If it sounds too good to be true, it probably is…but does that apply to Robinhood’s new 3% Checking and Savings accounts? After reading the fine print, here’s what you need to know. Enjoy! Add me on Snapchat/Instagram: GPStephan
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Robinhood just announced that it will now be offering a 3% Interest Rate on their Checking and Savings accounts to begin in 2019. What makes this an amazing offer is that “Robinhood Checking & Savings accounts come with no fees, minimum balances or deposit requirements.” Also, interest is paid out DAILY…that’s absolutely incredible.
The “catch” here is that because Robinhood isn’t technically a “bank,” you’re actually opening a brokerage account where your money isn’t FDIC insured. So instead, they offer SIPC Insurance. SIPC protects you up to $250,000 in cash, or $500,000 in assets upon broker failures…this means that if Robinhood ever closed down due to financial difficulties and assets went missing, SIPC steps in to help return client’s money. This does NOT apply if Robinhood mismanages funds or breaks regulation. It’s not quite as strong as FDIC insurance, but it’s relatively safe as long as Robinhood is in compliance.
Another small risk here is that the President and CEO of SIPC claims that “SIPC protects cash that is deposited with a brokerage firm for one limited purpose...the purpose of purchasing securities. Cash deposited for other reasons would not be protected.”
Robinhood claims that because the checking and saving products are technically part of a brokerage account, they would be protected by SIPC like other brokerage assets. People can trade stocks and other assets through the brokerage using the money in these checking and savings accounts. Personally, this sounds a little sneaky of Robinhood to call this a “checking account”…but characterize it as a brokerage account.
So how are they able to even pay out a 3% in the first place?
The way I see it, this is their cost of customer acquisition. This is how much they believe ONE customer is worth to them, long term. They want people to talk about it, they want people to be Robinhood customers, and in order to do that, they have to do something DRAMATIC…otherwise no one would bother moving their money over.
Fortunately for them, this is just going to be a Short Term loss…I have a feeling we’ll see ALL checking accounts offering a 3% interest rate in the next 10-15 months. And by then, they lose the early mover advantage of offering this before anyone else.
Here’s what I think is going to happen…this is going to be a loss leader for the company. I also think Robinhood is going to SIGNIFICANTLY underestimate how many people will sign up for this service, as well. But as long as they have the funds, they will manage just fine. Now of course you run the small risk of them being a newer company that’s not FDIC insured…and the “Risk” is really only for an extra 1% compared to keeping your money in Ally, for instance…so is it worth the risk? Maybe.
Also if something happens to Robinhood and they break the law, and SIPC insurance says “you called it a checking account, we’re not covering it”…you might be out of luck.
The good news is that Robinhood doing this forces OTHER companies to be more aggressive with their checking and savings account returns, and I bet we’re going to see many other companies follow this move coming in January!
For business inquiries or paid one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
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The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
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Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq

By Stock Chat

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25 thoughts on “A warning about robinhood’s 3% checking account”
  1. Avataaar/Circle Created with python_avatars Eric Wilson says:

    4.9 percent lol

  2. Avataaar/Circle Created with python_avatars Big Journey TV says:

    Robin the hood I keep telling people they're telling you in plain sight!!!!

  3. Avataaar/Circle Created with python_avatars fearlessreview says:

    Need an update on this with all the mess

  4. Avataaar/Circle Created with python_avatars synmn says:

    Safer than FTX

  5. Avataaar/Circle Created with python_avatars JMart530🦂 says:

    Has anything changed?

  6. Avataaar/Circle Created with python_avatars Pixel Pete (Peter Milko) says:

    They offer FDIC now!

  7. Avataaar/Circle Created with python_avatars Florence Jasper says:

    All thanks to ramidcrack ôn IG his the best I the world

  8. Avataaar/Circle Created with python_avatars Becky Bassey says:

    Ramidcrack made me the most happiest person ön earth.. His a pro..

  9. Avataaar/Circle Created with python_avatars Taron Lee says:

    It’s now $0.30% interest. (30% 😱)

  10. Avataaar/Circle Created with python_avatars Faith Adelu says:

    Go to Uriascode_ on Ïñstàgräm the real man that got my account unlink best man

  11. Avataaar/Circle Created with python_avatars Faith Adelu says:

    Go to Uriascode_ on Ïñstàgräm the real man that got my account unlink best man

  12. Avataaar/Circle Created with python_avatars Tyler Russo says:

    Do you think you could do an up-to-date video about Robinhood and if it is currently worth signing up for to novice investors who also want to use their cash management program as a "savings".
    Is it worth it currently in 2021?

  13. Avataaar/Circle Created with python_avatars Dorcas Bill says:

    Hey dudes meet my superhero🦸‍♂️
    Hex_hacker09 On InsTa got me a new password into my Snapchat and memories back account❤️

  14. Avataaar/Circle Created with python_avatars Salvadoski says:

    Can we revisit this?
    The interest rate plummeted

  15. Avataaar/Circle Created with python_avatars Valerie Sanchez says:

    Steals from the poor and parties with the rich

  16. Avataaar/Circle Created with python_avatars Shandoftb says:

    They’re fdic insured now

  17. Avataaar/Circle Created with python_avatars Alex Bemis says:

    Love what you do man keep it up. Love your insight on things.

  18. Avataaar/Circle Created with python_avatars Thekidwhosegood says:

    so when I connect my bank with Robinhood do the bank take some of my money when I buy stocks

  19. Avataaar/Circle Created with python_avatars kaythegardener says:

    What about using the Robinhood account for its test Paper Trading track only for a while, till the customers get more experience??

  20. Avataaar/Circle Created with python_avatars Russ Lea says:

    Robinhood doesn't rob from the rich and give to the poor, he just reallocates assets.

  21. Avataaar/Circle Created with python_avatars Antwan Russell says:

    Please cover Robinhood Cash Management's recent announcement yesterday

  22. Avataaar/Circle Created with python_avatars fery tonee says:

    the robinhood management account now is up! please make an update for this robinhood debit card. It is now 2% interest.

  23. Avataaar/Circle Created with python_avatars Furkat Tagaymurodov says:

    Robinhood they are the most cheating app I ever seen that before wow

  24. Avataaar/Circle Created with python_avatars Denver Guy says:

    Everyone?

  25. Avataaar/Circle Created with python_avatars Steve Wiseburn says:

    Graham, you don’t understand how banks make money. Fractional Reserve Banking allows banks to lend out your deposit multiple times essentially creating money out of thin air. A borrower is creating the funds with their own signature, so banks receive interest on your deposit multiple times. End the FED

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