Passedthe digital banking service aimed at teenagers and young adults now offers a 5% rate on their savings accounts.
With only 1 in 3 Americans have adequate savings for emergenciesStep is among dozens of startups, including Current, Greenlight, Super.com and Hyve, focused on helping people save.
There are no monthly fees or minimum balance requirements on Step accounts, and customers who open an FDIC-insured savings account with up to $250,000. However, to secure that 5%, users must set up a monthly direct deposit of $500 or more from a payroll provider or employer.
“Direct deposit is to encourage people to use the full suite of Step products,” CJ MacDonald, Step’s co-founder and CEO, told TechDigiPro.
And to be clear, “the savings percentage is not interest, but is earned as cash rewards funded and administered directly by Step,” according to the company.
Speaking of rewards, Step’s high rewards program is also new. Customers who qualify for 5% of their savings will also earn 3x points on purchases at select merchants; 2x points on restaurant dining, food delivery and charitable donations; and 1x points on entertainment, streaming and gaming.
The news comes about a month after Apple released its 4.15% savings account balance. When that announcement was made, the current data for bank fee showed a savings account APY rate of 3.5% to 4.75%. As of May 17, the APY range is 4% to 4.85%, so it’s safe to assume that Apple’s entry into the market perhaps inspired neobanks and other financial organizations to close the gap.
Step always had a goal of offering the highest percentage among competitors to attract and grow with customers, so Apple’s move didn’t inspire it to launch the high savings rate, MacDonald said.
“The hard thing with interest rates is that they keep changing,” MacDonald said. “In the last year and a half, the rates have been going up. Every time they go up, the [Federal Reserve] federal funds rates go up, and for any institution that receives payments, interest goes up as well. If they keep going up, 5% could go even higher. Based on today’s rates, it’s important to pay customers back essentially the federal funds rate.”
Step is working with its longtime banking partner, Evolve Bank & Trust, on the savings accounts. Meanwhile, the firm, which has raised more than $500 million in venture-backed funding, most recently last October, has more than 4 million account holders.
