Robinhood 3% Checking and Savings

[PhillyFIRE]

It looks like Robinhood is launching checking and savings accounts in early 2019 with 3% interest and no fees. You can sign up for a waiting list now. I read through all the FAQs and terms and conditions and didn't see anything about a cap, but even if there is, seems like a great option to park those emergency funds, right?

Here's my link to sign up for Robinhood and each get a free stock if you want to start another one of those chains: share.robinhood.com/seank73

[HeadedWest2029]

I'm intrigued as a Robinhood user too. Concern for me is the 3% interest will be short lived as a quick introductory hook after you move over all your automatic payments.

[benstagram]

Some interesting discussion at Doctor of Credit on this account being  SIPC insured rather than FDIC insured:

https://www.doctorofcredit.com/robinhood-introduces-3-apy-checking-and-savings-account-no-fdic-insurance/

[AK_FED]

I saw this today and am definitely very interested given that I have been shopping for a new savings account anyways.  After doing some research I still really do not understand the risk of SIPC vs FDIC as SIPC seems pretty darn safe.  What really doesn't make sense to me is why SIPC would apply to this kind of savings accounts as it is usually for securities.  I'll keep my eyes open for a while longer (especially as we can expect another 1-5 rate hikes in the next year), but Robinhood is near the top of the list for sure.

[coderstache]

I was excited by this but I also am unsure about how realistic 3% will be consistently. The highest savings accounts I've seen so far are 2-2.25%, via https://www.nerdwallet.com/blog/banking/best-high-yield-online-savings-accounts/. I was personally looking at CITI. Robinhood I'm fine with too, if that rate stays consistent.

[Radagast]

So is this basically loaning Robinhood money at lower than their corporate bond rate? I can't figure it out. SIPC says it does not protect cash except in a brokerage account for the purpose of trading securities, and Robinhood's "checking and savings" seems to be explicitly not for trading securities. Beyond that SIPC says it does not protect against misrepresentation or fraud. I can't tell if this is too good to be true.

[dividendman]

The big different between SIPC and FDIC is if a bank fails for any reason and is FDIC insured, then your cash deposits are guaranteed by the government whereas SIPC only protects your money in the event of fraud.

So, let's say robinhood took a bunch of your deposits in checking and savings and on the side took a huge loan to buy penny stocks and lost all the money and went bankrupt, your deposits would be paid by the government if robinhood was a member of the FDIC.

SPIC, on the other hand, only helps you in the case of fraud by robinhood - not foolish business decisions (i.e. if the company goes bankrupt due to the above penny stock case, your deposits would NOT be safe from creditors).

[Nothlit]

https://www.bloomberg.com/news/articles/2018-12-14/sipc-says-it-has-serious-concerns-about-robinhood-s-new-product

“I disagree with the statement that these funds are protected by SIPC,” Stephen Harbeck, president and chief executive officer of SIPC, said in an interview Friday. “Had they called us, I would have told them what I just told you in that I have serious concerns about this. This has gigantic ramifications for the banking industry.”

Time to break out the popcorn... 🍿

[katsiki]

So is this basically loaning Robinhood money at lower than their corporate bond rate?

I think so.  I am intrigued as a consumer though.

[Stimpy]

While I am intrigued enough that I am on the list and not going to remove myself( The amount I am planning on putting in is insignificant so if it's lost, meh.), I DO find it concerning that Robinhood didn't do ANY homework before making this announcement.

You know like call up the SIPC and ask the simple question of "Yo, if we do Checking and savings you got us covered?"  The answer to that (which would have been/is no) probably would have made it look LESS like Robinhood has egg on it's face and made them actually figure out IF they can make this work.   As of right now, I would say it's 1000% up in the air if as to if this is a good idea or not.

I suppose only time will tell if they actually pull this off, and IF they can get FDIC to actually back them, who knows, they might actually take on the "Big Bad Banks"!

[Radagast]

https://www.techradar.com/news/t-mobile-quietly-launches-site-for-mobile-banking-service

If you use T Mobile, you could use this handy account to get 4% on the first $3k, and 1% thereafter for a non T-mobile phone user, with FDIC insurance. The breakeven point would be $4400.

[Nothlit]

https://blog.robinhood.com/news/2018/12/14/a-letter-from-our-founders

We’re excited and humbled by the response to yesterday’s announcement of Robinhood’s cash management program launching in 2019. However, we realize the announcement may have caused some confusion.

As a licensed broker-dealer, we’re highly regulated and take clear communication very seriously. We plan to work closely with regulators as we prepare to launch our cash management program, and we’re revamping our marketing materials, including the name.

The “checking.robinhood.com” URL now just redirects to their home page, and the item in the menu bar has been renamed from “Checking & Savings” to “Cash Management”

[AK_FED]

Sounds like Robinhood's eyes were bigger than their stomach on this one.  I think they have a good idea though. I'm definitely going to keep a watch on them for future (real) products.

[kenaces]

I have read that wealthfront is planning on launching some type of high yield checking account in first quarter of 2019.

I think is long over due of tech to really start to challenge banks and their high fees / low yield!

[noplaceliketheroad]

ptf... been waiting for this new robinhood product to be discussed on here...

[DrumAllDay]

A few months ago I took all my money (mostly just fun money picking stocks) out of robinhood. With all the free stocks they give out and now this it's almost like it's too good to be true. No, Robinhood probably won't go under, but I would rather keep my money with a company I feel safer with.

I actually ended up timing the market pretty well because I cashed out my stocks in September right before stocks started tanking a bit. Nothing like being lucky! However I don't think I will be stock picking anymore anytime soon.