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They are offering this as a brokerage and not a bank so the accounts are not FDIC insured but SIPC insured instead https://support.robinhood.com/hc/en-us/articles/360001469903
Is it possible, that Robinhood is using high interest rate checking accounts not to make any money directly from them, but to encourage people to keep all their spare money one-click away from its investment products? In that case, checking accounts become just a business cost to Robinhood.
I’m not sure why other banks haven’t followed. One month treasury rate is already up to 2.3% now and banks can certainly lend it out at higher than treasury rate.
Because there is basically no competition. Plenty of credit unions around my area offer 3% or sometimes 4% checking, but the best bank rate I could find was under 1%. But credit unions and especially new small players like Robinhood aren't going to threaten PNC or BoA or Chase. So why would they give up free money if they don't have to?
They are offering this as a brokerage and not a bank so the accounts are not FDIC insured but SIPC insured instead https://support.robinhood.com/hc/en-us/articles/360001469903
It looks like both FDIC and SIPC have a 250K protection, are there any other differences between the two that would matter to an average consumer?
Earlier quoted context omitted.
What's stopping you from opening up similar accounts with other banks?
Most banks that will give you a current account will want to see £xxxx deposited every month (e.g, your salary) to earn any interest (if they even offer interest, it's rare on a current account). I could open multiple, but then every month I'd need to spend time transfering money to each to earn the interest. Im not sure that would even count towards deposited every month, they might want to see a direct debit that i…
For what it's worth, here in Australia they have similar offers. At one bank, I said I wasn't interested because of the regular 'salary' deposit requirement, and that bank offered to set me up with two accounts and a regular automated transfer between them to meet the minimum monthly deposit requirement. Though honestly, the fact they offered to do that concerned me even more.
They are offering this as a brokerage and not a bank so the accounts are not FDIC insured but SIPC insured instead https://support.robinhood.com/hc/en-us/articles/360001469903
It looks like both FDIC and SIPC have a 250K protection, are there any other differences between the two that would matter to an average consumer?
> SIPC insurance provides protection for your cash balance and securities holdings if Robinhood fails financially, but does not cover investment losses due to declines in the value of securities themselves.
Emphasis mine.
If you put $250,000 into an FDIC-protected checking account, that account holds cash and FDIC protects the full amount of that cash.
If you put $250,000 in an SIPC-protected brokerage account, that account holds both cash and securities, and SIPC does not protect you from a decline in the market value of those securities. So imagine the stock market drops and you go to your "checking account" and that has dropped too! To me, the concept of such a "checking account" violates my basic assumptions of how I think about my cash holdings vs. my security holdings.
I don't know how that percentage of cash/securities breaks down at Robinhood, but it's not going to be 100% cash and 0% securities. There is a reason big banks don't offer checking accounts with 3% interest rates. When the return is higher, the risk must have gone up too, somehow.
It also seems like there could be weird tax implications if your "checking account" has to liquidate securities to cover a big check you wrote.
Earlier quoted context omitted.
It looks like both FDIC and SIPC have a 250K protection, are there any other differences between the two that would matter to an average consumer?
Does this mean it's not smart to store more than 250k in robinhood? (I don't, just wondering)
They are offering this as a brokerage and not a bank so the accounts are not FDIC insured but SIPC insured instead https://support.robinhood.com/hc/en-us/articles/360001469903
It looks like both FDIC and SIPC have a 250K protection, are there any other differences between the two that would matter to an average consumer?
Anyone know of similar (short term) rates over here in Europe? Gotta be lucky to snatch up 1% for the first 6 months after signing up...
Also looking for something similar to Robinhood in Europe
People routinely have their money stuck in Robinhood with no response from support.
Cannot recommend using them.