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Robinhood launches 3% checking account

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Re: Robinhood launches 3% checking account

#461

Post by what_ever »

snowwrestler wrote: post #377
dunpeal wrote: post #365

Earlier quoted context omitted.

> You are never getting returns for free Sure, but you can buy US treasury bills, and then your risk is "lose some money if the US government defaults", which is very low. We all live every day with risks far greater than that risk level. If you look at the current treasury yields, they are very close to 3%. Add the interchange revenue, and RobinHood can pull a 3% guarantee while still making a (narrow) profit. If tr…

If this worked well enough to allow 3% interest on checking accounts, literally every single bank would already be doing it.

By that logic no company would have offered your free two day shopping for paying 70 bucks a year when Amazon Prime launched.

Re: Robinhood launches 3% checking account

#462

Post by 013a »

flexie wrote: post #284

This whole checking account / savings account, credit card/ debit card system that Americans have to deal with is so cumbersome and backwards. For Europeans that don't know: Most Americans have (at least) those two accounts, and those two cards. They usually spend from their checking account with their credit card, and save on the savings account. When they spend on their credit card, they sometimes "earn" points, de…

This comment is hilarious. Its so obvious that you haven't been to America in a looooong time.

Re: Robinhood launches 3% checking account

#463

Post by a13n »

kevstev wrote: post #376
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.

Eh lets not overstate it too much- this isn't the first time it has happened, paypal and a few other "internet banks" back in the early-mid 2000s was offering 5% interest rates when big banks weren't offering much. The big banks are as strong as ever. Generally, you really shouldn't be keeping much in a bank anyway, invest most of your money, even if only in ultra safe bonds.

Why would you lock your money up for years in a bond at a lower yield than you can now get with Robinhood?

Re: Robinhood launches 3% checking account

#464

Post by nawitus »

free652 wrote: post #326
flexie wrote: post #284

This whole checking account / savings account, credit card/ debit card system that Americans have to deal with is so cumbersome and backwards. For Europeans that don't know: Most Americans have (at least) those two accounts, and those two cards. They usually spend from their checking account with their credit card, and save on the savings account. When they spend on their credit card, they sometimes "earn" points, de…

Europe doesn't have credit cards, it's all debit cards. And I see a US system much more advantageous than in Europe. In many European countries cards aren't as widely accepted as in US.

What? Generalizations about Europe always seem to fail. Credit cards are widely used in Europe. In some European countries cash is starting be used rarely and payment is mostly done with a card or a phone.

One might argue that one benefit of the European system is that credit card processing fees imposed on the retailers are regulated, which ultimately causes credit card "points" to be uncommon. This in turn makes life simpler because there is no need to game the credit card benefits system. You can, however, get up to 0.5% cash back at least where I live.

Re: Robinhood launches 3% checking account

#465

Post by guelo »

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…

You should have put a disclaimer that you work at a competing fintech company.

Re: Robinhood launches 3% checking account

#466

Post by naravara »

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…

>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?

Think of it like being a health insurance salesman who puts your office at the top of a long flights of stairs. You can have a lower risk pool because the only clients who come to see you are the ones who can climb a bunch of stairs to get there.

In other words, they advertise to a user-base that doesn't have much in the way of savings so they're avoiding people who would keep high balances anyway.

Besides, most people who do have large balances tend to park them in money market funds anyway. They can usually hit between 2% to 3% annually and offer more flexibility in terms of being able to access the money without transferring balances around. Alternatively they'll be putting it in tax-deferred accounts.

If you have enough money coming in that you can accrue a lot of savings, a savings account isn't the most productive place to put it. It should be regarded as more of a rainy day fund or a place to park money that you're saving up for something specific, like a down payment.

Re: Robinhood launches 3% checking account

#467

Post by what_ever »

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 am not sure about that. It's how you are holding the money and not Robinhood. When I put 100,000 in cash in Robinhood and I am not converting it into to some Robinhood tokens that get appreciated by 3% every year. I keep it in USD. So it should be cash as per the SIPC definitions.

But I am not an expert and don't take my advice.

Re: Robinhood launches 3% checking account

#468

Post by stilky »

zaroth wrote: post #12
JohnJamesRambo wrote: post #2

Sorry if this is ignorant but how does the ATM system for this work? Who owns the ATMs at Target and 7-11? Is there a limit to how much cash you can deposit? I'd like to use this but I will be processing a lot of cash in the future and worry about depositing thousands of dollars at an ATM.

I would be very unconfortable depositing large amounts of cash at an ATM unless it was a first-party (owned by my bank) ATM with the newest tech that can scan bills as they go in. Even then I think for cash I might be more comfortable handing it to a teller and getting a receipt. These third party low-rent ATMs at convenience stores don’t even take deposits. They are withdrawal only.

Yeah most online banks like this don't accept cash deposits via ATM. If you need a cash deposit it's done either via depositing at a traditional bank and transferring, or getting a money order and cashing that via mobile check deposit.

Re: Robinhood launches 3% checking account

#469

Post by woolvalley »

simonsarris wrote: post #409
philip1209 wrote: post #332

I just spent 3 months in London, and it's crazy how Monzo seems to have taken the market. Almost everybody seems to be paying with a Monzo card, regardless of age. Asking around, I consistently heard that Monzo's competitors like Revolut are going to be a future case study in scaling before great product/market fit. I don't know how many people have Revolut accounts, but nobody seems to be using their cards in public…

> he US seems to have a wave of startups trying to reinvent checking accounts right now. I wonder which, if any, will take the market Square's Cash App + Cash Card is taking the lead here, IMO. Card, direct deposit, ATM usage, p2p payments, rewards program. They've been the #1 app in finance all year on the Apple store, and were #1 in all free apps for a little while this past week. They are massively popular in the…

I got a cash card, got a generic undefined activation error and no reply from support. I eventually just shredded the card.

When I talk to friends for p2p payments, people mostly use venmo, then messenger & apple pay and nobody uses square cash.

Re: Robinhood launches 3% checking account

#470

Post by xster »

flexie wrote: post #284

This whole checking account / savings account, credit card/ debit card system that Americans have to deal with is so cumbersome and backwards. For Europeans that don't know: Most Americans have (at least) those two accounts, and those two cards. They usually spend from their checking account with their credit card, and save on the savings account. When they spend on their credit card, they sometimes "earn" points, de…

And Canada has another slightly in between device that's super useful and mostly inaccessible in the US.

Going negative in an easy to transact, straightforward pay-for-amount-and-duration-of-debt from your bank has no US equivalents.

Having an unsecured line of credit along with your checking account is extremely convenient if you generally try to invest your savings and very occasionally need to go under temporarily.

It's not like a credit card. The super multi-faceted it-can-very-conditionally-be-used-to-consolidate-cash-debts-with-low-introductory-APR-but-is-also-a-purchase-transactional-tool-with-a-grace-period-except-when-you-break-it-then-you-get-20%-APR-and-get-charged-retroactive-debt-from-the-time-of-transaction-plus-all-your-subsequent-transations-all-have-no-grace-periods-until-you-do-something-magical-to-reset-the-state-of-your-account-and-all-that-except-when-you-do-any-cash-advances-in-which-case-all-bets-are-off is unexplainable and uncalculatable for normal people.

It's not like a loan because loans need paperwork and issuing per instance per purpose. And each time you use it triggers effects on your credit score. A line of credit is always there and free if you don't use it and you can use it on a whim for any arbitrary reasons.

It's not like taking money out of your investments because liquidating assets and possibly transferring between your brokerage and banking accounts can take a week. A line of credit can be cash in your checking account in milliseconds.

Edit: correction, it's not really inaccessible in the US, just a fringe product with 12% APR and other catches like no debt monthly fees vs 5% and no catch in Canada.

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