How much money do you have in your savings account right now? According to a recent study, 69% of Americans have less than $1,000 in their savings account. For most people, a savings account is basically just a temporary storage space for their paycheck. And the truth is, keeping a significant amount of money in a savings account simply doesn’t make sense anymore. After all, the average interest rate on a savings account is just 0.06%. With rates like that, you’re actually losing money. (Meanwhile, the banks are making 5 to 6% off your deposits.)
Beam wants to change all that by offering better interest rates than you’ll find anywhere else. Beam guarantees that all customers will receive a yield of at least 2% and could see up to a 4% return on their money.
Beam hasn’t launched yet, but they anticipate rolling out their private beta release this spring. You can get early access by registering with your email address.
Like what you’ve heard so far? Let’s check out Beam and see if it’s time to ditch the current banking model and move your savings to an account with Beam.
UPDATE: Beam recently launched its Private Beta, making the app available to a limited group of users. I tested out the app for a few months — check out our updated review HERE.
What is Beam?
Beam is a San Francisco-based Fintech startup that is working on changing the way people bank. Beam offers mobile-only, interest-paying bank accounts with guaranteed interest rates of 2-4% APY.
Why is this a big deal? Because most banks are paying just 0.01% a year in interest. That means that the cash you’ve deposited with your bank is actually being eroded by inflation to the tune of 2% a year!
What Beam is Not
Beam is not a full-service financial institution. Beam is not a traditional checking or savings account so don’t sign up for Beam thinking it will serve as a replacement for your primary bank account. At least initially, users will not be able to enroll in direct deposit or bill pay and they won’t be able to submit mobile deposits. And Beam won’t be issuing debit cards or paper checks to accountholders either.
At least to begin with, Beam will only offer Demand Deposit Accounts (DDAs) and ACH transfers between personal accounts.
Simply put, Beam is intended to be a supplementary account where users can park their cash to earn a higher interest rate.
Who is Beam for?
Beam is a good fit for anyone who:
- Is looking for a straightforward high interest savings account
- Wants 24/7 access to their deposits
- Likes risk-free guaranteed growth that doesn’t require any effort
- Doesn’t like paying bank fees
How Does Beam Work?
Beam users will receive a base rate of 2% APY. And unlike some bank account product that feature tiered interest rates depending on account balance, all Beam users are guaranteed a minimum 2% APY. Plus, there’s no minimum account balance with Beam. That means you’ll receive a risk-free yield of at least 2% whether you deposit $10 or $10,000.
It’s worth mentioning that getting that 4% rate will probably require a little effort. As of this writing, Beam hasn’t shared too many details about how users can secure a 4% APY, but they have indicated that Beam will offer free daily bonuses and rewards that users can take advantage of to boost their daily APY.
On top of that, users can make unlimited free transfers to and from their primary checking account. In most cases, transfers will take one to two business days. Beam also provides users with 24/7 access to their funds. That type of access is something most folks take for granted, but it’s a nice perk when you consider the most common way to lock in a guaranteed 2-4% return these days is by placing your money in a CD for six months or longer.
How Much Will Beam Cost?
Beam does not charge any fees and is completely free. It’s as simple as that!
How Can Beam Offer Such a High Interest Rate?
By now, you’re probably wondering how the heck Beam can guarantee such generous interest rates. After all, most traditional banks pay just 0.01%. Even Ally Financial, which has been long considered a leader in the high yield online banking space, only offers 1.45% APY with its online savings account. So how is Beam able to guarantee at least 2%?!
Is it too good to be true?
According to Beam, traditional banks have unnecessary overheads costs. For example, traditional banks incur costs for running physical bank branches and marketing campaigns. Beam plans to minimize those expenses. And instead of pocketing the savings, Beam shares them with its customers in the form of higher interest.
So, can Beam be profitable if they’re passing those savings along to consumers? Well, it remains to be seen. But Beam has some options to generate revenue. For example, Beam can earn a servicing fee to perform marketing, customer service, and product development duties on behalf of their banking partner. For now, Beam says it won’t promote credit cards or other financial products. With time, that could change too.
One thing is for sure: Beam is aggressively working to drive down its overhead costs. One example of Beam cost-conscious approach is its reliance on its customer-base for marketing. At the time of this writing, Beam’s waitlist is about 60,000 people and growing. Those who spread the word can move up the waitlist and get a chance to receive 7% APY for the first 100 days.
Is Beam Safe?
Beam has made customer privacy a top priority. According to Beam, they will not sell individual data or private information. On top of that, Beam’s mobile app employs bank-level security standards and 256-bit data encryption to safeguard consumer data.
Funds deposited with Beam will be held by an FDIC-insured bank partner. That means balances of up to $250,000 will be covered in case Beam or their banking partner goes bankrupt.
Aside from stating on their website that funds “will be held at a FDIC-insured bank with decades of operating history,” Beam still has not named its banking partner. According to Beam, they are under strict confidentiality requirements and will disclose the bank partner’s identity when they launch. For now, I can’t help but wonder who they’ve partnered with and what that bank thinks about Beam’s mission to reinvent the banking system. I suppose we’ll have to wait until Beam goes public before more information becomes available.
Getting Started with Beam
Right now, Beam is only accepting sign ups. As a young company looking to overhaul the banking industry, Beam wants to fine-tune its customer service to ensure that users have a best-in-class experience. To do that, Beam is introducing its first edition to a limited audience. Beam will grant priority access during its “beta” phase to a certain number of customers before it rolls out the product to a broader audience.
Use this link to claim your spot on the Beam waitlist. The sooner you sign up for your Beam bank account, the sooner you’ll get access!
Is Beam Right for You?
Until Beam finally launches, it’s difficult to say whether it can live up to its promises or the overall hype surrounding the company. There are still scores of unanswered questions, so I remain skeptical about Beam’s chances of success. At the same time, there’s a real possibility that Beam ends up delivering on their promises and becoming a disruptive force in the banking industry. That’s why I signed up for the waitlist.
From a consumer/investor standpoint, it will certainly take a lot more than a base rate of 2% APY to achieve financial freedom, but you can certainly do a lot worse than 2-4%. In my opinion, the opportunity to increase your savings account yield by 200x makes Beam a no-brainer alternative to traditional banking. After all, every dollar counts.
You don’t have to decide if you’ll use Beam right now. And since all you need to enter is your email (no SSN or other personal info), why not join the free no obligation waitlist so you can be notified when the service is ready?!