Robinhood launches 3% checking account • Hacker News Board

Re: Robinhood launches 3% checking account

#251

Post by curiouscats » Thu, Dec 13, 2018, 5:47 PM UTC

Glyptodon wrote: post #156

durkie wrote: post #136

PSA: those using Robinhood for trading, they use the FIFO/first-in-first-out method for determining your cost basis when you sell. This can have unexpected tax consequences. https://support.robinhood.com/hc/en-us/articles/360001226966

As someone with limited investment experience, what's a more normal strategy? Highest cost basis first? What are the pros/cons?

Any I have seen allow you to set what you want as the default for your sales and also chose to use a different style on each sale. Default setting for accounts I have seen is selling high cost first (as that will result in the lowest taxes).

Selling high cost first is likely the best strategy but if say you had some that was long term versus short term capital gain that might lead you to make a different decision on a particular case. Also if you had a choice to sell something that is about to be a long term gain versus one that you bought much more recently you might want to sell the more recent purchase first (in the event you were going to sell again say in a month - which could let you claim a long term gain for the 2nd sale). So there are reasons to make different choices in individual cases.

Re: Robinhood launches 3% checking account

#252

Post by deminature » Thu, Dec 13, 2018, 5:48 PM UTC

fullshark wrote: post #232

deminature wrote: post #225

Earlier quoted context omitted.

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.

Agreed, they are trying to buy customers, if it turns out that they can't convert these customers into traders they will lower the rate to a breakeven amount and not care if they lose those accounts.

Perhaps true, there's been an opening for a 'cool' millennial-oriented financial institution for a while now, so perhaps fewer customers will drop off than expected.

Re: Robinhood launches 3% checking account

#253

Post by JoBrad » Thu, Dec 13, 2018, 5:49 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’m sure a lot of people might start out that way. But if you get free money for parking your cash there, why not use that money to dabble in some trading? Seems like there is little downside for the company, and potential for upside for the consumer. Pretty good acquisition strategy, in my opinion.

Re: Robinhood launches 3% checking account

#254

Post by jcfrei » Thu, Dec 13, 2018, 5:54 PM UTC

brewdad wrote: post #195

notyourday wrote: post #168

Earlier quoted context omitted.

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

Hopefully, they've already added some fine print, or will shortly. I've seen other banks be successful with this high interest strategy but every one of them requires 12-20 debit transactions per month in order to receive the high rate. If Robinhood allows users to simply park their money, they could be in for a world of hurt.

My thoughts exactly. This looks like a good deal for people who would alternatively invest in money market funds. I bet they have an account cap or tiered rates.

Re: Robinhood launches 3% checking account

#255

Post by tanderson92 » Thu, Dec 13, 2018, 5:54 PM UTC

fizgig wrote: post #65

davio wrote: post #56

Earlier quoted context omitted.

BOA interest rates will probably rocket up from .02% to .03% when the prime rate goes above 6%

I know, right? I'm soooo tempted to hoard $100k with BoA for that 20% extra bonus to their crappy interest rate.

You joke, but a lot of savvy people hoard $100k with BoA through their brokerage in the form of ETFs specifically for the bonuses to credit card rates (and the free equity trades).

Re: Robinhood launches 3% checking account

#256

Post by whitepoplar » Thu, Dec 13, 2018, 5:55 PM UTC

To anyone knowledgeable with SIPC, what happens in the event that many firms go bankrupt at the same time (e.g. global financial collapse) and SIPC doesn't have enough funds to cover losses across all firms? As far as I'm aware, FDIC (for bona fide bank accounts) is backed by the full faith and credit of the U.S. Government (even though, on its own, it may not have enough funds to cover all liabilities, Congress can and will authorize additional funding to cover said liabilities), but I'm not sure if that's true for SIPC.

Re: Robinhood launches 3% checking account

#257

Post by subraizada3 » Thu, Dec 13, 2018, 5:55 PM UTC

kypro wrote: post #245

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.

From what I understand Robinhood ban people who day trade.

The SEC and FINRA (regulatory agencies) don't allow day trading for accounts with balances less than $25,000. If you exceed 3 (?) day trades in the past 5 days, your account is locked from day trading for 90 days (so if you buy a stock you will be unable to sell it that day). All exchanges enforce this rule, not just Robinhood.

Re: Robinhood launches 3% checking account

#258

Post by tekromancr » Thu, Dec 13, 2018, 5:55 PM UTC

kypro wrote: post #245

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.

From what I understand Robinhood ban people who day trade.

If you pattern day trade with less than 25k in your account, yes. You will have trading disabled temporarily, but they won't outright ban you

Re: Robinhood launches 3% checking account

#259

Post by jcoffland » Thu, Dec 13, 2018, 5:56 PM UTC

abuckenheimer wrote: post #250

DINKDINK wrote: post #178

Earlier quoted context omitted.

>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…

Yes HFT buys trade flow from robin hood because they make more money executing against it but that's not actually to the detriment of the people on the robin hood app. The main way HFT firms make money is by making a market, they offer to buy and sell stocks cheaper than anyone else and get paid by people crossing the spread and sometimes exchange fees. The reason robinhood trade flow is valuable to HFT firms Isn't b…

The stock market is a zero sum game. If HFTs are making money then someone else's is losing it. The other traders who's trades are closest are the most likely losers. HFTs will tell you what a great liquidity service they provide but they are doing nothing more than using the equivalent of insider information to skim the cream off the top.

Re: Robinhood launches 3% checking account

#260

Post by pcdoodle » Thu, Dec 13, 2018, 5:57 PM UTC

a13n wrote: post #104

This is massive news. Banks are going to have to decide whether they want to raise their rates to compete, or face bleeding customers. The best part is that the money comes from merchants and credit card companies, and is being returned to consumers. Robinhood truly is living up to their name: stealing from the rich and giving to the poor.

Hell yeah!