How does Credit Karma savings work and how does it earn more money
In a nutshell, putting your cash in a high interest savings account that doesn’t charge fees and can be started with just $1.
What is a high yield savings?
A high yield savings account is simply a savings account that pays a high interest rate. The key difference from a traditional savings account is the interest rate paid on the funds.
One caveat of opening a high yield savings account is that these typically require a good chunk of money to open. In addition, there are usually maintenance fees charged to the account, which can be avoided by having a hefty balance.
Related: 5 Benefits of a Savings Account
Its a numbers game though. Some high yield savings indicate there is no minimum to open the account, but the balance you must maintain to avoid fees may be pretty high. Something that is not always possible to do, so the maintenance fees end up absorbing part of what is earned with the interest rate. However, earning more interest for your savings is now possible for everyone through a Credit Karma high interest rate savings account.
In October of 2019, Credit Karma introduced a new way to save money by offering a savings account with a high interest rate and no maintenance fees.
What is Credit Karma?
Credit Karma is the company that allows consumers to monitor their identity for free, get free credit scores and several other free tools and resources to help consumers navigate finances. Overall, Credit Karma aims to help consumers make better financial decisions. It’s been around since 2007. Currently, it has over 85 million members who give it great reviews and has earned a good reputation.
Here’s a clip of Credit Karma CEO discussing the high interest rate savings account and their business model :
In case you didn’t watch it, CEO Ken Lin explains that there is a savings crisis in America, where often consumers don’t have even $500 saved. He aims to change that by making it easy for everyone to start saving. However, Credit Karma is not a bank, but rather a financial resource site. What they have done in order to offer their customers a high interest rate savings is partner with MBV Bank, member Federal Deposit Insurance Corporation (FDIC) insurance for their banking services and hold your deposit, thus stay competitive within the savings account market.
While there are a lot of high yield savings accounts to choose from, in my opinion the biggest advantages of a Credit Karma savings is that you can get started by funding your account with just $1. It’s also easy to sign up.
How to set up a Credit Karma Savings
The first step is to sign up for a free Credit Karma account. (This will also give you access to all their resources and finance calculators, free credit report, tax information, retirement planning and so on).
- Enter your email and choose a password
- Enter personal details
- enter your name, address, birth date and last 4 digits of your social security number (so you can get your free credit report)
- Once you’ve joined Credit Karma you can proceed to open your savings account
- Confirm your email address – Look for an email from Credit Karma to verify your account. If you can’t find it check the spam folder. Open the email and follow the directions to confirm your account.
- Confirm your Social Security Number
- If prompted, you may also need to confirm the email address and the phone number associated with your Credit Karma account.
- You should be redirected to Credit Karma site
- Log in and select the option Start saving
- navigate to the savings page section
- Review disclosures & terms
- Make a deposit
- To deposit funds into your Credit Karma Savings account you can connect an external bank account and make a transfer at least $1.
You also have the option to set up automatic deposits and adjust frequency to grow your savings
Credit Karma is running a sweepstakes where you can win 20K win when you open a savings account and fund it a minimum of $1
Here are some pros & cons about Credit Karma’s savings account:
- No fees
- Funds in your Credit Karma savings account are FDIC-insured up to 5 million
- High interest rate
- $1 to open
- Simple online/app management
- No physical bank
- all transactions are online
- No ATM card
- Cash withdrawals are not immediately available
To withdraw your money there is an extra step, which depending how you look at it, its both good or bad. To make a withdraw, you have to log in to Credit Karma account to make a cash transfer to your connected bank account, so cash is not immediately accessible. If you want to have immediate access to cash this wouldn’t be a good account for you. A high yield savings account is better suited for saving towards a dream vacation or another long term savings goal however. This type of account is meant to grow your money, so cash is supposed to stay in the account for a while.
The current annual percentage yield (APY) rate of Credit Karma’s high rate savings is 0.56%*
One thing to consider is that all savings rates fluctuate. What may have the highest savings rate right now may not be the highest the next time rates change. High yield saving accounts consistently have high rates however. Therefore, when choosing a high interest rate savings account, you should look at whether there are maintenance fees charged, what is the minimum balance you must have in the account to earn a high interest, how to withdraw your money, as well as how you can access and maintain your account. Nowadays everything has an app, and transactions are mainly done online.
The most important thing you should ensure is that your money is protected in case the bank flops. Choose an account that is FDIC insured. Most banks offer this, but you should look at the maximum amount covered. It would be terrible to have all your savings lost because your money is not insured.
Now that you’ve learned how easy it is to get a higher interest rate for your savings, take control of your finances and start saving with just $1 deposit.
Happy savings, TaLis
Note: Note: Credit Karma is not a bank, services are provided by MVB Bank Inc., member FDIC. Maximum balance and transfer limits apply. Maximum 6 withdrawals per monthly statement cycle. * The Annual Percentage Yield (APY) shown is current as of 03/19/2020. This rate is variable and may change. Balance must be at least $0.01 to earn APY. Maximum 6 withdrawals per monthly statement cycle. Credit Karma is not a bank and the banking services are provided by MVB Bank, Inc., Member FDIC. Please check current rate or visit Credit Karma help center for further details.
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