The high level of competitiveness between financial institutions to have the best interest rates on saving accounts sparked the development of high-yield savings accounts. The national average for the APY (Annual Percentage Yield) of a regular savings account is currently 0.06 percent, and consumers demanded higher interest rates on their savings. High-yield savings accounts take it to the next level and offer around 7x more APY than the average savings account.
Even fintech companies that aren’t banks, like Chime, offer high-yield savings accounts. PayPal looks to follow in these fintech companies' footsteps. The company revealed that it plans to include high-yield savings account options for its new app.
What has been added to PayPal’s new app update?
Along with a fresh new interface, Paypal says that the app now supports early direct deposit, where you can receive your paycheck up to two days early. Users will be able to choose whether they want to contribute all or a portion of their paycheck to their PayPal Balance. It also offers in-app shopping tools that allow users to find exclusive deals, make purchases, and earn cash back rewards. There will be a loyalty program that offers rewards for customers who complete purchases with PayPal.
Trying to manage and pay all of your monthly bills at once can be time-consuming and hard to keep track of. PayPal wants to resolve the conflicts with its enhanced Bill Pay feature by allowing users to pay bills from the app. The bills include utilities, TV and internet, insurance, credit cards, phone plans, and more. The app will give customers the ability to pay with QR codes when there isn't access to the internet and allow savings and rewards to be used for in-store purchases.
The biggest update that’s coming to PayPal’s app is high-yield savings accounts. Synchrony Bank has partnered with the fintech company to be the provider for the savings accounts. The PayPal Savings feature will allow customers to swiftly transfer money from their PayPal Savings account to their PayPal balance and vice versa.
Expected to be released on the app in the upcoming months, the savings accounts will require no monthly fees or a minimum balance. Similar to many other companies' APY rates, PayPal Savings will offer a 0.40 percent APY, and users will be paid interest payments at the end of each monthly statement period.
Who else offers high-yield savings accounts?
There are fintech companies, credit unions, and banks that offer competitive rates and are much better than your typical savings account. While the COVID-19 pandemic caused interest rates among various types of yielding accounts to decrease, interest rates have started to return back to normal.
Alliant Credit Union, one of the biggest online credit unions, offers a reported 0.55 percent APY for its high-yield savings account, as long as there's a $100 minimum balance. Marcus by Goldman Sachs offers a 0.50 percent rate for its accounts, and there isn't a minimum balance required. With many platforms requiring a minimum deposit or balance in order to have a certain rate for the high-yield savings account, PayPal will have the advantage of not requiring any minimum fees or balance.