Should You Get a Savings Account from Cash App?
You’ve already got the Cash App on your phone and it is a super easy way to send money to friends or family. Heck, you can even get a debit card from them and use it to access your Cash App balance when you’re in brick-and- mortar stores or shopping online.
Now, Cash App is offering a savings account product.
I mean, why not save money on the same app where you spend it so easily.
Except, well, the Cash App savings account doesn’t really work like traditional savings accounts OR even nonbank/neobank/fintech savings accounts.
Jason Mikula at Fintech Business Weekly highlights the key problems with the Cash App savings product:
Users earn no interest on their savings. In a rising rate environment, where other digital bank accounts/wallets offer rates as high as 3.75% APY, this is a meaningful distinction, though users who hold small balances may value convenience over the few dollars in interest they would earn.
No FDIC insurance (unless users hold Cash App’s debit card, Cash Card). The likelihood of Block going bankrupt seems remote, but, in a climate of heightened sensitivity post-crypto meltdowns, this is a curious choice.
So, this isn’t REALLY a savings account. It’s just another place within the app to hold some money before you “activate” it for spending.
Sure, Cash App may eventually develop a savings product — and this could be a precursor to that — but, right now, it’s really not worth doing from a customer perspective.
Mikula speculates that Cash App is trying to capture money coming in to consumer accounts as a result of tax refunds. So, they’re rolling out a product quickly even though it lacks some key features that would benefit customers.
As he notes, regular Cash App users may value the convenience of maintaining a savings balance on the app — but other than that, the utility of this new product is about the same as its interest rate — ZERO.
I reported earlier on Cash App getting into the small-dollar loan business — this also turns out to be a bad deal for consumers:
Is Cash App Offering Loans at 260% Interest Rates?
Cash App offers loans up to $600, now at 1 million loans a month
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