What is Rize and How Does it Work?

Rize has not yet officially launched, though the fintech platform is expected to offer savings and investment accounts.

Despite a high interest rate and — at first glance — a seemingly fairly priced product, there are some questions you should ask yourself before considering Rize, including whether the cash you keep in your Rize account is safe.

It’s important to note: There are online reviews of Rize from 2018 and 2019 that would indicate Rize’s products have been previously available or are still available to certain users. It’s unclear when Rize plans to launch, and multiple emails and voicemails to the company have gone unanswered.

We’ll provide information in this Rize review based on what we know.

What is Rize?

Rize, which is a brokerage rather than a bank, plans to offer both a savings account and an investing account. The savings portion is advertised as offering a 2.15% APY, though you cannot open an account yet.

Rize said it won’t charge any fees, which sounds like a great deal until you realize many of its competitors charge no fees for the savings portion of their cash management accounts. Rize users will be able to contribute an amount of their choosing — even as little as $2 or $3 a month.

Its savings account will have no minimum balance requirement.

The idea is that you will be able to set aside money for things such as vacations and emergency funds, as well as save for long-term goals through investing. Based on your goals, Rize would budget out small — and then, if you opt in, progressively larger — withdrawals from your outside funding account to enable you to reach those goals.

Rize savings account vs. Rize investing account

The savings and investing accounts will be available through Rize’s platform, which is partnering with Apex Clearing Corporation, with whom your money and investments will be held. There is technically no minimum to open your savings or investing account, but your monthly contribution to your investing account must be at least $2. There is a yearly 0.25% management fee, which is not out of line with many fintech investing platforms and robo-advisors.

One of the most positive things Rize has going for it is its investment options. Rather than actively managing your funds through an algorithm, as many robo-advisors do, Rize said it will use exchange-traded funds (ETFs) as a means to invest via index funds. Research by Morningstar shows that investing passively through index funds that mirror the market tends to turn out better than actively trying to find the most advantageous trades.

Specifically, Rize said it will only deal in two ETFs: Vanguard Total World Stock and Vanguard Total Bond Market. As the market goes up and down, these index funds are built with the intent to track it. If you have a short-term goal, your money will be allocated more heavily toward the bond ETF. If your goal is long term, your money will be allocated more heavily toward the stock ETF.

To transfer funds into and out of your investing account, though, you’ll have to wait five to seven days. Depending on the time horizon for your investing goal, this may be an issue.

How does Rize work?

When you’re able to open a Rize account, you will have to be a U.S. citizen of 18 or older. You will also be required to have a checking or savings account with one of the 2,500-plus banks or credit unions with which Rize works. You will use this account to fund your Rize savings, so Rize recommends using a checking account. Savings accounts are limited to certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle, according to federal Regulation D, so using Rize in conjunction with one could cause problems.

You will then set savings and/or investment goals. You’ll be able to set as many goals as you’d like. Rize said that after you tell it your pay dates, the app will set up automatic withdrawals to incrementally set aside money on each one. The catch is that transfers can take two to three days for the savings account and five to seven days for the investment account.

Though the app hasn’t yet launched, you can access it through the App Store and Google Play. DepositAccounts downloaded Rize via the App Store, but if you try to sign up, you’re brought to the desktop version of the waitlist.

That being said, there are almost 60 reviews on the App Store as of Oct. 22, 2019, including users citing earned returns. Rize didn’t respond to multiple emails or phone calls requesting information.

Rize’s homepage is also promoting a feature that would allow couples to save together using their account. The product and details surrounding it have not yet been released.

How much does Rize cost?

Rize said it will charge no monthly maintenance fees for its savings account, though you can elect to contribute. This pay-as-much-as-you-want model means you could pay $0 a month for Rize, $25 a month or any other figure. It’s completely up to you and how much you think the product is worth.

Rize won’t draw any money from your external bank account if the balance in that account is $50 or less. But since the transfers can take a couple of days, you have to be careful that you don’t draw down your external account between initiating the transfer and completing it. If you don’t have the money by the time the transfer hits your account, there will be a $30 fee.

If you are using the investing account, you will need to remember the 0.25% management fee, too.

Who should use Rize?

The way Rize’s future product is framed, the users who will get the most value out of it will be those with a regular paycheck deposited into their checking or savings account from which the app can draw. It may also serve couples attempting to manage their money together, though details on these features are not yet available.

If you’re a freelancer, you own your own business or otherwise get paid irregularly, Rize may not be the best match. Rize likely won’t be for you, either, if you’re looking for an app that can analyze your finances holistically as you can only link one funding account, and you have to wait 60 days between switching funding accounts.

Once Rize launches, you will want to pay attention to whether its investment account is taxable or if you can invest in a tax-advantaged retirement account such as a traditional or Roth IRA.

Is Rize safe to use?

Rize accounts do not carry Federal Deposit Insurance Corporation (FDIC) insurance. Instead, the platform offers insurance from the Securities Investor Protection Corporation (SIPC). The SIPC is a membership organization — not one enshrined into law like the FDIC. That makes it riskier, as the guarantee of payout is not as strong.

SIPC insurance will only cover investments, not savings accounts. While it offers up to $500,000 in coverage on investment accounts — a limit of $250,000 of which can be in cash — this coverage is explicitly denied in some of the situations where you’d think you’d want insurance coverage the most. If you’re scammed by a broker or naturally lose money in your investments as the market shifts, you won’t be covered. Instead, the SIPC covers your funds if your broker liquidates.

Meanwhile, most savings accounts worth their salt carry FDIC insurance. This insures money held across deposit accounts in your name at a singular financial institution, up to the legal limit. The FDIC was created in response to the bank runs that happened before and during the Great Depression. It is meant to give banking customers assurances that their money is safe. FDIC coverage does not apply to investment accounts.

Stephen Harbeck, the now-former CEO of the SIPC, had previously said money in certain cash management accounts may not be covered, according to MarketWatch. He noted the SIPC only covers cash that you have deposited into your account for the purposes of investing.

He was addressing the issue because another fintech company, Robinhood, started advertising its cash management accounts as having SIPC insurance before reaching out to the SIPC. While Robinhood is now listed as an SIPC member, it has scaled back both the volume and the details included in its advertising for its cash management account since the SIPC called it out.

The pros and cons of Rize

Pros

• Competitive APY
• Pay-what-you-want fee structure
• Has potential to lower the barrier to access of index fund investing
• Management fees on investment product are standard
• No minimum monthly balance or initial deposit requirements

Cons

• Product has not yet launched, and there are a lot of unknowns
• Carries SIPC insurance rather than FDIC insurance; your cash may not be covered
• If your financial institution does not have the technology to work with Rize, the accounts you hold there cannot be used to fund your account
• Potentially not a good match for those with irregular pay
• Regulation of accounts such as the ones offered by Rize are facing scrutiny by lawmakers

How does Rize stack up to the competition?

Because of the uncertainty around the cash holdings the SIPC will and will not cover, we will only compare Rize to competitors who carry FDIC insurance. That is an inherent mark against Rize when compared to any one of the following alternate cash management accounts.

Betterment Everyday Savings

Betterment’s cash management account will eventually include Everyday Checking and Savings, but for now it just offers the savings account.

Its offered APY is lower than Rize’s, at 2.04%, but it’s important to note that Betterment is paying this rate on a product while Rize’s rate is an intention for the future. Note that the 2.04% APY is only for those who join the waitlist for the checking portion of the account; otherwise, you’ll earn a 1.79% APY.

Another huge benefit is that Betterment can spread your savings deposits across four different partner banks, providing you with up to $1 million in FDIC insurance.

Wealthfront Cash Account

If you want your account to do more for you, look at a hybrid cash management account such as Wealthfront’s.

The Wealthfront Cash Account offers 2.07% APY, which is akin to rates you’ll find with the best online savings accounts, but it allows you to make more than six withdrawals a month like a traditional checking account. Wealthfront does so without charging you any fees, but it does not yet come with an ATM card, so withdrawals can only be made through transfers. This account is also insured through the FDIC up to the legal limit.

Simple Protected Goals

Simple provides a cash management account complete with debit card. It operates like a checking account but allows you to set budgets through goals such as rent or next month’s electric bill.

If you move your money into a Protected Goals Account, Simple starts acting more like a savings account. You won’t be able to spend this money without making a transfer, unlike your other budgeting goals, which you have the freedom to squander — even if it’s inadvisable.

Rates on money kept in this account are 2.02% to 2.15% APY depending on your balance, and FDIC insurance is provided up to the legal limit.

The bottom line

You can get comparable rates with other fintech companies offering cash management accounts. These accounts are preferable as they’re insured by the FDIC rather than the SIPC, so you know with certainty your cash is covered.

On top of all that, these three accounts are live, while Rize is still promised for the future.

Unless there is a significant value add for couples using the undelineated joint features of the account, the options you have today may serve you better than waiting for what could be coming tomorrow.