How does the Federal Reserve's interest rate changes affect the Market Savings APY?*

Modified on Fri, 05 Apr 2024 at 09:09 AM

Changes in the Federal Reserve's interest rates can affect the amount of investment we can make on your behalf only for new deposits.

The Market Savings Deposit Account with Webster Bank, N.A., Member FDIC,3 is a non-interest-bearing account, which means you do not receive interest on your FDIC-insured deposit.3 Instead of interest, we invest in the market on your behalf with equivalent portfolio investments and the returns are what you earn. 

What we mean by equivalent portfolio investments is essentially taking the economic value of your deposits and purchasing an equivalent investment on your behalf. Save buys strategy-linked securities whose value is equal to the notional value of the purchased strategy-linked security. The notional value accounts for the total value of the position, vs. market value which is the price at which that position can be bought or sold in the market.

Any equivalent investment is funded by Save partner banks, not from customer deposit accounts, and there is no requirement for customer outlay of their own capital, nor do we fund it from customer accounts. 

For Market Savings, all cash deposited by customers is placed in an FDIC-insured bank account with Webster Bank, N.A., Member FDIC,3 and is not used to fund investments and is therefore not at risk of loss. It is important to note that Save is not a bank, but we partner with FDIC-insured member banks.  

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