Goldman Sachs set up Marcus in 2016 in the US. It now offers several savings products in the UK that may help you achieve better financial health when approaching retirement.
With Marcus, you can open:
- An online savings account
- A cash ISA
- A 1 year fixed rate saver account
As an online-only bank, if you want to access those products, you need to be comfortable carrying out all your banking through a computer or app.
However, being run online is not unique to Marcus. There are so many online savings accounts available these days, so it's a great idea to know the advantages - and drawbacks - of as many of them as possible.
What is a Marcus online savings account?
A Marcus online savings account is a bank account that you can open with a minimum deposit of only £1. While the Annual Equivalent Rate (AER) is variable, users can also earn a bonus rate, fixed for the first 12 months. Before opening what is pipped as a ‘high-yield savings account’, it's always crucial to double-check the wider market's rates to ensure you get the best savings rate possible for your funds.
Other key features of a Marcus online savings account are that it is easy access and withdrawals are free. Many online savings accounts penalise users for taking money out, usually by dropping the Annual Percentage Yield (APY). There are no other monthly fees either.
Finally, there is a dedicated Marcus app to help manage your account and your general personal financial affairs. You can download their mobile app easily from Apple or Google Play.
How does a Marcus online savings account work?
There are several things to know about how a Marcus online savings account works.
Firstly, to open a Marcus account, you’ll need to provide your UK current account details. The bank calls this your linked account. You can only take money out of your Marcus account via transfer to your UK linked account. To make a direct deposit into your Marcus savings account, you can make a bank transfer or deposit a cheque from a linked account.
The minimum amount you need to open and maintain a Marcus savings account is £1, but the maximum amount you can ever hold in your Marcus account is £250,000. Bank transfers usually appear in your account immediately - so you can start earning interest that day. In contrast, cheques can take up to 7 days to clear, though Marcus starts paying interest within 2-3 days of receiving it.
The bank calculates interest on your account balance at the end of each day. The company pays interest without deducting tax, making this a gross interest account.
5 Advantages of a Marcus account
1. Easy Access
Usually, with an online savings account that offers a competitive interest rate, you will get penalised for making withdrawals. However, as your Marcus savings account is an easy access account, you always earn the advertised interest rate on your account balance at the end of each day. There is no fee for withdrawing money, either.
2. Mobile app
For many, being able to control their money through an intuitive and easy to use app is highly beneficial. Marcus's app is just that, making managing your cash and keeping an eye on your savings simpler.
3. Quick to set up
Often, when it comes to setting up a bank account, there is a lot of paperwork to complete. With Marcus, the online application makes the process far more straightforward. Importantly, if you use the online transfer facility from your linked account, you can start earning interest the day your funds clear, making your money work harder for you.
4. No time limit
The easy access nature of this account also means that there are no time limits on how long you have to deposit and lock away your cash. You can make withdrawals whenever you want, which can be crucial when you are living in retirement or nearing the time you are drawing a pension. You most likely do not want to be locking your money away for extended periods.
5. Low risk
Marcus is regulated by the Financial Conduct Authority (FCA) and authorised by the Prudential Regulation Authority (PRA). The FSCS also covers it, so you can put up to £85,000 in their online savings account and know your savings are protected. As a result, this is one of the lowest risk financial products around. Of course, no financial product is 100% safe. Still, these style accounts will never attract the same risks as some alternative assets or cryptocurrency investments.
3 Disadvantages of a Marcus account
1. Variable rate
Charging a variable interest rate could work out in your favour, as the bank may decide to up the rate of interest you can earn on your balance. In practice, that rarely happens, and the bank is only likely to change the rate for the worse. That does not automatically mean they will always lower it while you have an account open. But it is good to know for budgeting purposes that you cannot forever rely on earning the initial rate of interest advertised.
2. Current AER
Interest rates on bank accounts are currently at historic lows, despite the Bank of England starting to raise its base rate. The interest you earn on savings accounts is minimal, so you may want or need to put your money elsewhere if you have to achieve a higher return.
3. Maximum amount
Marcus limits the amount of money that you can save within these accounts. You are only allowed to pay in up to £250,000, which may be too low for your needs.
Opening a Marcus online savings account
Opening a savings account with Marcus is a good idea if it fits your investment targets and risk tolerance. Deciding whether it meets your needs is down to weighing up the advantages versus the disadvantages.
The most notable disadvantage to Marcus's current savings account is the paltry interest rate offered. However, that is sadly a market-wide phenomenon, so it could be that Marcus's interest rate is one of the best you can get. To determine that, you need to look at what other institutions offer. But the benefits of this savings account are attractive - an easy access account that does not charge fees with no time limits on locking money away.
Mike Barrow, financial coach at Claro Money, the UK’s first digital financial coaching app, spoke to Pension Times about Marcus online savings accounts. He said: “Most of the advantages and disadvantages of the Marcus account are shared with most other easy access accounts on the market and are not unique, whether for better or worse.
“One positive is the low entry point of being able to save from £1 in their easy access account, which is not the case with all others, however this is somewhat offset by a limit of £250,000. Yet, this is not a major limitation by any means, some accounts have higher maximums, some have lower, others may have none.
“Other features including FSCS protection, variable rates, no fixed time limit, and a mobile app, are shared amongst the majority of Goldman Sachs' peers so again, not a distinguishing factor for Marcus.
“On the easy access account, the interest rate currently quoted as 1% on their website is quite good. Despite this, it is not quite market leading at present as it has a lower interest rate than the highest rates on the market at present. The interest rate on the one-year fixed rate account unfortunately doesn’t keep up with the best rates in the market currently, however it certainly isn’t the worst!
“What really stands out is the cash ISA interest rate of 1%. This rate is currently one of, if not the leading market interest rate for easy access cash ISAs at present. This is great for those keen to save via an ISA, the viability of which in current market conditions is questionable for most savers unless they have relatively significant cash savings.
“In summary, while the cash ISA stands out and the overall offering certainly is not a poor choice for most, there is nothing at present that is particularly unique or market leading about the offering.”