Robinhood launches 3% checking account • Hacker News Board

Re: Robinhood launches 3% checking account

#141

Post by arminiusreturns » Thu, Dec 13, 2018, 4:30 PM UTC

nitsuaeekcm wrote: post #97

AustinGrandt wrote: post #45

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?

Banks who petition the Fed for FDIC insurance face much stricter reporting rules, capital reserve requirements, and limits on the riskiness investments they can make with client deposits from FINRA and the SEC. If you wanted, you could view the lack of FDIC insurance as a sign of a riskier institution overall, but like any other investment it might be worth it for the higher rate.

Just FYI, AFAIK, the standard 10 percent fractional reserve rate is no longer law after legislation post 08 crash bankers slipped through. So that old rule is very often not the case at a bank anymore.

Re: Robinhood launches 3% checking account

#142

Post by Arubis » Thu, Dec 13, 2018, 4:31 PM UTC

dawhizkid wrote: post #133

I actually like the newish Sofi Money debit card. It offers 2% for checking (so not as good but better than any other checking account at the moment), but the real benefit to me is unlimited ATM fee rebates at any ATM worldwide (which doesn't seem to be true of RH's product).

If you're so inclined, the Schwab Investor Checking accounts offer the same benefit.

Re: Robinhood launches 3% checking account

#143

Post by calimac » Thu, Dec 13, 2018, 4:32 PM UTC

What is their burn rate at 3%?

Re: Robinhood launches 3% checking account

#144

Post by zeroname » Thu, Dec 13, 2018, 4:32 PM UTC

snowwrestler wrote: post #95

AustinGrandt wrote: post #45

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?

Maybe: > 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 accoun…

I don't think understand that correctly. There's no such thing as a SIPC-protected checking account that holds securities. A checking account holds cash.

There's SIPC protection for your cash and securities (stocks etc.) that Robinhood holds for you, up to 250,000$ each. For obvious reasons, the value of a security in dollars fluctuates and therefore such losses cannot be insured. What is being recovered is the securities themselves, not their dollar value at a time of your choosing.

> 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's not the cash/securities that Robinhood holds as part of their business, it's the one they hold for you. You may well choose to hold 100% cash or 100% securities.

Actual banks hold only a small fraction of cash deposits in reserve, many of their assets may just as well turn out to be made up of bad loans, bad junk bonds and bad stocks. That's how banks can fail even without a bank run.

Re: Robinhood launches 3% checking account

#145

Post by notahacker » Thu, Dec 13, 2018, 4:32 PM UTC

thisone wrote: post #48

kin wrote: post #23

Unless I'm completely ignorant of what's out there, 3% interest on a free personal checking account is absolutely bonkers. I can only imagine everyone in /r/churning jumping on this if they have an invite.

When banks in the UK have offered 3% (Tesco bank did this) it was for the first 12 months and the number of new accounts was eventually limited. from what I understand Tesco bank had purchased bonds/securities/whatevs with a 5% interest rate, so made 2% off the deal. (and a slew of new customers worth x each to the bank) Hopefully something similar is funding this

Santander offered 3% up to £20k to all customers on their main checking account but had to cut that rate in the end.

Re: Robinhood launches 3% checking account

#146

Post by anoncoward111 » Thu, Dec 13, 2018, 4:32 PM UTC

everybodyknows wrote: post #125

anoncoward111 wrote: post #99

Robinhood has a horrible track-record for support. People routinely have their money stuck in Robinhood with no response from support. Cannot recommend using them.

Exactly. "Lean 300-person staff ..."

Crazy. The current organization I work for has easily over 1000 people customer support agents working 24/7. Large home heating oil provider in the US.

Most calls are "where's the driver" and has honestly been partially automated but older clients still like to call.

Either way, it takes humans to make sure the 600k customers don't fall through the cracks.

Re: Robinhood launches 3% checking account

#147

Post by kevin_thibedeau » Thu, Dec 13, 2018, 4:33 PM UTC

delecti wrote: post #129

dudul wrote: post #119

Earlier quoted context omitted.

Just to add a 3rd question to balance the other two: "Are financial firms able to change the way they've operated for decades (centuries?) easily?"

Your question seems to be implying that you believe financial firms are more stupid than greedy. In contrast to Hanlon's razor, I think it's usually fair to assume greed over stupidity.

Hence ACH. Greed and stupid combined.

Re: Robinhood launches 3% checking account

#148

Post by SilasX » Thu, Dec 13, 2018, 4:35 PM UTC

snowwrestler wrote: post #95

AustinGrandt wrote: post #45

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?

Maybe: > 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 accoun…

>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.

FWIW, some Vanguard bond mutual funds (most of the investment-grade ones) allow you to write checks against them, and those funds can lose value.

I can't find an easy link that says which specific ones, but here's their policy:

https://personal.vanguard.com/us/whatweoffer/accountservices...

Note: this isn't a general checking account that permits debit card usage, and each check must be for at least $250. But right now, you can use their Prime money market fund, which aims to avoid loss of capital ("breaking the buck" is very rare) and write checks against it, and it yields ~2.3%

https://investor.vanguard.com/mutual-funds/profile/VMMXX

Re: Robinhood launches 3% checking account

#149

Post by strangemonad » Thu, Dec 13, 2018, 4:35 PM UTC

dudul wrote: post #119

patio11 wrote: post #115

For folks trying to understand this, some context which may be useful: Checking accounts are loss leaders virtually everywhere, the exception being smaller community banks. Their primary revenue stream was, once upon a time, net interest income, but these days due to the extremely low interest environment and alternate sources of funding the revenue stream is more weighted towards fees (primarily NSFs, although that…

Just to add a 3rd question to balance the other two: "Are financial firms able to change the way they've operated for decades (centuries?) easily?"

Why is a question like this being downvoted? It seemed honest and in good faith – what is it that leads to organizational ossification and stagnation. It might be different factors in different industries.

Re: Robinhood launches 3% checking account

#150

Post by iknowordidthat » Thu, Dec 13, 2018, 4:36 PM UTC

patio11 wrote: post #115

For folks trying to understand this, some context which may be useful: Checking accounts are loss leaders virtually everywhere, the exception being smaller community banks. Their primary revenue stream was, once upon a time, net interest income, but these days due to the extremely low interest environment and alternate sources of funding the revenue stream is more weighted towards fees (primarily NSFs, although that…

In answer to your metacomment. The financial crisis is a strong indication that, yes financial firms can be terrible at math. Luckily, they have friends who can bail them out with taxpayer money when they fail at math.