I've had their cash account since their increase to 2.51%, and just got an email for an automatic increase to 2.57%. They generally seems to want to take market share and is offering one of the best rates I see with ease of liquidity for those who want some returns but are currently risk-adverse from investing. Easy integration for deposits/withdrawals for your main checking/savings account as well.
Q: What is Wealthfront's Cash Account?
A: It is a saving account offering 2.57% APY with FDIC insurance for up to $1 million (split over four banks). There are zero fees to open and maintain. There is Zero market risk as the cash is kept out of the markets (this is not their investment vehicle although they also offer a roboadvisor program). There are unlimited, free transfers but there is no direct deposit available (so you'd still have to set up transfers from your main bank account). There is a $1 minimum to open and there are no additional deposit requirements.
Q: How do they offer such a high APY?
A: Compared to traditional banks, internet banks can offer higher rates as they have lower overhead (no B&M costs). They do currently offer the highest rate, including against other internet banks, which they claim is possible because of their "smarter" business model. I also think they eat a small part of the costs in order to gain market share.
Q: Is my money safe?
A: Short answer - yes. It's as safe as putting your money in any other bank due to the FDIC insurance. In the rare case of complete annihilation to our global economy, you may have to jump through some hoops, but you'll get your money in the end. As any good financial advisor will tell you however - diversify. You shouldn't be putting all your eggs in one basket, so if you need the liquidity and flexibility of a checking/savings on a day to day basis, this account may not be for you as there is a slight time delay due to the transfers (if you needed to pay bills or write a check within a day for example). Otherwise, this is a very good secondary option - as a point of reference, my checking and emergency savings fund remains at my BoA / Capital One banks whilst the majority of my non-invested cash (cash that is basically going towards a house, future childcare costs - any other future major expenses or investments really) sits here.
I've personally also used their robo-investor and have been happy with it. The tax-loss harvesting feature is really nifty and would have been a headache to do myself, or costly by hiring a talented tax/financial accountant. I haven't had any issues with using Wealthfront over the past three years I've used them from the investment side. Some more helpful articles / disclosures: