PayPal is the latest company attempting to attract savers who aren't happy with today's low interest rates from traditional savings accounts.
The financial services company, which has traditionally been used to make digital payments between people and businesses, announced that its new app features include a high-yield savings account called PayPal Savings, which will roll out to U.S. customers in the coming months.
The account, provided by Synchrony Bank, will offer 0.40% annual percentage yield (APY) — although the rate could change before the PayPal Savings is launched — and will have no minimum balance or monthly fees. PayPal said via a news release that customers can automate transfers to PayPal Savings and transfer money between the account and their PayPal balance to make purchases with the platform.
Savings rates have been frustratingly low for years, with the interest rate for savings accounts in the U.S. averaging just 0.06% lately, according to the Federal Deposit Insurance Corporation. Even though the APY of high-yield savings accounts is nowhere near the above 2% we saw in 2019, putting your hard-earned money somewhere with a 0.40% yield is likely tempting, especially as inflation makes it hard for bank account interest rates to match rising prices.
But PayPal Savings' expected APY isn't as high as some of its competitors. Savings accounts for online banks Ally Bank and Marcus by Goldman Sachs currently have an APY of 0.50%, while Vio Bank offers 0.51%. Before choosing which high-yield savings account is best for you, check out Money's list of the best high-yield savings accounts of 2021 in which we compare their APYs, fees and best features.
The move into high-yield savings is the latest attempt from PayPal to establish its platform as more of a holistic finance app rather than just an electronic payment system like Venmo or Cash App.
The PayPal app's other new features include in-app shopping tools, and it will enhance existing features around bill management and getting paid up to two days early with direct deposit, the company said. PayPal also has a buy-now-pay-later offering and allows customers to buy, sell and hold cryptocurrency on the platform.
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