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Is Tellus’s high-yield savings product safe?
What are the risks involved?
Are they any better alternatives to Tellus High-Yield Savings Products?
How Tellus Works
Tellus is a savings platform that aims to generate higher interest income for you on your savings through residential real estate lending.
In other words, Tellus takes your deposits and then uses the money to provide single-family home loans to American borrowers.
Tellus makes money from the spread between what it pays on your Tellus high-yield account and what it charges the borrowers.
According to the Tellus App website, Tellus pays 3.85%- 5.5% on its high-yield passive income account, which is up to 22x more than the average bank savings account.
On top of that, your earnings are accelerated with daily compounding interest.
Personally, I think that the daily interest income crediting is probably the most attractive feature of Tellus.
What that means is that your daily interest income is also helping you earn interest income on top of your original deposit.
There are no fees for opening a Tellus account.
You can also withdraw your money anytime.
To get started, you simply download and install Tellus App for free.
Then, it takes about 3 minutes to get set up and make your first deposit.
You will receive your first interest payout the same day.
Is your money safe with Tellus?
Here are some steps that Tellus have taken to protect your money.
First of all, every dollar deposit is backed by high-quality, US-based, single-family, residential real estate collateral with a geographic concentration in prime US Pacific Northwest markets.
On top of that, Tellus holds cash proportional to every dollar deposited to provide an additional protective buffer and liquidity reserves.
As of 1 Nov 2022, there is a 30% protection buffer.
In other words, $1 of depositors’ money is backed by $1.3 worth of real assets.
Lastly, All Tellus account holders’ data and deposits are backed by bank-level security (AES 256 encryption)
Tellus Business Model
As the lending industry is highly competitive, how does Tellus stand out to compete with all the other lenders such as banks?
According to Tellus’ co-founder Rocky Lee, Tellus targets existing homeowners who wish to upgrade to larger homes without selling the homes they live in.
Generally, these borrowers are looking for a super jumbo loan which is a large loan that is the standard conforming mortgage.
As it’s difficult for these homeowners to get approved for loans by traditional mortgage lenders, that’s where Tellus comes in.
Tellus mortgages are typically 12-18 month loans and are always over-collateralized.
Is Tellus’s business model viable in the long term?
Honestly, I don’t know.
What I do know is that banks are also in the lending business and banks are very profitable.
So, the potential could be big for Tellus.
But, banks could get into trouble if they don’t adhere to prudent and stringent lending practices or if depositors start to pull out their money all at the same time.
So, Tellus face the same potential risks.
Risks Of Tellus Savings Products
When you deposit your money with Tellus, here are some of the potential risks that you should consider.
First of all, Tellus is NOT a bank and it is NOT FDIC insured.
So, your savings with them are not FDIC-insured.
In other words, if Tellus goes bankrupt, your savings are not protected and not insured.
Simply put, you are exposed to the credit risk of Tellus.
Also, any outstanding balance in your Tellus account is an unsecured obligation to you by Tellus.
If Tellus’s business keeps thriving, everything would be good.
But, should you be concerned about Tellus’s business?
Tellus is an early startup with no operating history and operates in a highly competitive and regulated lending industry.
So, there is a chance of Tellus never becoming profitable.
There are also many other factors that could adversely affect Tellus’s business.
For example, if these borrowers default on their loans and the value of the property collateral goes down due to worsening economic conditions, these will adversely affect Tellus’s operating results and financials.
Alternatives To Tellus Savings Product
So, is it a good idea to go for Tellus savings products?
Tellus Savings products are a good option if you cannot find other high-yield savings accounts or high-yield money-market accounts that are safe and FDIC-insured.
As Federal Reserve continues to raise interest rates to bring inflation down, many banks and credit unions are giving very high-interest rates (up to 4% APY) on their savings account or money-market account.
These high-yield savings accounts and money-market accounts are FDIC-insured, which means your money is considerably safer while yielding as high a return as the Tellus account.
Now, there is an easy and simple way for you to shop for the highest-yield savings product in one place without having to open another new bank account.
Raisin is a financial technology company that allows people easy and quick access to competitive interest rates on products like savings accounts, money market accounts, and CDs from multiple banks and credit unions — without ever having to open or maintain multiple accounts or juggle multiple statements.
Since SaveBetter is NOT a bank, is your money really safe?
Because your money is always held by an FDIC-insured bank or NCUA-insured credit union, NOT by SaveBetter.
High-yield Savings Accounts From Banks
High-yield savings accounts are one of the safest investments that you can have if you are looking for a high-yield return.
Plus, interest is credited to your account every month.
Below is a list of banks that currently offer higher-than-national-average yields on savings accounts.
It’s very simple and fast to open a high-yield savings account. Most importantly, your money is federally insured up to $75,000.
So, there is almost close to zero risk as you can get when it comes to high-yield investments.
|Bank High-Yield Savings Accounts||%AYP|
|Western Alliance Bank||5.05%||Min $1 deposit, Daily Compounding, Interest credited monthly, Federally Insured, 24/7 online access|
|Greenstate Credit Union||5.01%||Min $1 deposit, Daily Compounding, Interest credited monthly, Federally Insured, 24/7 online access|
|First Mid Bank & Trust||4.90%||Min $1 deposit, Daily Compounding, Interest credited monthly, Federally Insured, 24/7 online access|
|Mission Valley Bank||4.86%||Min $1 deposit, Daily Compounding, Interest credited monthly, Federally Insured, 24/7 online access|
|Medallion Bank||4.82%||Min $1 deposit, Daily Compounding, Interest credited monthly, Federally Insured, 24/7 online access|
|Adda Bank||4.85%||Min $1 deposit, Daily Compounding, Interest credited monthly, Federally Insured, 24/7 online access|
|State Exchange Bank||4.70%||Min $1 deposit, Daily Compounding, Interest credited monthly, Federally Insured, 24/7 online access|
High-yield Money Market Accounts (From Banks & Credit Unions)
High-yield money market accounts are just as safe as savings accounts because it’s federally insured.
The key difference between money market accounts and savings accounts is that money market accounts might allow you to write checks and give you debit cards.
Most money market accounts only require a minimum of $1 deposit to open.
|Money Market Accounts||%AYP|
|Atlantic Federal Credit Union||4.75%||Min $1 deposit, Federally Insured, 24/7 online access|
|Hanover Bank||4.85%||Min $1 deposit, Interest credited monthly, Federally Insured, 24/7 online access|
|America First Credit Union||4.90%||Min $1 deposit, No Fees, Interest credited monthly, Federally Insured, 24/7 online access|
|Patriot Bank||4.8%||No fees, Daily Compounding, Federally Insured, 24/7 online access|
|Great FVC Bank||4.75%||Min $1 deposit, No Fees, Interest credited monthly, Federally Insured, 24/7 online access|
|MPH Bank||4.70%||Min $1 deposit, Daily Interest Compounding, Federally Insured, 24/7 online access|