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Recently I saw this Intrx company advertise a savings account with 2.91% APY on Facebook, and claim it would be FDIC insured up to 100M.

They explain their business in the following:

We are an Online Banking Platform that allows individuals and businesses to earn the highest return on their cash. Interest accrues daily.

How do we do this? By leveraging our partnership and technology that allocates the cash to the highest yielding banks across the US and by taking advantage of scale and volume.

Given that current Fed rate is 2.5%, I always suspect any offer higher than that. (Why would bank pay customer more than 2.5% if they can easily borrow cash at 2.5%?)

When other people question them on Facebook, their explanation is "Financial institution and extremely wealthy individual have done this for a decade, and we just make it available to everyone."

Is this something legit (with some mechanism I don't know) or simply too good to be true and should avoid?

  • The trick will probably be: "Intrest accrues daily" which probably means they can also change it daily. Always think of this wise old saying: "If it sounds to good to be true, it is." – Lucas Raphael Pianegonda Feb 6 at 6:56
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    Given that current FED rate is 2.5%, I always suspect any offer higher than that (Why would bank pay customer more than 2.5% if they can easily borrow cash at 2.5%?). - that is false. They only need to borrow money from the Federal reserve when their cash on hand is below the requirements. They only pay depositors above average rates when they need more deposits so they can make more loans. – mhoran_psprep Feb 6 at 11:18
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    From their website: "FDIC insured up to $100M per account". FDIC coverage limit is $250k. Riddle me that one... – Bob Baerker Feb 6 at 14:31
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    @BobBaerker While $100M is excessive, almost all investment firms offer services that split your deposits across multiple FDIC insured banks to increase the limit. As I recall, the default sweep option at my brokerage covered somewhere around $5M. – user71659 Feb 7 at 5:58
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    @BobBaerker Read the link I put in. The investment firm, which is not a bank, automatically splits the money in your account into multiple banks and withdraws as necessary. Therefore, the account I linked to is an account that is backed with FDIC insurance of $1.5M. Not all accounts are bank accounts. – user71659 Feb 7 at 15:55
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You can't actually get the savings rate, because it isn't currently a running business or bank. It is an early stage startup (i.e., a business pitch), they are trying to collect email addresses for a wait list. This is a very typical strategy for dot-com startups now a days, and honestly I've seen pages like this given as an assignment for students where they are asked to build such a page to show they learned something about entrepreneurship/marketing/etc. It is hard to get in trouble for making unsubstantiated claims when you aren't actually selling anything.

The tactic works like this: make a website with a full sales pitch on your product/service/business, and invite people to "get on the wait list" or "apply for the beta test" or "get early access", etc. There is often no product whatsoever in existence, beyond the web page built to collect your email address. You can get a hint of this on this company website by the fact there is an image showing buttons to get it on the Google Play Store and on the App Store. What happens when you click there? Nothing, its just a screenshot of what such a button would look like. If there was an app, it would likely just be a mobile web form inviting you to sign up for the wait list too.

Everything they have to say about how they might possibly achieve what they claim is put in an FAQ on the web page, but honestly it doesn't matter (they claim they will just deposit your money for you in many different bank accounts so that collectively the insurance is up to $100M - they don't have to show they can actually do that, which they probably can't, it is just a website). If you do some looking around one of the co-founders claim this particular company started literally last month (January 2019).

There are actually a number of these going around, so you might ask "why do they bother with all this?" The business strategy is to collect a big list of "potential customers" they can tout to venture capitalists and potential investors in an attempt to get people to give them money. If they collect enough millions, they may try to build an actual product and operating company, and then they will just revise their promises until they make sense - or they will use investment capital to pay temporarily high returns and hope they keep raising money faster than they lose it.

This of course is also not the only attempt at offering high-yield savings accounts around 3% or more. For instance, the more established company Robinhood recently stirred quite a bit of debate for their high interest savings offering. And as a cautionary tale, if Robinhood can't just split up money into a bunch of FDIC insured banks and offer 100M insurance per account just like that, and instead must rely on non-FDIC protection, chances are that a web-page-only startup is going to find it hard to deliver on their promise even if people give them piles of investment money to play with.

Bottom line? Talk is cheap, especially when people are promising you easy, safe, guaranteed returns on your money that are higher than any normally available alternative. A fool and their money are soon parted - don't let it happen to you.

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    I don't understand the Robinhood issue about splitting up deposits to increase FDIC limits, other than $100M is excessive. The idea is offered in nearly all investment banks, and there are companies specialize in it. Checkwriting on an investment account is offered by pretty much every investment firm. – user71659 Feb 7 at 6:04
  • @user71659 A) that's an absolutely fabulous link about ICS, and here is one linked from there stating how this became possible with a law change: promnetwork.com/research-insights/articles/… Wow, that's decidedly something. On the other hand, my understanding is that you still have to be officially a bank to offer the service (brokered deposits that aren't counted as brokered), which is I presume why Robinhood can't do it, and by extension some new startup could not do it either. And the money goes to the bank, so no high % rate. – BrianH Feb 7 at 16:53
  • @user71659 So my proposed logic that if a large, well-funded existing company far bigger than a new startup can't offer FDIC insurance at all, and given your link even Fidelity can't arrange for uninvested deposits to be insured over 1.25m through the Program (and that money is held as a deposit in multiple banks, and the banks do not apparently provide a high interest rate return for that deposit), then by extension some startup won't be doing it in practice either. I welcome any way to improve the logic or clarify the presentation, and thanks for the up-to-date resources! – BrianH Feb 7 at 16:56
  • Sweeping deposits is definitely not new, I remember my investment firm (a non-bank non-FDIC subsidiary) offering this in the early 2000s. I think the rules around allowing FDIC-insured banks to sweep is new. I know that the limits are often business-driven, e.g. Big Bancorp actually runs under 3 charters, so they choose to sweep between those three technically separate banks and not their competitors. I don't know the feasibility of arranging 400 separate banks to get $100M, but there are ~5k bank charters in the US. – user71659 Feb 7 at 17:26
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"Financial institution and extremely wealthy individual have done this for a decade, and we just make it available to everyone."

Marketing.

Edit: you have to join a wait list. They are clearly just buying new business and creating buzz. Don't expect this rate to last very long...

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