Beam Review: Can You Really Earn Up to 4% With This Savings Account?

The average savings account paid out a measly 0.08% in interest as of August 2018, according to the FDIC. That rate isn’t enough to help you build real wealth; it’s not even enough to keep up with inflation. Yet, that’s what the average bank account is offering now, which means some banks do offer a higher rate of return — the best online savings accounts, in particular, routinely pay out 1% to 1.5% — while others offer even less.

But one newer online bank has promised to change things up for consumers with an interest rate that’s much higher than they can get elsewhere, even online or in a certificate of deposit. With Beam Bank Accounts, eager savers can earn between 2% and 4% on the money they save up, the company has said. The 2% rate is guaranteed, but you’ll have to do a little work to get the higher rate. Is it worth it? We’ll let you decide.

How Does Beam Work?

By and large, Beam offers a bank account that has everything consumers should want — a higher than average rate of return, and no maintenance fees. Funds you deposit with Beam are insured by an FDIC-insured bank as well, so you don’t have to worry about losing money if the startup closes down or loses steam.

Speaking of “startup,” Beam is currently open for a private, invitation-only beta membership, though it’s accepting names for a waitlist. So, you can sign up to get started with Beam later on, but you can’t open an account quite yet.

When you do get a chance to open a bank account through Beam, you’ll need to link your account with that of another bank. Beam then sets up third-party access to your account, making it easy to move money to your Beam account when you’re ready.

From there, Beam promises a return of 2% APY, which is not bad at all. However, Beam offers the opportunity to earn a higher rate of return by being active in their app. Phillip Taylor of PT Money has been part of the private beta testing for Beam, and he says one way to interact with the app is to “accept free rewards” that can temporarily increase your interest rate. These rewards, called “Billies,” arrive in the evenings and can be claimed for a temporary boost to your APY. However, as Taylor notes, the increase is very short-lived: Your interest rate retreats to the normal 2% APY the next day. While Beam promises a potential return of up to 4% APY, Taylor says he has never received a return greater than 2.99% APY so far.

You can also boost your rate by referring other people to Beam, the app notes. How much? Nobody knows for sure, or for how long, so we’ll have to wait until Beam is fully released to find out more.

Other features of Beam:

Once you can open an account, you can keep up to $15,000 on deposit. This amount is slated to increase to $50,000 once Beam is released to the general public.
Beam promises unlimited fund transfers.
Beam is easy to access online, and your funds are FDIC-insured.

How Can Beam Afford to Pay More Than Other Banks?

In case you’re wondering how Beam can afford to pay higher rates than other banks, they address this question in their FAQs. Because they don’t have brick and mortar buildings, excessive executive bonuses, employee perks, or a huge advertising budget, they avoid a lot of the overhead costs many of their competitors face. This means they can pass the savings on to consumers in the form of a higher return on their deposits.

Beam also claims that traditional banks earn 4% to 5% on your deposits, despite offering you only paltry returns in exchange. CFA Sam Huszczo of SGH Wealth Management said this is mostly true, since rising rates over the past two years have helped banks boost their “net interest margin.”

Federal Reserve figures show all banks earning an average of 3.23% on deposits as of early 2018. That’s not quite the 4% to 5% Beam claims, but it’s close, and a lot higher than the average 0.08% banks return to their account holders. It’s also an average, meaning some banks are earning more. Either way, Beam says it can pay more interest because it’s not an average bank.

Should You Consider Beam?

If you have money in a high-interest savings account and you aren’t earning at least 2%, it can pay to get on the waitlist for Beam. Once the company opens to the public, you can deposit up to $50,000 into one of these accounts, and you could potentially earn more on your deposits if you engage with the app by accepting rewards and referring friends.

While it can pay to deal with a local bank that has a brick and mortar location, an account with Beam would be a great place to stash your emergency fund, a travel fund, or any budgeting overages you have throughout the year. Basically, any cash that’s earning less than 2% APY would be better off in a Beam account since that’s the lowest return you’ll receive. And since Beam isn’t charging any fees to keep your money with them, you won’t have to worry about any.

Why You Should Wait on Beam

Still, Beam isn’t perfect and you may wind up being disappointed with the end result. You have to engage with Beam regularly to earn higher than 2%, they note, whether that means taking the time refer friends or to accept rewards each evening. Let’s face it; most people don’t want to spend their free time playing with a banking app to earn interest each day. And, if the deposit limit is truly $50,000 once Beam becomes public, then this account is somewhat limiting.

Another potential downside is that, while Beam doesn’t charge any fees for their accounts, you may incur fees from your other bank when you make transfers to and from your Beam account. You should make sure to check whether you’ll incur any fees before you sign up — especially if you’re someone who likes to transfer money back and forth between accounts regularly.

For those reasons, you may be better off with a regular high-interest savings account. Fortunately, there are many that offer up to 1.85% APY on qualified deposits without requiring you to refer friends or jump through any other hoops. Most of us want to set our savings on autopilot so we can focus on other aspects of our lives anyway, right?

The Bottom Line

If you’re angling to earn as much as possible on your savings and have the time and desire to fiddle with an app every day, consider signing up for the waitlist so you’ll be notified when you can open an account with Beam. Since these accounts don’t have any fees and are FDIC-insured, you don’t have a lot to lose by trying it out. And you may find you don’t mind taking extra steps to earn a little more than 2% part of the time.

Still, you should read the fine print and make sure your existing bank account won’t charge you for transferring money into a Beam account. This bank offers rates that are hard to beat with no fees, but the devil is often in the details.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.

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