIC insurance. Wealthfront is covered by SIPC, which doesn't have the same level of safety and guarantee as FDIC.

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whodidntante
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Re: Wealthfront cash account 2.57% APY

Post by whodidntante » Sun Jul 21, 2019 12:38 am

mathguy3021 wrote:
Sun Jul 21, 2019 12:37 am

Wealthfront is technically a brokerage firm so as soon as you transfer money to the cash account, the money is not FDIC insured until it is deposited into one of the FDIC insured banks. I see this short window of time as a slight risk that does not exist with traditional or online banks with FDIC insurance. Wealthfront is covered by SIPC, which doesn't have the same level of safety and guarantee as FDIC.
Did you just answer your own question? :happy

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mathguy3021
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Re: Wealthfront cash account 2.57% APY

Post by mathguy3021 » Sun Jul 21, 2019 1:00 am

whodidntante wrote:
Sun Jul 21, 2019 12:38 am
mathguy3021 wrote:
Sun Jul 21, 2019 12:37 am

Wealthfront is technically a brokerage firm so as soon as you transfer money to the cash account, the money is not FDIC insured until it is deposited into one of the FDIC insured banks. I see this short window of time as a slight risk that does not exist with traditional or online banks with FDIC insurance. Wealthfront is covered by SIPC, which doesn't have the same level of safety and guarantee as FDIC.
Did you just answer your own question? :happy
yes. I did more research on the cash account and figured it out. It is still worth it. Wealthfront is very unlikely to lose my cash before the deposit.

7eight9
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Re: Wealthfront cash account 2.57% APY

Post by 7eight9 » Sun Jul 21, 2019 9:59 am

Not a bad rate. The OP could likely do a bit better if they are willing to chase sign-up bonuses, open reward checking accounts (and do requisite activities) and open accounts like Netspend or DCU that pay 5-6.17% interest. Right now there is a discussion about the bonus Marcus is offering - 1% on up to $50,000 of new money. Simple.com also has a bonus based on $10,000 deposit. It all depends on how much effort one wants to make to chase the best rate.
Link to Marcus discussion --- viewtopic.php?f=2&t=285961
I guess it all could be much worse. | They could be warming up my hearse.

am
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Re: Wealthfront cash account 2.57% APY

Post by am » Sun Jul 21, 2019 10:06 am

Will this rate last or is this a short term rate to draw In customers?

Jags4186
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Re: Wealthfront cash account 2.57% APY

Post by Jags4186 » Sun Jul 21, 2019 10:38 am

am wrote:
Sun Jul 21, 2019 10:06 am
Will this rate last or is this a short term rate to draw In customers?
You should call and ask them.

am
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Re: Wealthfront cash account 2.57% APY

Post by am » Sun Jul 21, 2019 10:54 am

Jags4186 wrote:
Sun Jul 21, 2019 10:38 am
am wrote:
Sun Jul 21, 2019 10:06 am
Will this rate last or is this a short term rate to draw In customers?
You should call and ask them.
As if they’d admit it’s a teaser rate :D

It’s yielding more than mm at vanguard, makes me think difference is coming out of their profits, but not for long.

drk
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Re: Wealthfront cash account 2.57% APY

Post by drk » Sun Jul 21, 2019 2:17 pm

In one of the many other threads about this account, indexfundfan shared a blog post from the CEO about the offered rate:
indexfundfan wrote:
Sat Jul 13, 2019 4:46 pm
SlowMovingInvestor wrote:
Sat Jul 13, 2019 2:55 pm
With the big online banks (Ally, Marcus, Purepoint) dropping rates, I suspect many of these smaller banks will do the same except under limited circumstances.

Whereas Wealthfront might see it as a marketing expense so they might keep it going for a while. Although I wonder if it's possible to find out from one's Wealthfront statement, how much interest the banks are actually paying and how much Wealthfront is dipping into it's own reserves to fund.
Their CEO says they are not allowed to pay more than what they earn (if you can believe him)

https://blog.wealthfront.com/why-did-al ... wer-their/

am
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Re: Wealthfront cash account 2.57% APY

Post by am » Sun Jul 21, 2019 3:17 pm

Yield chasing over 10,20,30 basis points is a loser. You have to open new accounts, risk rates dropping, identity theft, complicating your financial life, complicating matters for heirs, etc. 30 basis points on 100k is 300 bucks. After tax it will be less, for some of us 1/2.

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