Is the Tellus Savings App Too Good to be True?
Read on to learn why you should walk away from a potential 5% savings APR
Let’s face it, savings accounts for the last two decades have been paying out abysmal interest rates — making them a place to avoid if you needed to park money somewhere, earn interest, and have some liquidity.
Even now, a savings account is relatively safe, but also a way to achieve a net loss in money parked due to persistent inflation.
What if you could earn more than 5% APR on money you kept in a savings account? Plus, what if you could do all the work of managing that money from a convenient app on your phone?
Fintech app Tellus is counting on consumers choosing the convenience and high interest of a Tellus savings account.
They are apparently also counting on consumers NOT reading the fine print or investigating just how those high yields are made.
Fortunately, Jason Mikula over at Fintech Business Weekly provides some key insight into Tellus.
The bottom line: Stay away!
Here are some highlights of the Tellus savings product — these should give you pause if you were considering using the app for your savings needs:
“Tellus is not a bank. Tellus is not FDIC insured.”
Ok, so that alone is a huge red flag. There’s no FDIC backing for your money. Tellus loses the money b/c of its investment strategy? You lose, too! No guarantee.
If you’re not already walking away from Tellus, here’s more:
. . . it pools individual consumers’ funds in order to write super jumbo mortgages — which, in turn, may be sourced or underwritten in part based on data from Tellus’ rental property management platform for landlords.
Remember mortgage-backed securities, anyone? 2008? Great Recession?
Yeah, well, Tellus is asking for trouble. Deposits are not FDIC insured and they are offering great rates by writing super jumbo mortgages.
But wait, there’s more:
First, “short-term multi-million dollar loans at above-market interest rates to second-home buyers who can’t get mortgages from any other lenders? Eeek.”
Um, what? Yeah — these are some pretty risky investments. Sure, if they pay off, Tellus makes out great (and so do depositors). But, um, given the cyclical nature of markets AND the very real possibility of a market cool coming soon, this seems like a very, very bad plan.
Mikula goes into more detail about the risks of what Tellus is offering, but this final note should be of great concern:
According to those terms of service, Tellus can change or eliminate the interest rate it pays on user funds, at any time, for any reason, with or without notice.
I’m imagining a notification from Tellus to its app users directing them to a message that goes something like this:
Um, so, hey — we know we promised you 5% on your money, but, um, yeah, we can’t do that now. Also, your money is gone. Ooops!
Anyway, if you’ve been tempted to try Tellus for your savings needs, don’t.
If someone you know and care about is super excited about Tellus, do them a favor and point out these red flags.
And always remember: If a savings or investment product seems too good to be true, it probably is.
