Move over Apple, Step launches 5% savings account

Image credit: step /

Step, the digital banking service aimed at teenagers and young adults, is now offering 5% interest on its savings accounts.

With only 1 in 3 Americans having sufficient emergency savings, Step is among dozens of startups, such as Current, Greenlight, Super.com and Hyve, focused on helping people save.

There are no monthly fees and no minimum balance requirements on the Step accounts, and customers open an FDIC-insured savings account with up to $250,000. But to secure the 5%, users must set up a monthly direct deposit of $500 or more from a payroll provider or employer.

“The direct deposit is to encourage people to use the full suite of Step products,” CJ MacDonald, co-founder and CEO of Step, told TechCrunch.

And to be clear, “the savings percentage is not interest, but instead earned as cash rewards directly funded and managed by Step,” according to the company.

Speaking of rewards, also new is Step’s enhanced rewards program. Customers who qualify for 5% on their savings will also earn 3x points on purchases at select retailers; 2x points on restaurant dining, food delivery and charitable donations; and 1x points on entertainment, streaming and games.

The news comes about a month after Apple launched its 4.15% savings account balance. When that announcement was made, current data from Bankrate showed an APY rate for savings accounts of 3.5% to 4.75%. As of May 17, the APY range is 4% to 4.85%, so it’s safe to assume that Apple’s entry into the market may have inspired neobanks and other financial organizations to close the gap.

Step always had a goal of offering the highest percentage among competitors to attract and grow with customers, so Apple’s move didn’t inspire it to launch the high savings rate, MacDonald said.

“The difficult thing about interest rates is that they keep changing,” MacDonald said. “During the last year and a half, prices have gone up. Every time they go up, [Federal Reserve] Fed Fund rates go up, and for any institution that gets paid, so does the rate. If they continue to rise, the 5% could go even higher. Based on today’s rates, it is important to give customers back essentially what the Fed Fund rates are at.”

Step is working with its long-standing banking partner Evolve Bank & Trust on the savings accounts. Meanwhile, the company, which has raised over $500 million in venture-backed funding – as of last October – has over 4 million account holders.