Robinhood launches 3% checking account • Hacker News Board

Re: Robinhood launches 3% checking account

#161

Post by mcv » Thu, Dec 13, 2018, 4:47 PM UTC

09bjb wrote: post #153

mcv wrote: post #114

Earlier quoted context omitted.

What are securities in this context? Is that not something that you personally choose to invest in? Because if it is, then this is basically the same. Your cash is fully insured, but obviously your investments run investment risk. If Robinhood automatically converts your money into securities, then it's a different matter. It sounds unlikely to me that any bank account would work that way, but I don't know how Robinh…

Not an expert in this domain but I'll cover the basics: ecurities are a euphemism for stocks and similar. Banks have been loaning out the money you deposit since the beginning of time; it's how they make money. They don't keep all the cash that people have deposited on hand, which is why a "run on the bank" was problematic in the past. They basically keep enough cash around ("reserves") so that the average withdrawal…

So what does that mean here? Are you saying that the part of your money that the bank uses to invest, is not insured? If so, then what does the insurance for the remainder even mean? Money that the bank doesn't touch doesn't need to be insured, because it's always there. The whole point of such an insurance is to reimburse you in case the bank loses your money due to their bad investment. If that's not covered but only the part that they never touch, then the whole insurance becomes meaningless.

I still suspect that the securities mentioned are your own securities rather than the bank's, which makes it totally sensible that they're not covered by the insurance.

Re: Robinhood launches 3% checking account

#162

Post by kurtisc » Thu, Dec 13, 2018, 4:47 PM UTC

strangemonad wrote: post #149

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?"

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.

Because HN is learning some bad habits from its mother site with regards to the purpose of votes.

Re: Robinhood launches 3% checking account

#163

Post by dixie_land » Thu, Dec 13, 2018, 4:49 PM UTC

I think folks are overthinking this.

The math itself doesn't matter. Have you seen recent Robinhood commercials popping up on TV? Their whole business is to encourage folks that should not be day trading to day trade.

Having your money parked there just facilitates knee-jerk-reaction and follow-the-crowd trading.

Re: Robinhood launches 3% checking account

#164

Post by biomene » Thu, Dec 13, 2018, 4:50 PM UTC

iknowordidthat wrote: post #150

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.

The financial crisis was not a result of bad mathematics. Investments are made because they promise to return dividends. But there is always a chance that they might return lower than expected dividends, or none at all. This can be because the market didn't grow as expected, wages rose above expectations, a tsunami wiped out your factory or an array of other factors completely beyond your control. The best mathematicians in the world cannot predict how many coca cola bottles will be sold in a year.

Re: Robinhood launches 3% checking account

#165

Post by benj111 » Thu, Dec 13, 2018, 4:52 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

Tesco's 3% is ongoing, it is limited to £1500 though, I've had one for 5? Years. Was only guaranteed for 12 months, and guaranteed it again when they had their security breach a few years back.

They have limited account opening at various times though.

Re: Robinhood launches 3% checking account

#166

Post by deadmik3 » Thu, Dec 13, 2018, 4:53 PM UTC

subhro wrote: post #92

freehunter wrote: post #18

Earlier quoted context omitted.

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?

Which credit union offers 4% on all money with them? I know of a few CUs that will offer much higher interest on the first X dollars. Ex: inspiruscu.org

Yeah when I started looking at one of my local credit unions I almost jumped at the 10% interest rate before I realized it was only 10% on the first $1k then less than 1% on everything after that

Re: Robinhood launches 3% checking account

#167

Post by [deleted] » Thu, Dec 13, 2018, 4:55 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…

[deleted]

Re: Robinhood launches 3% checking account

#168

Post by notyourday » Thu, Dec 13, 2018, 4:55 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…

If RobinHood's MBAs are about to learn a lesson of what a fatwallet/slickdeals effect is.

Re: Robinhood launches 3% checking account

#169

Post by snowwrestler » Thu, Dec 13, 2018, 4:55 PM UTC

krn wrote: post #81

ericliuche wrote: post #29

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.

Checking accounts are loss leaders for most banks, even with low interest rates.

And big brokerages have offered this type of account for decades. It's usually called a "cash management account" and works just like a checking account--takes direct deposit, provides checks and an ATM card, etc.

Robinhood's innovation might simply be in calling it a "checking account" so the interest rate looks huge (it's actually small compared to expected investing returns) and marketing it to young people who are suspicious of big financial companies.

Re: Robinhood launches 3% checking account

#170

Post by DINKDINK » Thu, Dec 13, 2018, 4:56 PM UTC

"Robinhood" steals from its users to gives to its investors:

"Robinhood Is Making Millions Selling Out Their Millennial Customers To High-Frequency Traders" [1]

"Robinhood Investing App Secretly Makes Millions Selling Millennials' User Data To HFT Firms" [2]

[1]https://seekingalpha.com/article/4205379-robinhood-making-mi...

[2]https://www.zerohedge.com/news/2018-09-15/robinhood-investin...