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Robinhood launches 3% checking account

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Re: Robinhood launches 3% checking account

#181

Post by hocuspocus »

novaRom wrote: post #64
MrL567 wrote: post #38

Earlier quoted context omitted.

Interest rates for banking accounts for quite some time have been low. 3% is very high for the USA so it' s a pleasant surprise for many people.

Also 3% is astronomical for Euro zone. Here you typically have 0.01-0.1% on saving accounts (only for 100k Euro and below), and negative rate on checking accounts (most people usually pay 7-12 Euro per month for checking accounts and 20-40 Euro per year for Visa card).

It's not a fair comparison. Interest rates have bounced back (to some extent) and interchange fees are quite a bit higher in the US.

I haven't checked everywhere in the eurozone but a lot of major banks have online brands/products that are typically free. You should be able to have at least a checking account and a debit card without paying any fees. "Neobanks" are also a lot more developed than in the US: see N26, Revolut, Ferratum, ...

Savings accounts yield nothing, but that has nothing to do with retail banks :) That said, you can find fixed-term deposits between 1 and 2%: https://www.raisin.com/

Re: Robinhood launches 3% checking account

#182

Post by ptero »

crgt wrote: post #126
ptero wrote: post #96

Earlier quoted context omitted.

Brokerages love fat cats and most provide free high quality additional insurance up to at least 5-10M. What happens if brokerage fails? My bet is its insurance, reinsurance or gov't would bail investors out (ask Lehman clients many of whom had accounts a LOT bigger than 250k). My guess is that it is safe to keep at least 5M in a single brokerage, but decide for yourself.

Many Lehman clients got pennies on the dollar..

Can you provide some references? This is an honest question, I am just stunned that this did not cause major account fragmentation (fat cats splitting millions into 500k chunks). Just googling (which, granted, is not truth) seems to point to major news outlets confirming that customer accounts were safe.

To clarify, I am talking about customers who held money at LB invested in mutual funds or securities. If the account had a mix M of securities before LB collapsed they would have the same mix once the dust settled and LB account was forced to whatever other brokerage. If this is incorrect (not for some advanced hedge funds, etc. but for retail customers) I would love to know.

If you are talking about folks who held LB stock or bonds, they sure did lose money when the company went bankrupt, but that is not unexpected. Stocks fluctuate in price and some go all the way to zero; for every Google there are a few KMarts, Sears or Enrons.

Re: Robinhood launches 3% checking account

#184

Post by snowwrestler »

mcv wrote: post #114
snowwrestler wrote: post #95

Earlier quoted context omitted.

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…

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…

That's my question. I understand how SIPC protects the cash in my brokerage account, and I understand how I can use that cash to generate returns. And brokerages have offered "cash management accounts" with checks and ATM cards for years.

I don't understand what a "checking account" is that guarantees 3% interest and is covered by SIPC instead of FDIC.

Re: Robinhood launches 3% checking account

#185

Post by whitepoplar »

Schweigi wrote: post #117
1123581321 wrote: post #74

Earlier quoted context omitted.

You shouldn’t store more than $250k in cash in any kind of bank or brokerage due to the insurance limit (unless the bank has account insurance beyond $250k.) Investments are different, of course. Edit: I forgot about the details of the limit. Thank you all.

Interactive Brokers introduced a Bank Deposit Sweep Program this year. They distribute cash over 10 banks to provide up to $2.5mio FDIC insurance.

Same with Fidelity's free CMA account.

Re: Robinhood launches 3% checking account

#186

Post by dec0dedab0de »

DINKDINK wrote: post #178
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…

>their core strategy, which is spending what would otherwise be a marketing budget on keeping commissions at zero, making money on the other ways "Making money others ways" aka stripping their clients of financial privacy by selling their clients' investment-decision data: "Robinhood Is Making Millions Selling Out Their Millennial Customers To High-Frequency Traders"[1] If your investment brokerage firm's strategy is…

Aren't all orders eventually public anyway? I get that the liquidity that "market makers" claim to create is not really that beneficial to society, but as long as you're not trying to use robinhood to compete with the high speed traders, I don't see a problem with it.

Re: Robinhood launches 3% checking account

#187

Post by Zooper »

DINKDINK wrote: post #170

"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...

So, they're exploiting users in some of the ways banks are, but not all ways currently. Other banks do all of the things listed above already, have been for decades.

Re: Robinhood launches 3% checking account

#189

Post by snowwrestler »

zeroname wrote: post #144
snowwrestler wrote: post #95

Earlier quoted context omitted.

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 secur…

> 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.

If I'm holding 100% securities, a) SIPC offers me no protection from losses, b) I better be making more than 3% return, and c) I would not call that situation "a checking account."

Re: Robinhood launches 3% checking account

#190

Post by nimish »

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

3% in the UK on GBP is different from 3% in the US on USD. You can't really compare them.
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