Interest money

3 reasons why I didn’t put my money in a high interest crypto account

  • My husband and I mostly keep our money separate because we have different investment strategies.
  • He recently told me to put my money in a high interest crypto account, but I didn’t take the advice.
  • It’s not FDIC insured or easy to withdraw, and many cryptocurrencies are not stable.
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One of the biggest and best decisions my husband and I made when we got married last March was to separate the majority of our finances.

We have a joint checking account which stores our wedding gift money, but apart from that we have separate credit cards, investment accounts and savings accounts.

This works especially well for us because we have different opinions on some major financial strategies. For example, my husband is more comfortable investing in cryptocurrencies and NFTs.

I’m a bit more conservative investing my money in digital pieces and art, although I’ve made very small investments in both.

In early 2022, my husband encouraged me to put some of the money from my traditional savings account into a high interest cryptocurrency account. These accounts allow you to earn interest on the digital assets you have purchased, as you agree to let them lend your cryptocurrency in exchange for the high interest.

While some cryptocurrency accounts offer an interest rate of 8% or more, which is significantly higher than the 0.5% my bank currently offers, I’m already worried about converting too much money in cryptocurrency. In the end, I decided to ignore my husband’s advice. Here’s why.

1. There is no deposit insurance

When I deposit money into my traditional savings account at a bank, I feel comfortable knowing that it comes with FDIC insurance, which is a government guarantee that if the bank fails, my money is protected up to $250,000 per account.

With most cryptocurrency interest accounts, this is not the case. This means that you are putting your money in a riskier account just for a higher (potential) reward.

Additionally, the money you put into these cryptocurrency accounts is then loaned out to different borrowers. If these borrowers do not repay the loan, there is little or no protection and your money could be gone.

2. Withdrawals are not always easy or free

A big advantage of keeping my money in a traditional savings account is that I can withdraw it whenever I want for free. For some cryptocurrency savings accounts, your money is a bit more limited.

For example, some cryptocurrency savings accounts charge you a fee to withdraw your money and some have withdrawal limits, which can cap the amount you withdraw from the account for a specific period.

Although I have money on CDs with similar restrictions, I like to keep a lot of my money in a savings account that gives me the freedom to withdraw on a whim.

3. Price volatility

When you put your money in a cryptocurrency savings account, you can decide which digital coin to put it in. If you don’t choose a stablecoin – those that have value are pegged to another stable asset like a precious metal or fiat currency – and instead choose a more volatile coin like Bitcoin, Ethereum or Amp, then your balance and your interest payments can fluctuate greatly depending on the market.

Because the prices of these digital coins can go up or down at any time, and sometimes several times a day, it affects the money in your account.

This kind of risk breeds too much unnecessary anxiety and was ultimately one of the main reasons I turned down my husband’s advice. The benefit of keeping our finances separate is that we can have different financial ideologies and track throughout the year who made the best money move.