I wouldn't trust any benefits Robinhood is offering to be around for the long term. They started their interest earning cash account around the Fed Funds rate (was 2%), but now Fed Funds is at 5.25% and Robinhood is again slashing it from 1.5% currently to 0%. Only by paying a subscription do you get approximately the Fed Funds rate which no decent interest earning bank account is that bad.
Robinhood's new, attractive and expensive credit card
21–29 of 29 posts
Re: Robinhood's new, attractive and expensive credit card
#22> Sure, the Robinhood Gold membership fee will act as a cushion, but at $5/month, it will only take cardholders around $2,000 to recoup their money. Not a high amount. On top of that, Robinhood is on the hook for 5% APY on uninvested cash. Yes, the uninvested balance is cash that Robinhood can invest and profit from, but will they clear the 5% hurdle every time? I am not sure. Oh, did I mention that they would give 1…
Yeah, Ubers credit card had good cash back for a while and then they nerfed it.
It's part of the marketing budget spend.
Re: Robinhood's new, attractive and expensive credit card
#23> On top of that, Robinhood is on the hook for 5% APY on uninvested cash. Yes, the uninvested balance is cash that Robinhood can invest and profit from, but will they clear the 5% hurdle every time? Just one example, of many, that shows this author doesn’t know what they’re talking about. At all.
Exactly. On the 3% Cash back CC, they talk about how they will lose money, and they absolutely won't. The APR on balances > 30 days will almost certainly be in the high 20's like every other credit card. Banks don't look at the interchange fees fed to them separate from the rest of the CC business. 3% is easy to pay when most people hold balances on their CC's and they are charging 20+% and getting 2+% on interchange…
If you scroll down the page of this product, you will see that the card is issued by Coastal Community Bank. It's common that a popular technology firm partners with a bank to issue credit cards.
Yes, APR is going to be 20%+ and even 30%+, but not all cardholders will revolve. Some, if not many, will be transactors and won't pay any interest at all. There is also cost of funds and losses. There is a reason why there is no other 3% cash back card on the market. The most popular set-and-forget card out there is 2% cash back.
Re: Robinhood's new, attractive and expensive credit card
#24Author doesn't see RH profiting by selling customer information they acquire.
I don't think you can simply "sell" customer information in the financial industry. It's a heavily regulated industry. RH can use information from the card to cross-sell its loans, if customers allow marketing communication. But I don't think they can just profit from allowing a 3rd-party access to that data. I never heard of a card issuer monetize their customer data that way. If you have an example, please do share.
Re: Robinhood's new, attractive and expensive credit card
#25I wouldn't trust any benefits Robinhood is offering to be around for the long term. They started their interest earning cash account around the Fed Funds rate (was 2%), but now Fed Funds is at 5.25% and Robinhood is again slashing it from 1.5% currently to 0%. Only by paying a subscription do you get approximately the Fed Funds rate which no decent interest earning bank account is that bad.
Yea, I went with SoFi because they offered points for things like direct deposits and invites. But they scaled it back after a year or two. They even got me on a personal loan they said they'd give $1000 in free crypto for and never paid it out.
Re: Robinhood's new, attractive and expensive credit card
#26Earlier quoted context omitted.
I've been using privacy.com for years now for this purpose, it's great and I cannot imagine using my actual cards for anything online again.
I've been looking for a reason to use their spun off card creation api for something: https://www.lithic.com/
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Re: Robinhood's new, attractive and expensive credit card
#27Earlier quoted context omitted.
Exactly. On the 3% Cash back CC, they talk about how they will lose money, and they absolutely won't. The APR on balances > 30 days will almost certainly be in the high 20's like every other credit card. Banks don't look at the interchange fees fed to them separate from the rest of the CC business. 3% is easy to pay when most people hold balances on their CC's and they are charging 20+% and getting 2+% on interchange…
If you scroll down the page of this product, you will see that the card is issued by Coastal Community Bank. It's common that a popular technology firm partners with a bank to issue credit cards. Yes, APR is going to be 20%+ and even 30%+, but not all cardholders will revolve. Some, if not many, will be transactors and won't pay any interest at all. There is also cost of funds and losses. There is a reason why there…
On CCB running the card for Robinhood, that's very expected, my last paragraph was about them probably outsourcing it.
Yes, not all accounts will revolve and be charged interest, many will. credit card balances have been going up for decades: https://fred.stlouisfed.org/series/REVOLSL (This is ALL revolving credit, not only credit cards, but it's mostly credit cards). It's well over 1 trillion dollars now. Yes there are cost(s), but credit is a very strong and well run business now and is absolutely a profit center for banks. If they get too many freeloaders that don't carry balances to hit their income targets, they will add some fine print to curtail freeloader use-cases enough that they can hit their income targets. This has been going on for decades now.
Re: Robinhood's new, attractive and expensive credit card
#28Earlier quoted context omitted.
If you scroll down the page of this product, you will see that the card is issued by Coastal Community Bank. It's common that a popular technology firm partners with a bank to issue credit cards. Yes, APR is going to be 20%+ and even 30%+, but not all cardholders will revolve. Some, if not many, will be transactors and won't pay any interest at all. There is also cost of funds and losses. There is a reason why there…
On CCB running the card for Robinhood, that's very expected, my last paragraph was about them probably outsourcing it. Yes, not all accounts will revolve and be charged interest, many will. credit card balances have been going up for decades: https://fred.stlouisfed.org/series/REVOLSL (This is ALL revolving credit, not only credit cards, but it's mostly credit cards). It's well over 1 trillion dollars now. Yes there…
I agree with you that RH may put a cap on rewards earnings or change the program later. We have seen issuers take away travel benefits before, but I haven't seen a lot, if any, cards that roll back rewards.
For me, because the RH CEO in an interview (https://www.youtube.com/watch?v=QT5OMUdaZtg) said he wanted the card to be profitable on a standalone basis, I just don't see it that way, but you can be right for all I know.
I got one part, at least it seems, wrong in my blog, that was my bad. I just want to say I did not forget about the interest income side of the card, I just don't think it will be profitable. Again I can be wrong. But thanks for the interaction.
Re: Robinhood's new, attractive and expensive credit card
#29Earlier quoted context omitted.
On CCB running the card for Robinhood, that's very expected, my last paragraph was about them probably outsourcing it. Yes, not all accounts will revolve and be charged interest, many will. credit card balances have been going up for decades: https://fred.stlouisfed.org/series/REVOLSL (This is ALL revolving credit, not only credit cards, but it's mostly credit cards). It's well over 1 trillion dollars now. Yes there…
I agree with you that RH may put a cap on rewards earnings or change the program later. We have seen issuers take away travel benefits before, but I haven't seen a lot, if any, cards that roll back rewards. For me, because the RH CEO in an interview ( https://www.youtube.com/watch?v=QT5OMUdaZtg ) said he wanted the card to be profitable on a standalone basis, I just don't see it that way, but you can be right for all…