Vanguard Starting Bank

Maecl | Jun 21, 2023 | 149 posts since 2010

I remember talk of this years ago. Now Vanguard is starting a bank pilot.

This was the email.

Good news! Now you can get 4.50%* APY on your cash.

We're inviting you to consider enrolling in the pilot of an exciting new savings account alternative: the Vanguard Cash Plus Account.

The annual percentage yield (APY) is just 1 reason to love the account. It could be just right for the money you're putting aside for emergencies and other expenses.

Here is the link:

https://investor.vanguard.com/accounts-plans/vanguard-cash-plus-account?cmpgn=RIG:EM:CMPGN:WMENG:05112023:QRC:EM_letter:202304_URH_CM_CashPlus_EM_C015035_Non:GRW:XXX:XXX:XXX:PRwUHNW:POS02:XX&CMPSP=1460809189&EMGRP=RT048260563

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Rickny | Jun 21, 2023 | 1,298 posts since 2017

The rate is low but I like the FDIC coverage limits for this account :

"Rest easy knowing the cash in your Vanguard Cash Plus Account is eligible for FDIC coverage up to $1.25 million for individual accounts and $2.5 million for joint accounts".

Ally6770 | Jun 22, 2023 | 4,310 posts since 2010

Isn't this the same as banks and credit unions with 5 beneficiaries? It does say up to- - -

111 | Jun 22, 2023 | 672 posts since 2019

I think Ally6770 is correct. Those two limits seem the same. Always beware, particularly in "marketing language", the dreaded "up to ..." clause!

Ally6770 | Jun 22, 2023 | 4,310 posts since 2010

I believe credit unions have had a limit of 5 beneficiaries for a while and banks now have a limit of 5 beneficiaries as of April of this year.

GH1 | Jun 21, 2023 | 1,058 posts since 2017

I opened when email came out . No issues

Rickny | Jun 21, 2023 | 1,298 posts since 2017

VMFXX 7 day yield is a bit over 5%. No FDIC insurance but I believe Vanguard would back it up if it broke the buck.

Also, To sign up for a Vanguard Cash Plus Account, you must be an existing Vanguard customer. This program is still in the “pilot stage,” which means Vanguard isn’t opening it up to everyone (yet).

The Vanguard Cash Plus Account also has eligibility requirements, and Vanguard clearly states that “not all Vanguard clients will be eligible to open a Cash Plus Account.”

me1004 | Jun 21, 2023 | 1,381 posts since 2010

Actually, Vanguard is not starting a bank! It says they send the money to one or more of various banks participating in their program. While in these banks, yes, the money does get FDIC insurance. They have a list of the participating banks here:

https://personal.vanguard.com/pdf/Bank_Sweep_Participating_Banks.pdf

And notice it saying:

You are responsible for monitoring the total assets you hold at each Program Bank for FDIC coverage and limitations. These total assets will include not only Eligible Deposits under the Bank Sweep, but also any other deposits you may hold at those banks. For more information about FDIC insurance coverage, please visit the FDIC website at FDIC.gov.

So, if you have other money at any of these banks, consider that. You can opt any bank in their list out your money going to that one. I presume that might change your return.

This has similarities to a brokered CD, where the the broker directs your money to a CD at a bank, and you can deal with that CD direct with the bank.

Capper | Jun 21, 2023 | 50 posts since 2018

One other thing to be aware of. I called them a few months back when I received the invitation. I can't recall what the amount is but there are some limits on what you can withdraw on (I think) a monthly basis. My memory fails me but I thought it was like $100k a month. May not be an issue for most but I would inquire before opening just in case you are going to be depositing a large amount and then you need access to all of it.

111 | Jun 22, 2023 | 672 posts since 2019

As a long-time Vanguard customer with both tax-deferred and taxable accounts, I've not been offered this so far (it's possible that offer has been made but I've missed it in the daily email barrage). However, lately I've kept a lot of funds in Vanguard's VMFXX money market fund, also their default settlement fund.

In all seriousness, I wonder if Vanguard's marketing crew specifically targets those customers who do not keep significant funds in VMFXX, for this "kinda', sorta' bank account" offer? So far the only actual bank I know of that's connected to Vanguard is JP Morgan/Chase, the banking entity they use to receive and send wire transfers.
FYI - If I understand it correctly, this new Vanguard program also has echoes to the old "CEDARS" deposit program.

RZ | Jun 24, 2023 | 394 posts since 2017

111, I have a similar relationship and recall the announcement came as a banner seen when logging into the brokerage account. I am OK staying with the higher yielding MMs

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