Repeating Age-Old Warning About Too Good To Be True Deposit Account Rates (And Applying It To SaveBetter)

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In the 17 years since BestCashCow was founded, we’ve heard countless stories of people looking for savings or CD rates that are just too good to be true, only to end up wishing they kept their wallets.

The importance of staying careful with your savings and deposit dollars cannot be overemphasized. For the most part, it’s money you can’t afford to lose and take unnecessary risk or no risk at all. You can speculate in real estate or the stock market, but when it comes to savings, if something is too good to be true, it probably is.

I’ve warned in the past about everything from Robinhood offering a SIPC-insured (not FDIC-insured) savings account, to uninsured neobanks offering higher rates, to fintechs move your money so you don’t know if it’s insured or where it’s insured.

Now along comes SaveBetter, a platform run by a New York-based LLC that appears to be 100% owned by German fintech Raisin GmbH. The SaveBetter platform allegedly allows savers to open deposit products at multiple partner banks under one account. SaveBetter has partnered with several different banks, including Ponce Bank, Liberty Bank, and Patriot Bank, for at least a few months. It seems to have caught the eye recently by partnering with Sallie Mae Bank and offering penalty-free CDs at rates not offered directly by Sallie Mae to its existing customers. (Thanks Sallie!)

Regardless of the partners, the warning is the same. A quick look at SaveBetter’s terms of service reveals that customers don’t actually hold individual deposit accounts at a partner bank. Instead, they hold a portion of a large deposit account that SaveBetter calls an “omnibus deposit account,” which is held at a small Oregon bank that “does not provide advice to consumers on consumer accounts. deposit”.

There is nothing in the language of the FDIC or its history that would lead anyone to believe that your deposits would in fact be protected when held in some sort of pool account. In fact, the involvement of one fintech and multiple accounts greatly increases the likelihood of losing it all due to fintech failure or uninsured bank failure.

While I hope no one loses their hard-earned money, the lawyer in me looks forward to seeing how this one might be judged if and when SaveBetter fails.

It is proven and true and easy to save your wealth by joining FDIC and NCUA Rules and Limits. Plus, it’s so easy to open multiple savings and CD accounts online. In the meantime, it’s sheer folly to become a German fintech guinea pig in order to gain unnecessary comfort and maybe some extra basis points.

Ari Socolow

Ari Socolow: Ari Socolow is chief economist and editor of BestCashCow. He is particularly interested in issues relating to banking transparency and the climate crisis. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert in local and national savings accounts, CD products, mortgage and loan products, and credit card rewards products. credit.

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