Apple’s recent move to raise the interest rate on its Apple Card savings account to 4.5% is now prompting a competitor to do the same. Cash App announced today that it will now offer “up to” 4.5% APY (annual percentage return) for Saving cash apps customers, with some caveats. While the Apple Savings account requires customers to qualify for an Apple Card credit card, the Cash App will limit its high rate to its cardholders in a different way.
The company says customers will have to direct deposit $300 or more a month in paychecks to raise their rate to 4.5 percent. This could be more difficult for those who bank elsewhere but use the Cash app for peer-to-peer payments or business purchases. But for those new to the Cash app, it could prove to be an incentive to use the app as their primary account in the future. (Without direct deposit, Cash App’s interest rate is a less notable 1.5%).
To earn the 4.5% rate, customers must also have a Cash App Card, use a personal (not business) account and be at least 18 years old.
Image Credits: Cash application
To be competitive with other banks, Cash App offers other benefits. For example, customers have up to $50 overdraft coverage on their Cash App Card purchases, free network ATM withdrawals and one free withdrawal per month from any ATM, as well as access to call customer support from the app, says company.
The news is another example not only of how Apple’s entry into the savings market is forcing others to raise interest rates to compete, but also how consumers are benefiting from the Federal Reserve’s push to fight inflation. Banks take their cues from the federal funds rate, which has also been raised.
At launch, the Apple Savings Account came in at a hefty 4.15% APY, but Apple raised that to 4.5% last month. At the time, Apple’s rate was almost 10 times higher than the national average.
Other fintechs have followed Apple’s lead to attract customers. Another digital banking service, Step, raised the interest rate to 5% after Apple entered the market, for example.
