8
votes
Robinhood launching checking and savings account with 3% interest
Link information
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- Title
- Introducing Robinhood Checking & Savings
- Authors
- Robinhood Team
- Published
- Dec 13 2018
- Word count
- 185 words
The SIPC has now complained about this offering, and it actually looks like Robinhood has deleted this post and delayed the whole thing.
The SIPC doesn't cover the value of investments at all, so this wouldn't be insured in any practical sense, unless the account is actually just cash, and the "interest" is a casino-style incentive connected with Robinhood being confident that they can convince these accountholders to invest their deposits.
Tons of people already lost their savings with RH (unconfirmed)
The majority of Americans do not even have $1,000 in savings. The people who do have larger savings will be able to get better returns through other investments. Who is this for?
Investment is more than just return rate. In this case, savings/checkings accounts are more liquid than other instruments. Some even say that cash is king.
Also, if you are planning on spending a lot of money soon (e.g. buy a house) then you may want to sock away money in an account that can't possibly lose value. Otherwise you could be at risk if the market suddenly tanks.
I am quite suspicious of this deal because the sales pitch of other online banks (like Ally) are that they give you a great interest rate because they cut out a lot of the overhead. How is it that Robinhood can cut out so much more that they can offer 50% more than the next highest competitors?
It seems like this is a loss-leader strategy to get more people to use the other parts of Robinhood (that actually make them money). It's rather convenient, for example, that this isn't an actual bank account, but rather a brokerage account that can easily be used to trade on RH.
So not much different from Fidelity and Schwab's cash account offerings then, no?
Except that those are well established banks with billions in revenue over decades as opposed to a unicorn tech startup offering more than they can sustainably afford on account of VC funding.