Until recently, well-heeled investors with a minimum of $10 million on hand could bank with Goldman Sachs.
But the investment firm just announced online savings accounts with no minimum balance, eliminating the enormous $10 million requirement and opening the doors to everyone on Main Street.
Goldman moved into retail banking at the right time. In the wake of the Great Recession, the federal government wanted to ensure that big banks would have sufficient cash flow and wouldn't need a taxpayer bailout in the event of another economic downturn. So, when new regulations tightened the bank's profit margins in bread-and-butter sectors like trading, the 147-year-old firm realized it could expand its business into new areas.
Online banking makes sense for Goldman, since it can reach a large section of the public without adding overhead from countless brick-and-mortar locations across the nation, a challenge for large national chains and some of the smaller community-sized banking institutions.
Curious about Goldman Sachs' new offering? Here's what you should know:
Goldman Sachs Bank (GSB) has two new products for the everyday consumer: FDIC-insured savings accounts and certificates of deposit. There is no minimum deposit on savings, but the bank has customer deposit limits of $250,000 for new individual accounts and $500,000 for new joint accounts -- which shouldn't be an issue for the average account holder. A big plus is that there are no transaction fees on these accounts either.
Currently, savings accounts come with a 1.04 percent interest rate and 1.05 percent APY, with daily compounded interest on your initial deposit and the interest you accrue, which Goldman pays on a monthly basis. Just keep in mind that these rates are variable and could change depending on whether the Federal Reserve Board changes the federal funds rate and if banks respond by adjusting their rates accordingly.
Goldman's CD accounts range from six-month to six-year terms, with a starting interest rate and APY of 0.70 percent for its shortest-term CD to a 1.98 percent interest rate and 2.00 percent APY for its six-year CD.
Notably, GSB also offers a 10-day CD rate guarantee, so that any customer who opens an account gets the highest yield APY within 10 days of that action -- even if rates change. In addition, Goldman gives its customers flexibility with their monthly interest disbursement, allowing them to transfer any interest they've accrued to their GSB savings account, an outside bank account or to withdraw the money penalty-free. However, if you withdraw the principal before the account term ends, you'll face an early withdrawal penalty of between 90 to 365 days' interest on the amount withdrawn.
No checking accounts: Goldman Sachs Bank did not include checking accounts in its new online banking offer. However, the bank is using its online savings and CD accounts as a litmus test, according to recent reports -- and it may consider adding checking accounts and electronic bill payments in the future if its new retail banking sector performs well.
No mobile app: One of the biggest drawbacks is that Goldman doesn't have a mobile app. Savings account holders can make deposits via direct deposit, by transferring funds between accounts, domestic wire transfer and check. (CD account holders can deposit using the last three options as well.) Consumers, especially tech-savvy millennials, who want this convenience should look elsewhere.
Cap on savings withdrawals: Federal law limits customers to six withdrawals per statement cycle, which GSB abides by (as does every other banking institution). It simply means that you need to plan when to withdraw funds from your account.
Rates and fees: Goldman offers better rates and lower fees compared to other big banks. For example, a Wells Fargo savings account has a low 0.01 percent interest rate and APY, respectively as of the date of this writing. (Its CD rates aren't any better.) Wells Fargo also requires a minimum opening deposit of $25 and has a $5 monthly service fee if you don't maintain a minimum $300 daily balance.
Currently, other national competitors, including Bank of America, Chase and Citibank, offer low rates similar to Wells Fargo. In fact, the only banks that come close to the rates offered by Goldman Sachs Bank at the moment are Barclays (1.03 percent APY), Synchrony Bank (1.05 percent APY) and MySavingsDirect (1.00 percent APY), all of which are FDIC-insured online banks.
Other services: Goldman Sachs Bank lacks several of the other features that consumers expect: mobile banking, overdraft protection, an ATM card and ATMs, and branches nationwide.
So, should you bank with Goldman? If you have existing accounts with the firm or want a higher interest rate savings account, it may be a good option. But if you crave flexibility and the convenience of mobile banking, then another bank -- possibly a brick-and-mortar bank? -- may be your best bet.
FDIC Certificate #: 33124
Primary Internet Web Address: www.gsbank.com