Betterment Cash Reserve Review 2022

Best for Extra FDIC Insurance Coverage

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Betterment is a lot more than a robo-advisor. With feature-filled checking and savings products, it can handle most, or potentially all, of your money needs. For example, Betterment Cash Reserve is its savings product with very high levels of FDIC insurance coverage and an above-average interest rate.

The Betterment Cash Reserve account is a competitive savings product from Betterment. This unique savings product works in conjunction with partner banks, which gives you more FDIC protection than with the typical high yield cash account. The interest rate is much higher than the typical brick-and-mortar bank but falls short of leading online banks.

Our Betterment Cash Reserve review is covering how this account works as well as the other cash management options this leading robo-advisor provides.

Betterment Cash Reserve Review

Commissions & Fees - 10
Customer Service - 7
Ease of Use - 8
Savings Options - 8
Rates - 8

8

Total

The Betterment Cash Reserve account works in conjunction with partner banks, giving you more FDIC protection than with a typical savings product. Its interest rate is higher than traditional banks but it's rate falls short of other online banks.

What Is Betterment Cash Reserve?

Betterment Cash Reserve is a savings product with some unique features that make it great for people who have existing accounts at Betterment and want to get the maximum possible FDIC insurance coverage for their cash.

Betterment Cash Reserve is an online savings product. That means you can't go to a bank to deposit cash or ask questions. But you can easily and quickly transfer money between your Betterment accounts, including Cash Reserve, with one login.

Instead of holding your cash at Betterment, funds deposited into this account are held by one or more partner banks. This allows you to get up to $1 million in FDIC coverage with one account owner or $2 million in coverage for joint accounts.

As of September 26th, 2022, the current interest rate for this account is 2.25%. That's about five times the national average and 40 times what you would get with the biggest traditional banks in the United States.

You can still find higher interest rates with many mobile banks, where high-yield savings accounts can pay upwards of 5% APY. But if you're investing with Betterment's robo-advisor already or looking for a flexible cash management account, its Cash Reserve makes a lot of sense.

Betterment Cash Reserve APY Disclosure - Annual percentage yield (variable) is as of 9/26/2022. Cash Reserve is only available to clients of Betterment LLC, which is not a bank, and cash transfers to program banks are conducted through the clients’ brokerage accounts at Betterment Securities.
For Cash Reserve (“CR”), Betterment LLC only receives compensation from our program banks; Betterment LLC and Betterment Securities do not charge fees on your CR balance.

Betterment Cash Reserve Features

AccountsSavings, Checking, Money Market, CDs
AccessWeb Based, iPhone App, Android App, Blackberry App
Amount of Branches0
ATM Reimbursement
Online Deposits
FDIC Insurance
Customer ServiceBetterment support is available by phone and online

Like most savings products, Betterment Cash Reserve is just a place to store your cash and earn interest. Here are some unique features of this account that make it stand out from the crowd:

  • No fees: There are no fees for any regular activity. Partner banks compensate betterment, so it doesn't need to charge customers to make money.
  • High FDIC insurance coverage limits: Because multiple partner banks hold balances, FDIC coverage is up to $1 million for solo accounts and $2 million for joint accounts.
  • No maximum withdrawal limit: This is technically not a savings account by Federal Reserve standards. That means you can withdraw more than six times per month with no penalties or fees.
  • Spending/saving analysis: Integrated tools in the Betterment app help you find ways to improve your savings habits and meet target balances. This works best when you also have Betterment checking and investment accounts.
  • Quick transfer times: This account features instant internal transfers between Betterment accounts and one- to two-day transfers to external accounts with no limit on how much you can move at a time.

How Does Betterment Cash Reserve Work?

In most ways, Betterment Cash Reserve works like any other online savings product. Here is how some of the features work to manage your money.

Savings Spread Across Multiple Banks

The most complex feature is all handled behind the scenes, so you don't have to worry. If you dislike any bank on the list, you can call Betterment customer service and opt-out of that specific depository institution.

Several notable partner banks include:

  • The Bancorp Bank
  • Barclays Bank Delaware
  • Citibank
  • Cross River Bank
  • HSBC Bank USA
  • State Street Bank and Trust Company
  • Wells Fargo Bank

These banks use demand deposit accounts and money market accounts to hold the funds in your name. But you never have to interact with the partner banks directly. On the surface, it's all Betterment.

Enhanced FDIC Coverage

Each bank account is FDIC insured up to $250,000 per depositor. That means you usually get $250,000 in FDIC coverage for an account on your own or $500,000 for joint accounts.

But Betterment holds your funds at up to four partner banks at a time. And this means you can get four times the FDIC insurance coverage. If Betterment goes out of business, you are guaranteed by the U.S. government to get your money back up to $1 million for your own account or $2 million for joint accounts.

Managing Your Account

Accounts are managed with the Betterment mobile app and website. Both are easy to use and navigate. The apps offer excellent integration of Betterment investment, checking, and Cash Reserve accounts.

The Betterment Checking Account – Another Account to Consider

The Betterment Cash Reserve is an excellent place to hold extra cash you're not investing so it still earns interest. But it works well in combination with Betterment's Checking account since you can transfer money to this account for easier spending.

Perks of the Betterment Checking account include:

  • No fees
  • Up to $250,000 in FDIC insurance
  • Easily mobile management
  • Cash-back rewards from brands like Adidas, Dunkin', Sam's Club, and Walmart
  • ATM fee and foreign transaction fee reimbursement

Betterment Cash Reserve vs. Competitors

If you're using Betterment's robo-advisor service, opening a Cash Reserve account is an excellent idea. This makes it easy to store idle cash somewhere it earns meaningful interest, and you can always move the money over to your investment account when you want to put your money to work.

However, there are other cash management accounts and online bank accounts you can also consider.

HighlightsAlly BankWealthfront Cash

Betterment Cash Reserve
Rating8/107.5/108/10
AccountsSavings, Checking, Money Market, CDsSavings, Checking, Money Market, CDsSavings, Checking, Money Market, CDs
Online Deposits
Physical Branches
FDIC Insurance
ATM Reimbursement

If you want to try out another top robo-advisor, Wealthfront is an excellent contender. And its cash account currently pays 1.40% APY, which is higher than Betterment. It also charges 0.25% in annual fees on the robo-advisor side of things like Betterment. You can read our post on Betterment vs. Wealthfront for a complete comparison.

As for Ally, we like this online-only bank for its range of accounts and investing options. For starters, you can open an Ally Invest or use Ally's robo-advisor to start investing. It also has an excellent high-yield savings account that pays over 1% APY at the time of writing, plus one of the best money market accounts.

Pros & Cons

pros

  • No monthly fees
  • Enhanced FDIC insurance of up to $1 million for individual accounts and $2 million for joint accounts
  • No minimum balance requirements
  • Quick transfer times

cons

  • You can find higher interest rates with many online-only banks
  • You don't get a debit card or checks

Bottom Line

Betterment Cash Reserve is high-quality savings product from a big name in robo-advising. It's best for its high FDIC insurance protection and above-average interest rate. However, they do not have the best interest rate around.

If you already have accounts at Betterment, adding a savings product could make sense. And it's also a good choice if you have a high net worth and want to keep a lot of cash protected with FDIC insurance.

Is Betterment FDIC Insured?

Yes, Betterment's Cash Reserve account and Checking account have FDIC insurance of up to $250,000. You can also get enhanced FDIC insurance for the Cash Reserve account of up to $1 million for individual accounts and $2 million for joint accounts. Your investments with Betterment also have SIPC insurance.

Does Betterment Have a High-Yield Savings Account?

Betterment's Cash Reserve account is similar to a savings account in that it pays a high interest rate on your balance. However, it's not technically a savings account, so you don't face the same withdrawal limits and restrictions.

What Is Betterment's APY?

Betterment's current interest rate for its Cash Reserve account is 2.25%.

Betterment Cash Reserve Disclosure - Betterment Cash Reserve ("Cash Reserve") is offered by Betterment LLC. Clients of Betterment LLC participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients' funds are deposited into one or more banks ("Program Banks") where the funds earn a variable interest rate and are eligible for FDIC insurance. Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities through Betterment LLC and Betterment Securities. Cash Reserve should not be viewed as a long-term investment option. Funds held in your brokerage accounts are not FDIC‐insured but are protected by SIPC. Funds in transit to or from Program Banks are generally not FDIC‐insured but are protected by SIPC, except when those funds are held in a sweep account following a deposit or prior to a withdrawal, at which time funds are eligible for FDIC insurance but are not protected by SIPC. See Betterment Client Agreements for further details. Funds deposited into Cash Reserve are eligible for up to $1,000,000.00 (or $2,000,000.00 for joint accounts) of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 for each insurable capacity—e.g., individual or joint—at up to four Program Banks). Even if there are more than four Program Banks, clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $1,000,000.00 (or $2,000,000.00 for joint accounts). The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured. For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see the full terms and conditions and Betterment LLC's Form ADV Part II. 

Eric Rosenberg

Eric Rosenberg is a finance, travel and technology writer in Ventura, California. He is a former bank manager and corporate finance and accounting professional who left his day job in 2016 to take his online side hustle full time. He has in-depth experience writing about banking, credit cards, investing and other financial topics and is an avid travel hacker. When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers and spending time with his wife and little girls.

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2 Comments

  1. You claim: “Not the best interest rate around” variaible 4% APY. which online savings account is greater? The online links show banks ranging from 1-2%APY. could you provide some examples?

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