Robinhood launches 3% checking account • Hacker News Board

Re: Robinhood launches 3% checking account

#221

Post by RobAtticus » Thu, Dec 13, 2018, 5:27 PM UTC

lettergram wrote: post #207

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…

It's also a way they can secure their loans. It's the exact same reason Capital One has bank accounts along with their credit card business (and Amex doesn't). Getting credit on the open market is expensive, by getting you to sign up with your bank account, they can leverage it to get cheaper loans for buying stocks (i.e. margin accounts). Capital One targets lower income people, so it's riskier and more vulnerable t…

Perhaps true in the past, but AmEx has recently (I think?) started offering bank accounts. Their high-yield savings account is 2%, which is pretty comparable to Ally, etc.

https://www.americanexpress.com/personalsavings/high-yield-s...

Re: Robinhood launches 3% checking account

#222

Post by lavezzi » Thu, Dec 13, 2018, 5:27 PM UTC

lotsofpulp wrote: post #73

iandanforth wrote: post #44

Maybe I'm doing it wrong but the "no foreign transaction fees" is just as exciting. Using my BofA card on trips always results in a welcome home set of charges I could do without.

Charles Schwab checking account has offered free ATM withdrawal worldwide for a long time.

This isn't the same though. The wording is transaction fees, not ATM fees. It's far more convenient to pay with your card where possible rather than tracking down a foreign atm that you can use.

Re: Robinhood launches 3% checking account

#223

Post by deepakhj » Thu, Dec 13, 2018, 5:28 PM UTC

iandanforth wrote: post #44

Maybe I'm doing it wrong but the "no foreign transaction fees" is just as exciting. Using my BofA card on trips always results in a welcome home set of charges I could do without.

Charles schwab doesn’t charge arm or foreign transaction fees. I use Citibank for traditional checking, I rarely ever deposit cash anymore.

Stop using debit cards because they don’t have the same fraud protection as credit cards.

Re: Robinhood launches 3% checking account

#224

Post by mikeryan » Thu, Dec 13, 2018, 5:29 PM UTC

Aunche wrote: post #215

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…

> geeks who believe they have outmathed a financial firm should ask themselves "Are financial firms likely to be bad at math?" and "Are financial firms incapable of hiring their own geeks?" Moviepass was also bought by a financial firm... Come to think of it, they have many similarities. Both companies are basically handing out free money and it's unclear how they would make any profit. People speculate that both com…

Moviepass was bought by what is, primarily, an analytics firm. Though apparently so is Robinhood.

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

Re: Robinhood launches 3% checking account

#225

Post by deminature » Thu, Dec 13, 2018, 5:31 PM UTC

mikeash wrote: post #218

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…

Why would they expect this account to be used as a high-velocity, low-balance account rather than a park-your-savings account, given the rate? I agree that the high rate is reasonable in that scenario, but the high rate is also actively fighting to ensure that scenario doesn’t happen. I don’t see people here thinking that Robinhood is bad at math. They’re all asking, “what’s the catch?” Because it sure seems like the…

I assume they're trying to break the inertia people have with major banks. There's no reason to change bank unless there's some substantial incentive like favorable interest rate to offset the hassle involved. I'm not sure there's an ulterior motive here other than customer acquisition.

Re: Robinhood launches 3% checking account

#226

Post by copperx » Thu, Dec 13, 2018, 5:32 PM UTC

Arubis wrote: post #142

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.

Not the 2% interest. Nope.

Re: Robinhood launches 3% checking account

#227

Post by criddell » Thu, Dec 13, 2018, 5:32 PM UTC

elliekelly wrote: post #62

apo wrote: post #34

3% on checking sounds too good to be true. What's the catch? For example, I didn't see anything about how funds are insured. If Robinhood were to somehow lose depositor funds, what recourse would account holders have?

Like all "tech" companies - they're selling your data. They already do it in their brokerage accounts. Now imagine the value of knowing what you spend every single dollar on, how often you're shopping at a competitor, what time of day you're most likely to swipe your card, etc. They're SIPC insured (like a brokerge account) instead of FDIC insured (like a bank account) which is a subtle difference and ever-so-slightl…

With 3% interest, that would be where I park money. What information will they get from me other than I dumped $ in and it's sitting there?

Re: Robinhood launches 3% checking account

#228

Post by rconti » Thu, Dec 13, 2018, 5:33 PM UTC

JumpCrisscross wrote: post #208

dixie_land wrote: post #163

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.

> Their whole business is to encourage folks that should not be day trading to day trade Less cynically, it’s building a book of investors who have likely never lost money in the stock market.

It doesn't really matter; they're making the spread anyway, whether you make money or lose money.

Re: Robinhood launches 3% checking account

#229

Post by lowercased » Thu, Dec 13, 2018, 5:34 PM UTC

“These fees like overdraft fees — they’re not fees millionaires are paying. It’s ordinary folks paying. It’s actually more expensive for those that have less money and it’s cheaper for those that have more money. We think that isn’t right and we think that’s bad business” Bhatt gripes.

================

It's been pretty good business for many banks for years. ???

Re: Robinhood launches 3% checking account

#230

Post by mikeash » Thu, Dec 13, 2018, 5:36 PM UTC

deminature wrote: post #225

mikeash wrote: post #218

Earlier quoted context omitted.

Why would they expect this account to be used as a high-velocity, low-balance account rather than a park-your-savings account, given the rate? I agree that the high rate is reasonable in that scenario, but the high rate is also actively fighting to ensure that scenario doesn’t happen. I don’t see people here thinking that Robinhood is bad at math. They’re all asking, “what’s the catch?” Because it sure seems like the…

I assume they're trying to break the inertia people have with major banks. There's no reason to change bank unless there's some substantial incentive like favorable interest rate to offset the hassle involved. I'm not sure there's an ulterior motive here other than customer acquisition.

Right, but that incentive is only substantial if you’re going to park a lot of money there, which is exactly the sort of customer they don’t want according to the comment I replied to.