What is a Smart Deposit and How Does it Compare?

smart deposit

Smart deposits are a relatively new type of bank account that offer higher interest rates but come with certain restrictions. This article will explain what smart deposits are and how they compare to savings accounts, money market accounts, and certificates of deposit.

What is a Smart Deposit?

A smart deposit is a deposit account offered by online banks and fintech companies that pays an above-average interest rate, usually 2-4% APY. The catch is that you have to commit to keeping a certain amount deposited for a set period of time, typically 3-12 months. If you withdraw early, you pay a penalty.

Smart deposits appeal to savers seeking higher returns, but the locked-in commitment means less liquidity compared to normal savings accounts.

How Smart Deposits Compare to Other Accounts

Savings Accounts

  • Interest Rate: 0.01-0.5% APY
  • Liquidity: Fully liquid, withdraw anytime

Money Market Accounts

  • Interest Rate: 0.5-2% APY
  • Liquidity: Fully liquid, withdraw anytime

Certificates of Deposit (CDs)

  • Interest Rate: 0.5-3% APY
  • Liquidity: Locked-in 3-12 month commitment

Smart Deposits

  • Interest Rate: 2-4% APY
  • Liquidity: Locked-in 3-12 month commitment

As you can see, smart deposits pay significantly higher rates but share the same locked-in timeframe as CDs, compared to the full liquidity of savings and money market accounts.

The Pros and Cons of Smart Deposits


  • Higher interest rates
  • Good for short-term savings goals
  • FDIC insured up to $250,000


  • Reduced liquidity due to locked-in commitment
  • Interest rates fluctuate with the market
  • Early withdrawal penalties

In summary, smart deposits offer great rates for savers willing to sacrifice some liquidity. Compare interest rates and terms across banks to find the best smart deposit account for your needs.

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