Marcus by Goldman Sachs (Marcus) has finally responded to rising interest rates and to its competition by increasing its Online Savings Account rate. Today, the APY increased from 0.50% to 0.60%. It’s the first savings account rate increase at Marcus since January 2019. At that time, the Marcus Online Savings account rate peaked at 2.25% APY. The rate cuts began in June 2019, just before the Fed’s first rate cut. The cuts continued until the rate reached a bottom of 0.50% in November 2020. After 17 months, the rate has finally increased.
This savings account rate increase doesn’t move Marcus into the rate-leader status. Several smaller online banks are offering savings account yields between 0.60% and 0.80%. Nevertheless, it moves Marcus to be inline with other major online banks like Capital One (which just hiked its 360 Performance Savings rate to 0.60%) and Synchrony Bank (which hiked its savings account rate to 0.60% in early March).
CD Rate Hikes
Marcus also increased the rates of several of its CDs today. As has been common, most of the CD rate increases were larger than the savings account rate increase. It continues the trend by most online banks of focusing rate hikes on CDs instead of savings accounts. The following are the six most noteworthy of today’s CD rate hikes at Marcus: The new APYs are shown in bold and are effective as of 4/22/2022. The previous APYs are noted inside parentheses.
- 12 mo - 1.20% (0.75%)
- 13 mo NP - 0.75% (0.65%)
- 18 mo - 1.50% (0.75%)
- 24 mo - 1.60% (1.15%)
- 36 mo - 1.80% (1.20%)
- 60 mo - 2.15% (2.00%)
13-Month No-Penalty CD
It’s interesting to note that Marcus didn’t increase the rates of its other two No-Penalty CDs. The 7-month No-Penalty CD (0.45%) and 11-month No-Penalty CD (0.35%) rates remain low. Unless these rates are higher than the 13-month No-Penalty CD, there’s no reason to choose these over the 13-month. Since you can close these CDs anytime seven days after funding without a penalty, the longer-term no-penalty CD is always better.
Marcus customers can use this 13-month No-Penalty CD as a way to boost their savings account yield without losing any significant liquidity. The only risk is that you don’t track rates and forget about the CD. You might then miss the time when the savings account rate exceeds 0.75%. When that happens, the 13-month No-Penalty CD should be closed and the funds transferred back into the savings account. Marcus makes that process quick and easy, but you still have to monitor rates and take action when rates rise.
Out of all the Marcus High-Yield CDs, its 18-month CD had the largest rate gain, rising 75 bps to 1.50% APY. That increase doubled the yield, and it moved the Marcus 18-month CD into rate leading status for the 18-month CD category.
The 12-month High-Yield CD rate increased 45 bps to 1.20% APY. That’s 10 bps higher than the Marcus 10-month CD Special (1.10% APY) which is still available, but is now much less attractive.
The new rates of Marcus longer-term High-Yield CDs are quite competitive with other direct online bank CDs, but it’s hard to get excited about these rates as we are just starting a fast moving rising rate period.
The following table provides the current yields of the ten Marcus CDs that had rate increases today. Click on the “details” arrow to display the CD rate history and other details. For the full list of Marcus CD rates, please refer to the rates section of our Marcus Bank page.
Thanks to DA reader Buckpasser who posted on these higher rates in the DA Forum and the DA reader who emailed me news of the new rates.
Important Features of Marcus High-Yield CDs
The following overview of the Marcus High-Yield CD features is mostly a copy from my February Marcus CD review. The details of the current rates and the rate histories of Marcus CDs are available in the CD rates section of our Marcus Bank page. Unfortunately, Marcus does not offer IRA CDs.
There has been a recent and significant change to the Marcus CD early withdrawal penalties (EWPs). In summary, the EWPs have been reduced for most terms. The 1-year term had the largest reduction, with the EWP reduced from 270 days’ interest to 90 days’. Also noteworthy is the reduction for the 5-year term. The new EWP is 180 days’ interest, which is down from 270 days’. The full details of the EWPs are included in the Marcus’s FAQs and deposit account agreement. Excerpts of these documents are provided below:
Less than or equal to 1 year – 90 days simple interest on the principal at the rate in effect for the CD.
More than 1 year to 5 years – 180 days simple interest on the principal at the rate in effect for the CD.
More than 5 years – 270 days simple interest on the principal at the rate in effect for the CD.
By using the DA CD Early Withdrawal Penalty Calculator, you can see that the Marcus 5-year CD closed early compares favorably to the Marcus shorter-term CDs that are held to maturity.
Another important feature of early withdrawals is that Marcus does not allow partial early withdrawals of principal. Only early closure with full withdrawal of principal and interest (minus the penalty) is allowed.
The following is an excerpt from the deposit agreement that explains the above limitation. It also explicitly gives the customer the right to make an early withdrawal. Disclosures at some banks have language that only allows an early withdrawal with the consent of the bank.
Early Withdrawal of Principal: You are not permitted to withdraw a portion of your principal at any time prior to maturity. You may withdraw the entire principal amount prior to maturity, but you will be charged an early withdrawal penalty, except in the case of a No-Penalty CD. The entire principal, however, may be withdrawn prior to maturity without a penalty in the case of your death or if there is a judicial or administrative determination that you are legally incompetent.
Also important for early withdrawals is the process that the customer must use to initiate an early withdrawal. Some banks make this process long and difficult. For the case of Marcus, this process wasn’t clear from the online documentation. Thus, I called customer service. According to a Marcus CSR, you cannot close a High-Yield CD online like you can a No-Penalty CD. You must call and request the early closure. If you have a Marcus Online Savings account, the funds can be transferred to the savings account within one business day. If you request a transfer to a linked external account, that will take one to three business days.
Opening the CD
One concern with CDs when rates are rising is that you’ll miss out on a rate increase soon after you open the CD. Marcus’s 10-Day Rate Guarantee helps with this issue. According to this guarantee, you’ll get the highest published rate up to 10 days after you opened your CD. The one caveat is that you must reach the minimum deposit of $500 within this time period. The following is the excerpt of the Marcus FAQ:
What happens if the interest rate changes after I open my CD?
If your Marcus CD account reaches the $500 minimum deposit within 10 days of the day you open your Marcus CD account (opening day plus 10 days), you will receive the highest published interest rate and Annual Percentage Yield (APY) we offer on the Marcus CD product and term you selected during that period, starting on your account opening date and extending for 10 days. This only applies to Marcus branded CD products.
If your Marcus CD account does not reach the $500 minimum deposit within 10 days of the day you open your account, your rate will be the interest rate and APY available for your Marcus CD product and term on the day your Marcus CD account reaches the $500 minimum deposit.
This 10-day rate guarantee has become the standard at online banks. However, Marcus has an additional allowance for opening CDs. You can add additional funds to the CD for up to 30 days after you open the CD. Here’s the excerpt from the Marcus FAQ:
Can I add additional funds to a CD once it’s been opened?
You have 30 days following the day you open your CD account to fully fund your CD. You cannot deposit additional funds into your CD account after it has been open for more than 30 days.
After the first 10 days, the rate won’t be guaranteed, but in a rising rate environment, it might actually be better to get a rate later in this 30-day window. According to the above two FAQs, if you do an initial funding of the CD that’s less than $500 and your final deposit is made at the end of the 30-day window, the APY will be set based on the APY in effect “on the day your Marcus CD account reaches the $500 minimum deposit.” It would be wise not to wait too long into the 30-day window to ensure the $500 minimum is reached. Also note that the rules for the No-Penalty CDs are a little different.
Other Useful CD Details
The following is a synopsis of other information from the Marcus FAQs:
- Accounts can be funded by an internal transfer, an ACH transfer, wire transfer, or check.
- Monthly interest disbursements are allowed to your savings account or to one of your linked external bank accounts.
- 10-day grace period at maturity. Interest is earned during grace period up to the day before the funds are withdrawn.
Up to six beneficiaries can be added to each account, with Social Security numbers or taxpayer identification required for each beneficiary. A beneficiary must be a natural person: trusts or other entities cannot be named as a beneficiary. In fact, trust accounts are not offered at all.
Online Savings Account Overview
The new Marcus Online Savings Account APY is above the current 0.501% online savings account yield index and has averaged slightly higher than the online savings account average for the last four years.
The Online Savings Account has several features that make it a strong contender for a primary online savings account, including the following:
- No minimum opening deposit.
- Rate applies to all balances of $1 or more.
- Free ACH bank-to-bank transfer service.
- Up to 4 external accounts can be linked.
- Because of a change in federal law, the six monthly withdrawal/transfer limit has been suspended. There is currently no limit on the number of withdrawals/transfers that can be made.
- Maximum outgoing transfer is $125k per transaction if done online (no limit if done by phone).
- No incoming transfer limit (as long as the maximum balance limit is maintained).
- Same-day transfers of $100k or less to and from other banks.
- Funds received by ACH transfer initiated at Marcus are available on the third business day. Funds received by ACH transfer initiated by another bank are available on the next business day (see FAQs for full details).
- No charge for sending or receiving wire transfers, but wire transfers to a third-party (such as a mortgage company) are not allowed. Wire transfers requested online can only be sent to a previously linked external account.
- Maximum balance of $1 million for individuals (new customers).
- Up to six beneficiaries per each account.
- A beneficiary must be an individual: you may not name a trust or other entity as a beneficiary.
- Social security numbers required for beneficiaries.
- Trust accounts are not offered.
Other Marcus Accounts and Promotions
Marcus had been offering a savings account bonus, but that ended in February. There is still a referral program called Marcus Referred in which current and new customers can earn an additional 0.50% APY on their Online Savings account for three months. According to the terms:
You can earn a maximum combined total of 5 referral bonuses under these Referral Program Terms and any other Marcus by Goldman Sachs referral programs in each calendar year.
Marcus still offers AARP members two special deals. New and existing Marcus customers can receive an extra 10 bps on their savings account for 24 months. There’s also a special 8-month No-Penalty CD with a rate that’s currently equal to the standard Marcus 13-month No-Penalty CD (Since they are no-penalty CDs, there’s no reason to choose the 8-month over the 13-month.) Please refer to my 2020 AARP Marcus promotion review for more details.
Several readers have reported problems with Marcus in transferring large sums via ACH to their linked bank accounts.
The most recent transfer problem was reported in February by reader sharon907 who tried to transfer a large amount from a linked account into Marcus and then, after the hold period, tried to transfer this amount to another linked bank account. The reader reported that the outgoing ACH transactions were reversed. Marcus would only allow an outbound transfer to the original source of the funds. After many hours with customer service that included confirmation of the ownership of the two linked accounts, Marcus still did not allow full access to these funds.
Similar issues have been reported in bank reviews. Reader YieldTracker reported in October 2021 that Marcus prevented an outbound ACH transfer of a large amount to a linked account that had been established and used for seven years. After calls to customer service, Marcus would only allow a maximum outbound transfer of $50k to this linked account.
These problems appear to be due to anti-fraud measures that impact innocent customers. As is common with anti-fraud measures, banks reveal little on these incidents. These problems appear to be increasingly common, not only at Marcus, but at other banks and credit unions these days. Extra care is required if you plan to move large sums into and out of banks. Unfortunately, these issues seem to occur even when customers comply with the hold periods, the transfer limits and the linked account process.
Headquartered in New York City, Goldman Sachs Bank’s internet bank operates under the Marcus by Goldman Sachs brand. Savings accounts and CDs are available nationwide and can be opened using the Bank’s online application. Account owners must be U.S. citizens or legal residents and at least 18 years old.
To open a Marcus Online Savings Account or CD, click on the “Open an Account” button on the DA Bank Profile Page for Marcus. Once at Marcus.com, you can start the online application. If you’re new to Marcus, the online application process will allow you to fund the CD by first linking your CD account to a savings or checking account at another bank.
In early 2016, Goldman Sachs Bank completed its acquisition of GE Capital Bank’s internet bank division, thus establishing the “GS Bank” brand. The “Marcus by Goldman Sachs” brand was launched in October 2016 as an online platform that offered unsecured personal loans to consumers. As I noted in a November 2017 blog post, Goldman Sachs decided to consolidate savings accounts, CDs, and personal loans under the Marcus by Goldman Sachs brand.
Goldman Sachs Bank has an overall health grade of “A” at DepositAccounts.com, with a Texas Ratio of 3.16% (excellent), based on December 31, 2021 data. In the past year, the Bank has increased its total non-brokered deposits by $92.04 billion, an excellent annual growth rate of 57.16%. Please refer to our financial overview of Goldman Sachs Bank (FDIC Certificate # 33124) for more details.
Goldman Sachs Bank is currently the eighth largest bank in the nation based on assets. The Bank has had a dramatic increase in size in 2021. From December 31, 2020 to December 31, 2021, assets have increased almost 60%, from $272 billion to $434 billion, and deposits have increased 48%, from $217 billion to $322 billion.
How 18-Month High-Yield CD Compares
When compared to CDs with terms from 15 to 20 months tracked by DepositAccounts.com that are available nationally and have minimum deposit requirements of $10k or less, no banks or credit unions have a higher rate than offered on the Marcus 18-month High-Yield CD. The following table compares the 18-month CD to the two highest-rate CDs from other banks and the two highest-rate CDs from credit unions.
How the Online Savings Account Compares
When compared to nationally available Money Market Accounts and Savings Accounts tracked by DepositAccounts.com, that do not require large balances or direct deposit and do not have small balance caps, the Marcus Online Savings Account’s APY is far below the highest rates. However, it’s comparable to rates offered by the major online banks. Below is a sample of the top rates along with online savings account rates from a few of the major online banks.
Comparing the Marcus High-Yield CDs to Brokered CDs and Treasury Bills/Notes
This year, Treasury yields have been rising faster than any direct CD yields. Brokered CDs, which compete with Treasury bills and notes, have also experienced larger rate gains than direct CDs from online banks and credit unions. Below are 1-year and 2-year Treasury yields at yesterday’s market close (via Daily Treasury Par Yield Curve Rates) and today’s top non-callable new-issue brokered CDs listed at Fidelity and Vanguard:
As you can see, Treasury bills/notes and brokered CDs currently have higher rates than the Marcus 12-, 18- and 24-month High Yield CDs. Coincidentally, Goldman Sachs Bank is the issuer at both Fidelity and Vanguard with the highest non-callable 1- and 2-year brokered CD rates.
The one benefit of the direct CD over the brokered CDs and Treasuries is a fixed early withdrawal penalty. If you want to access the money from your Treasury bill/note or brokered CD before maturity, you’ll have to sell it in the secondary market. You will likely have to sell it at a loss if interest rates have risen. The more that interest rates have risen, the larger the loss.
The above information and rates are accurate as of 4/22/2022.