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Robinhood launches 3% checking account

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Re: Robinhood launches 3% checking account

#531

Post by meow81 »

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…

> Simple tried to reinvent banking, but they never seemed to go beyond polishing the UI.

I'd take another look at Simple. I've been with them since the beginning and their recent enhancements are fantastic! Expenses tied to your pay schedule that automatically set money aside, same with goals. and then the big one for me was an interest bearing savings account, yielding 2%.

See more here:

https://www.simple.com/2percent

https://www.simple.com/features/expenses

Re: Robinhood launches 3% checking account

#532

Post by X-Istence »

naravara wrote: post #466
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…

>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 advertis…

I'm a millennial, and the target market for this sort of product.

1. I don't care about physical branches, I've been using online banking from the beginning. 2. I am at a stage in my life where I am slowly paying back all my debts and making just enough to set some cash aside every paycheck.

I don't have enough money to go looking at financial instruments such as money market funds or CD's, because they tend to lock my money up for a certain period of time.

I still need to be liquid. Some place where I can make 3% and have it just sit is fine for me, and allows me to access it in case of an emergency without paying fines or penalties for doing so, and with less hassle than some other financial instruments where it is locked up.

Once I have a buffer built up, and I feel comfortable with that buffer, maybe then I'll start looking at other places to potentially let my money make more money faster with a little higher risk and with less liquidity.

Re: Robinhood launches 3% checking account

#533

Post by zem »

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…

> Metacomment: 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?"

reminds me of the first time i interviewed at google, and one of the interviewers asked "if you could set up your own project and get a team to work on it, what would you do?". i answered that i would get a bunch of maths phds together and have them work out graph-theoretic ways of detecting link farms (this was 2004, and i had actually been wondering for a while why google hadn't done exactly that).

the interviewer (who was a pretty senior person) asked "why do you think the spammers don't have their own phd mathematicians to defeat such measures?". i was only a few years out of grad school at the time, and it was honestly the first time i thought about the fact that people who were both smart and educated might nonetheless go into a shady and declasse activity like running spam sites. i consider it a valuable lesson to this day.

Re: Robinhood launches 3% checking account

#534

Post by alexhutcheson »

soupsranjan wrote: post #445
philip1209 wrote: post #435

Earlier quoted context omitted.

I love Schwab's checking account product because it's highly functional. But, I don't think that it has mass-market appeal. It appeals to a rational buyer, not an emotional one. The opportunity here for a startup bank is to replace credit card spending in the USA. The potential earnings are huge if you can get consumers to spend on a debit card instead of a credit card (because the rake is higher). To make a checking…

> The opportunity here for a startup bank is to replace credit card spending in the USA. The potential earnings are huge if you can get consumers to spend on a debit card instead of a credit card (because the rake is higher). I think the converse is true. Card issuers earn 1 percent points higher interchange rates on credit cards (2.60%) than debit cards (1.60%).

Once the bank has more than $10 billion in assets, they legally have to reduce their debit card swipe fees to 0.05%.

Re: Robinhood launches 3% checking account

#535

Post by X-Istence »

stupidbird wrote: post #443
asdff wrote: post #327

Earlier quoted context omitted.

> Their whole business is to encourage folks that should not be day trading to day trade Trading for most people used to be deliberately obtuse. $7.5 commission per trade is criminal for most people, so is charging $50 a month to get a weekly email with basic technical analysis, but that's literally been the bread and butter of retail investing for decades and no one bats an eye to how deliberately ridiculous it all…

The average person is more likely to lose money day trading than gain (especially considering the time sink). It's basically boring slow gambling wrapped in the guise of The American Dream.

The average person shouldn't day trade. I buy stocks and basically hold them for years. I've picked some losers and I've picked some winners... but overall my return over the last ~5 years is 19%.

Buying stock with dividends helps even more, now you get money back to invest into more stock :-D

Re: Robinhood launches 3% checking account

#536

Post by pjc50 »

icedchai wrote: post #393
mikeash wrote: post #230

Earlier quoted context omitted.

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.

I'll move my ~$100K emergency fund into there just to get free money. And move it out somewhere else when the rates change. Over the years I've moved accounts between Dollar Savings, Emigrant, Orange, Ally, and probably 2 or 3 others...

Nice way to humblebrag there.

Re: Robinhood launches 3% checking account

#537

Post by X-Istence »

coryfklein wrote: post #368
webninja wrote: post #350

Earlier quoted context omitted.

I’m still up 12% (although down from 30%) in this bull market. The trick to buy an array of better companies and to not sell/trade them. Every trade you make gives the HFT MIT quants an opportunity to take money out of your pocket! Hold at least 1 year for the substantial tax advantage, 2 years for gains to materialize (Peter Lynch’s Advice), or indefinitely as Warren Buffet has advised. Also don’t touch or put more…

> The trick to buy an array of better companies Congratulations, you just reinvented the S&P 500.

Which is why buying into funds that track the S&P 500 and holding for a long time is a valid way to go...

Re: Robinhood launches 3% checking account

#538

Post by superfrank »

Havoc wrote: post #502
superfrank wrote: post #479

Earlier quoted context omitted.

>makes it sound like RH was robbing them at gun point. >It pretty much is. It really really isn't. This is the type of exaggeration why I find that sub insufferable. Robinhood's stability issues are well known and normal for a fast growing, early stage startup. You as a user need to understand the limitations of the platform and incorporate them into your trading strategy. Swing trading options on RH is like carving…

>stability issues are well known This isn't someone startup app going wonky that needs a server reboot. It's peoples money & expectations for reliability are much higher. Justifiably so. >limitations of the platform This isn't a 'limitation'!?!?! Their system crapped out and caused chaos >Swing trading options on RH is like carving a turkey with a chainsaw Agreed. This isn't about which broker is best for what strate…

> This isn't someone startup app

It totally is. The company is exactly 5 years old and has only had customers on their platform for 3.5 years. The company only has like 300 employees. It's a start up through and through.

For reference, Coinbase and Acorns are older than Robinhood.

> This isn't a 'limitation'!?!?!

It's totally a limitation in terms of availability of the platform. They are not promising 100% uptime and no reasonable person should be expecting that from an app barely out of the beta stage.

If your trading strategy can't handle a few hours of downtime, you should find a platform that has an SLA guaranteeing uptime.

> This is about a broker failing to fulfil its core purpose - reliably executing orders

It's also about understanding that shit happens, especially with startups.

I'm not trying to let RH off the hook here, but people using their platform need to understand that they are a new company growing quickly and things will break. If your lively hood depends on things not being broken then you are going to have a bad time.

Robinhood has gone down before and will go down again, don't use it if you can't handle that truth. To use an old adage "Fool me once shame on you, fool me twice shame on me"

Re: Robinhood launches 3% checking account

#539

Post by brown9-2 »

pascalxus wrote: post #439
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…

here the catch, I believe: 1. it's ensured by SIPC, not FDIC, so it's not as safe. 2. They're going to lower that 3% rate down whatever all the other banks are at (2%) in a couple of years, unless the interest rates catch up to their higher rate, which they are expected to do in about 2 to 3 years: at that time, 3% will be roughly the norm for the highest interest savings accounts. I remember the days when Citibank w…

> It's just classic bait and switch.

Are you unaware that interest rates today are drastically different than a decade ago?

Re: Robinhood launches 3% checking account

#540

Post by yorwba »

Scoundreller wrote: post #522
notyourday wrote: post #505

Earlier quoted context omitted.

Cash balances ensured by SIPC are safe to the coverage amount. 100% safe actually.

I’m sure they said that about Cyprus and Iceland too.

As far as I can tell, the coverage amount of 100,000 euros was respected in these cases, probably precisely to avoid doubts like that about the safety of deposits.
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