How do Crew savings accounts pay such high interest?
This is by far the most common question we receive about Crew. How can Crew accounts pay 4.7% annual percentage yield (APY)¹ in interest today while most large banks pay 0.01% APY?2 The short answer is that we’re a digital only offering without the cost of physical branch locations, but there’s a lot more to the story here.
The truth is most banks don’t pay you a higher interest rate because they don’t think they have to. They’re betting that you won’t take the time to set up a new high-yield account and move your money.
If your savings aren’t earning meaningful interest in the current economic environment, you should consider moving to a high-yield account like Crew offers.
For a family with $10,000 in savings, Crew’s 4.7% savings APY earns $470 annually in interest. By comparison, 0.01% APY at a legacy bank would generate $1 in interest. Annually.
What are your deposits worth to a bank?
A primary way that banks make money is by gathering deposits from customers and lending them out at a higher interest rate than they pay depositors. This difference between the interest banks pay on deposits and the interest they receive on loans is called net interest margin (NIM).
While it’s a bit of an oversimplification, your bank can generally count on making about the fed rate on your cash deposits. Because of that, you can think of any amount less than the fed rate that you’re earning in interest on your deposits as the price you pay for your bank account.
As the fed rate has gone up since early 2022, banks have kept average interest rates low. That means they've expanded their net interest margin, passing little if any of that gain to you.
As with the beginning of this article, let’s assume you have $10,000 in savings. If the fed rate is 5.33%, the risk free return for those deposits that the bank could earn by lending to other banks would be about $533. Therefore, the cost of you accepting only 0.01% APY on your savings deposits would be about $532 annually. Does that seem like a lot for the bank experience you're receiving?
In conclusion
Keeping your money in a 0.01% APY interest bearing account in today's rate environment could mean missing out on a significant amount of interest income. Many banks continue to offer low interest rates because they don’t think you’ll move your savings to a high yield account like Crew.
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About Crew
Crew is a banking app for families. Crew provides high interest joint accounts for parents and kids, and supports allowances and safe spending for kids. Learn more at trycrew.com.
Crew is a financial technology company, not a bank. Banking services provided by Bangor Savings Bank, Member FDIC.
1. Large comparison banks include the following, all rates retrieved 5/10/2024:
- 0.01% JP Morgan savings rate here
- 0.01% Bank of America standard rate here
- 0.01% Wells Fargo Way2Save rate here
- 0.01% US Bank standard interest rate under $10,000 in deposits here
- 0.01% PNC standard rate here
- 0.01% Truist rate here
2. APY is variable and may change after account opening. The advertised 4.7% savings APY is accurate through May 31, 2024 and may change at any time. There is no minimum balance or deposit required to obtain the advertised APY.
