Sophisticated stock traders have gravitated towards TD Ameritrade over the years.

For over a decade, TD Ameritrade has had the best trading platform in the online trading business, and with the Sink or Swim acquisition they also have a great options business.

TD Ameritrade’s fees have not been the lowest, but TD Ameritrade was always competitive and was the first to match Schwab’s move to zero.

Most importantly, TD Ameritrade has always treated its active customers with respect. This has manifested itself in two ways.

First, TD Ameritrade never tried to sneak in hidden fees. Many online brokers routinely try to sneak in “ADR fees”, “reorganization fees”, inactivity fees and all sorts of transfer fees. At some point early in the game, TD Ameritrade got the message that their customers would tolerate this, and for at least the last decade or so it has not played that game.

Second, TD Ameritrade has always been very generous to its customers with retention and now money bonuses. For years, TD Ameritrade handed out United, Delta and American Airlines miles generously for small cash transfers in. More recently, customers with even small balances can expect to receive hundreds of dollars each year just by asking for a retention bonus. And, even over the last several weeks, TD Ameritrade has been offering huge bonuses to customers bringing new money to the bank (paying as much as $6,000 for a $2,000,000 transfers in).

Now, along comes Schwab, a company that has for decades targeted inexperienced and unsophisticated investors with products that generated high fees for the bank.

It is unclear where this goes for those who have developed loyalty to TD Ameritrade and enjoyed its service over the years, but on its face this looks a lot like the Marriott – Starwood acquisition.

The last few months have seen the emergence of non-bank savings products that purport to be FDIC-insured often to amounts higher than the FDIC limits that online banks are able to offer ($250,000 for individuals, $500,000 for couples).

Whereas we saw neo-banks emerge in late 2017 and early 2018 as all sorts of other non-FDIC insured products were offered, these latest products are offered by large roboadvisors and the like and target high net worth investors.

BestCashCow cannot guarantee the application of these FDIC limits, and advises they all be avoided until more clarity is provided by the institutions and by the FDIC.

The products that concern us are as follows:

1. Credit Karma Savings

Credit Karma is known for its free credit-scoring services and nuisance emails to those who register. It announced in November 2019 that it has partnered with a series of national banks to offer a competitive online savings product with FDIC insurance up to $5 million. The product has been initially offered with a starting 1.90% rate.

Our concerns: If you read the fine print, Credit Karma states that the product is offered by MVB Bank and not by Credit Karma. It also explicitly states that FDIC coverage does not apply until they move your money to one of Credit Karma’s so-called network banks and that your actual FDIC insurance limit may be lower than $5 million if they do not move it (presumably, much lower). Credit Karma would have to have at least 20 network banks to provide coverage to $5 million, and they don’t disclose who the network banks are.

2. Betterment Everyday

Betterment is a roboadvisor targeting young investors who are unable to understand simple ETFs and no load mutual funds. Its Everyday Cash Reserve program is designed to deliver a competitive savings rate for an individual up to $1 million by dividing deposits between four so-called program banks. Betterment has a list of twelve banks from which a depositor’s four program banks are selected. As of the day that this article is written, Betterment is offering 1.85%.

Our concerns: Betterment itself states that this program is intended only for cash that you are deploying in Betterment products (The SIPC covers up to $500,000 a cash that is in brokerage accounts and intended to be invested in investment products anyway). The list of program banks may include one or more that is defined as at risk by the FDIC. The full amount of your money is at risk during transfer periods and when it is not held by program banks. If you have another accounts with a program bank, your total deposits at that bank are only insured to $250,000.

3. Wealthfront Cash

Wealthfront is a more refined, California-ish version of Betterment, but equally unnecessary for investors with even the most basic investment understanding. Their savings product is similar to Betterment’s, except that their list of program banks is limited to four so you will always know where your money is deposited. You can also opt out of individual program banks if you already have deposits at that account. Wealthfront is currently offering 1.82%.

Our concerns: Our concerns about Wealthfront’s savings program mirror those we have with Betterment’s.

4. SoFi Money

SoFi is the company that advertises all over the place about helping to get millennials out of debt and recently became a broker dealer. Again, their product is similar to Betterment’s, except that their list of program banks is limited to six so you will always know where your money is deposited. SoFi Money is currently offering only 1.60%.

Our concerns: Our concerns about SoFi money mirror those above.

5. Others - Robinhood, Empower, Etc.

Robinhood, the trading app that tried earlier to offer a savings account entirely insured by the SIPC, and Empower, the financial coaching app, also offer similar savings products, but these outfits are so silly and the products are not competitive so depositors and investors should not be considering these.

Bottom Line: There is really no need to play with these. Online banks provide complete FDIC coverage up to FDIC limits with no ambiguity. To boot, there are many that still offer much higher savings rates than these companies are offering. Plus, they also offer short-term CDs with much higher rates.

The Federal Reserve lowered the Fed Funds target to 1.50% to 1.75% on October 31, marking its third rate cut this year and causing many of the most recognized online banks to lower their savings’ offers below 2%.

The paradox is that the points where it is hard to get excited about cash are those where most banks are lowering their rates and where it becomes more important to be sure that you are maximizing your returns on cash.

And, the reality is that you can still get over 2% APY in online savings and money market accounts from online banks. As of today, BestCashCow shows over 30 online savings and money market accounts that deliver over 2%. Of course, all of these banks are safe for deposits up to FDIC limits, but those who insist of depositing assets only with well-recognized names will find that a solid list includes names such as HSBC, Salem Five and Live Oak. And, of course, you may still find high savings and money market rates at banks and credit unions near you.

Check local savings rates here.

Check local credit union savings rates here.

We’ve written about No Penalty CDs before as a way to lock in a higher rate than savings accounts offer, without risk. While rates of these instruments have fallen, those who have savings accounts at Marcus, Purepoint, Ally or CIT should still consider moving their money into these products for a slight boost and to protect against the possibility that Trump is not removed from office and rates continue to fall in 2020. See No penalty CD rates here.

One-year CDs continue to offer a premium over savings accounts for those who do not anticipate needing access to their capital. Sallie Mae and Live Oak Bank are still offering 2.35% and 2.30% APY, respectively, and these accounts have early withdrawal penalties of only three months’ interest. CIBC Bank is offering 2.25% with an early withdrawal penalty of one month of interest. Again, you may find better rates locally.

Check local CD rates here.

Check local credit union CD rates here.

Finally, it is worth noting that we still see online 2-year CD rates as high as 2.60% and 5-year CD rates as high as 3.00%, and these products could be interesting for those who think low rates are here for some time and do not require access to their capital.

Have a great month and Happy Thanksgiving!