Cash App takes on Apple with 4.5% APY for savings accounts (with direct deposit)

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Apple’s recent decision to increase the interest rate for its 4.5% Apple Card savings account now encourages a competitor to do the same. Cash App announced today that it will now offer “up to” a 4.5% APY (annual percentage yield) for its Cash savings on the app customers, with some reservations. While Apple’s savings account requires customers to qualify for an Apple Card credit card, Cash App will limit its high percentage rate to its cardholders in a different way.

The company says customers will have to directly deposit $300 or more per month in paychecks to increase their rate to 4.5%. This might be more difficult for those who bank elsewhere but use Cash App for peer-to-peer payments or business purchases. But for those new to Cash App, this could prove an incentive to use the app as their primary account in the future. (Without direct deposit, Cash App’s rate is a less remarkable 1.5%).

To benefit from the 4.5% rate, customers must also have a Cash App card, use a personal (not professional) account and be at least 18 years old.

Image credits: Cash App

To be competitive with other banks, Cash App offers other advantages. For example, customers enjoy up to $50 in overdraft coverage on their Cash App card purchases, free withdrawals from in-network ATMs, and one free withdrawal per month from any ATM, as well as access to call customer support from within the app, the company says.

This news is another example of not only how Apple’s entry into the savings market is forcing others to raise rates to compete, but also how consumers are benefiting from the Federal Reserve’s efforts to fight inflation. Banks take their cue from the federal funds rate, which was also raised.

At launch, the Apple savings account came in with a high APY of 4.15% but Apple increased it at 4.5% last month. At the time, Apple’s pricing 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 its rate to 5% following Apple’s entry into the market, for example.

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