Add Aspiration to the growing list of fintech upstarts offering a competitive rate on a new cash account.
The startup announced Tuesday morning the Aspiration Spend & Save account, an online-only account that pays up to 2 percent APY. The rate, which is much higher than what many big banks offer, is earned by making regular deposits or maintaining a certain balance. The cash management account also gives customers unlimited cash back on all of their purchases.
The product comes within a week of Wealthfront announcing an account that pays depositors 2.24 percent yield.
How the Aspiration Spend & Save account yield compares
The Spend & Save account can be opened with as little as $10. To earn the 2 percent APY, you have two options: Deposit at least $1 per month into any of your Aspiration accounts or maintain a balance of $10,000 or more. If you don’t meet one of those conditions, you will not earn any APY for that calendar month.
Even if you earn the 2 percent APY on your deposits, there are higher yields available elsewhere. CIBC Bank offers 2.39 percent APY on its savings account, while Marcus by Goldman Sachs offers 2.25 percent APY. Both accounts require a balance of only $1 to earn the APY. You can compare competitive savings account offers on Bankrate.
However, Aspiration’s yield is up to 20 times the national average of 0.1 percent for savings account, according to Bankrate data. Plus, you will get unlimited cash back on your purchases — a perk that is common for credit cards but not common for debit cards. Currently, Aspiration offers 0.5 percent cash back on every purchase and 1 percent cash back at businesses with a strong social conscience.
Insurance, fees and penalties
You won’t have access to physical branches with the Aspiration account, but you will get free access to every ATM. If an ATM operator charges you a fee, Aspiration will automatically reimburse you.
Aspiration also has a unique business model: Rather than charging you set fees, you decide what’s fair to pay — you can even pick $0. Also, Aspiration will donate 10 percent of its earnings to charities.
Importantly, the new Aspiration Spend & Save account is not a basic savings or checking account. It’s a cash management account that you will open directly through Aspiration.
But Andrei Cherny, co-founder and CEO of Aspiration, says the account offers everything consumers would expect from a checking or savings account, including checks, a debit card and a mobile app. These accounts are also FDIC-insured up to $250,000 per depositor because the deposits are swept into FDIC member institutions.
The launch of the Aspiration Spend & Save account comes on the heels of Robinhood’s controversial plans to enter banking. The free stock trading app had said the deposits were covered by the Securities Investor Protection Corp. — but it subsequently modified the way it described the high-yield account after the CEO of SIPC expressed concerns over the fund’s protection.
Aspiration, meanwhile, said it spent more than a year getting licenses and approvals from the Financial Industry Regulatory Authority as well as 50 states and territories.
Aspiration also offers investing and retirement products.
Perks beyond rate
Like most products delivered by fintech firms, Aspiration’s new account is not wooing you on rate alone. “We’re not trying to be the highest number out there,” Cherny says.
Rather, the firm — whose motto is “Do Well. Do Good.” — aims to provide a respectable rate for consumers who also share the company’s values and ethics of helping to save the planet.
Aspiration, for instance, makes available intriguing features, including the Aspiration Impact Measurement — a metric that scores businesses on how they treat their customers and the environment as well as other factors. Customers will receive 1 percent cash back for shopping at businesses that receive a high score.
What it means for Aspiration
Aspiration’s new cash management account represents part of a big trend of upstarts aiming to reimagine retail banking.
For Aspiration, it marks other big news: The 4-year-old startup is no longer a neobank. Its new account replaces the Summit Account, a checking account where deposits were held at Radius Bank. Now working independently, Aspiration gets to call more of the shots.
“It allows us to make our own decisions about what is right for the consumer,” Cherny says. “When you’re working through a third party, there is just inevitably going to be tension between what their interests are and how they make money and how a business like Aspiration makes money.”