Betterment Freezes Checking Account Applications
Betterment, the uber-popular robo-advisor, has temporarily stopped accepting applications for its checking account option.
The account, Betterment Checking, is one half of the company’s highly regarded cash management offering. It charges zero maintenance or overdraft fees, and reimburses all third-party ATM fees. Betterment Checking is available as a free-standing option separate from the robo-advisor platform.
For most of the new year, however, new users have been unable to sign up for Betterment Checking, a Betterment customer service representative confirmed to Forbes Advisor. Meanwhile, users have begun highlighting on social media the trouble they’ve had applying for the account.
Betterment representatives have faulted an increase in suspicious activity for the freeze and said the suspension should be short-lived.
“We have temporarily suspended new checking account signups due to an increase in attempted fraud volume,” said Danielle Shechtman, director of communications at Betterment, in a statement to Forbes Advisor. “We expect to reopen checking account signups in the near future.”
As of this writing, Betterment’s website makes no mention of the change in policy.
Betterment Cash Management Options
The company launched Betterment Checking a little over two years ago, in partnership with nbkc bank. The latter holds the accounts and provides Federal Deposit Insurance Corporation (FDIC) coverage for users’ deposits as Betterment lacks a banking charter.
The company told Forbes Advisor that Betterment Cash Reserve, the savings side of Betterment’s cash management account, is still accepting applications. Betterment Cash Reserve allows customers to make an unlimited number of transactions or transfers and offers up to $1 million in FDIC insurance.
Betterment’s cash management products were a welcome supplement to the company’s investing platform, which offer users well-diversified, low-cost portfolios. The checking account allowed users to better unify their finances under one account as well as helped them save on fees.
The application freeze has not impacted Betterment’s robo-advisor services, though it has proved to be a frustration to some potential users.
“Be advised, today Betterment support told me they stopped accepting new checking accounts on January 5, 2022,” wrote one user on Reddit’s Betterment forum. “I have been waiting 20 days for Betterment to get my checking account approved.”
Account Drew Regulators’ Attention before Launching
This is only the latest issue Betterment has faced with its cash management options.
The company drew scrutiny from regulators when it first announced plans to offer checking and savings accounts in July 2019. The plan had been to give users a boffo 2.69% APY on deposits in the savings side of the account, a rate that at that time was among the highest in the industry.
The fine print had stipulated that you would have to enroll in both the checking account and the savings account to earn that rate, and that it was only good for the rest of the year. Meanwhile, the “variable” rate could be changed at any time and currently yields just 0.10%, which is in line with typical bank deposit APYs.
Reportedly, Betterment was contacted by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) regarding the account. When the account launched, there was no requirement to open a checking account in order to get the better APY on the savings side.
What You Should Do
Betterment told Forbes Advisor that current customers are unaffected by the signup application suspension. If you use the checking account and like the lack of fees and convenience, you needn’t change anything.
Prospective customers, on the other hand, will have to wait until the suspension lifts. If you’ve applied during the suspension period and waited in limbo to find out your application status, you may not be inclined to reapply. Remember: You don’t need a Betterment checking account to use Betterment’s robo services.
Forbes Advisor will monitor the situation to determine if the suspension lasts longer than Betterment expects and determine how that might affect its place as our Best Overall Robo-Advisor selection.
