PayPal Savings attracts attention with competitive interest rates

Since its introduction in 2021, PayPal savings accounts have offered interested PayPal users attractive interest rates and cashback benefits. Originally launched with an interest rate of 0.40% APY, the offering already provided a decent return compared to the national average of only 0.09%. In 2024, interest in PayPal savings accounts reaches a new peak: the interest rates now stand at a remarkable 4.30%, while the nationwide average is only 0.45%. However, there are limitations in accessibility that make the account less flexible compared to other high-yield savings accounts. PayPal Savings is available online for users with PayPal balance accounts. Deposits are made through transfers from the PayPal balance account, including cashback credits. The savings accounts are provided by Synchrony Bank and are insured by the FDIC up to an amount of $250,000. A notable feature is "Goals with PayPal Savings," which allows users to set individual savings goals and visually track their progress. Although PayPal Savings is appealing with regular balances in the PayPal account or through cashback benefits, there are significant drawbacks. Transfers are only possible between PayPal balance and PayPal Savings; external transfers or cash withdrawals are not provided, which hampers access. The Consumer Financial Protection Bureau (CFPB) warns against holding balances on non-FDIC-insured platforms like PayPal, Venmo, or Cash App. However, switching to PayPal Savings provides the user with insurance and an attractive interest rate. Nevertheless, it is advisable to consider alternative online savings accounts for more flexible access options.