Robinhood aims to court users with 1% interest rate on cash

https://techcrunch.com/2022/05/10/robinhood-investing-aims-to-court-users-offering-1-interest-rate-on-cash/

by prostoalex • 4 years ago

25 42 4 years ago

At least one competitor has 1.25% with minimal strings. I think Robinhood is going to have to do better if they want a meaningful amount of folks to park their cash with them.

hbcondo714• 4 years ago

Mind mentioning the competitors?

mgh2• 4 years ago

Sofi

scubbo2• 4 years ago

One Finance has a 1% savings account, and a 3% high-yield account that you need to jump through some hoops to fund (you can't put money into it directly, you can only skim 10% of any paycheque that you pay into your overall account)

CameronNemo6• 4 years ago

Lots of competitors have better rates with strings attached. But among the major brokerages, interest on cash positions is unusual. And even HYSAs are not cracking 1% yet AFAIK.

londons_explore• 4 years ago

Surely with robinhood you can buy lots of bonds and bond-like government backed securities which have returns over 1%?

Edit:. I put this comment here a few days ago.... And suddenly it says '19 minutes ago'. What happened?

prostoalex• 4 years ago

Principal risk, though.

ISL• 4 years ago

Like T-bills, which return 2% for a year?

https://home.treasury.gov/resource-center/data-chart-center/...

jakear• 4 years ago

Story probably resurrected in the “second chance queue” and comments ported over.

lupire2• 4 years ago

I hate that. It's creepy deja vu gaslighting.

kgwgk2• 4 years ago

And then you don't have cash.

vmception• 4 years ago

Maybe this post was given a second chance?? Not sure

hackernewds• 4 years ago

More trickery to separate impulsive amateur retail investors from their savings

CameronNemo6• 4 years ago

Ah yes, all those impulsive amateurs signing up for HYSAs and holding large sums of cash where this actually matters.

CameronNemo6• 4 years ago

I was wondering about this. RobinHood has offered interest on uninvested cash for a while. Once rates were dialed down, nobody seemed to care, but now that rates are going up it is more important.

Recently when they announced their new card program, they mentioned that they would no longer be paying interest on cash. I am grandfathered into the new card program, but I was still thinking of leaving the brokerage before they kicked me off.

I got an email last week saying they increased their interest rate for uninvested cash. I was wondering if that was just for the old program or it was part of their future plans.

This is a nice clarification. I think.

Edit: this page seems to have changed since I last read it: https://robinhood.com/us/en/support/articles/difference-betw... Specifically the interest rate portion. Looks like they are including this in the new cash/card system they have.

vkhn• 4 years ago

Except if you’re a pattern day trader (even with more than 25k) in which case you get the middle finger and nothing. Zero interest. Which is ridiculous because they make more money on these people.

JumpCrisscross• 4 years ago

If someone is pattern day trading on Robinhood, they’re not likely to notice let alone be deterred by such details.

RotaryTelephone• 4 years ago

Or actually have any significant funds.

lvl102• 4 years ago

They really need to tap into the 401(k) market but we all know how that is going to end for retail investors…

CameronNemo6• 4 years ago

IRAs would be way easier, right? Do Vanguard or Schwab do 401ks/403bs? I thought only Fidelity had started in on that market.

iwanttocomment2• 4 years ago

Vanguard and Schwab both do 401(k)s.

Ozzie_osman• 4 years ago

I love how all these companies offering high-interest accounts basically use two tricks in their playbook. First, they use the old "16x as much interest" which is technically true, but really 16x a number that is basically zero, sounds much better than it is.

Second, they offer these rates for a little bit then when people have switched over and would be too lazy to switch back, they drop the yield again.

CameronNemo6• 4 years ago

The second point is not my experience with two institutions (a credit union, and Robinhood). In both cases they consistently tracked the federal funds rate, raising and lowering my account interest as market conditions changed. There has been no rug pull. For several years.

dgacmu• 4 years ago

E*Trade did this quite a few years back - 10 or 15, IIRC. They used to offer a "max-rate checking" account that did a quite good job of coming close to matching the top rates you could shop around for. And then they decided they wanted out of the banking business, as far as I could tell, and dropped their rates to something like 0.01%. They've now outsourced it to morgan stanley's private banking and it still gets 0.05% (about 1/12 of what you can easily get at other banks).

greenyoda• 4 years ago

My experience over many years is that about a half of the accounts that I've opened at high rates have continued to track prevailing rates, and the other half went down to essentially zero (e.g., 0.05%) and stayed there.

hamiltonians• 4 years ago

2 year treasuries paying close to 3%. not bad

travisjungroth2• 4 years ago

What’s the plan for Robinhood to make money? Brokerages used to make it on fees, but now everything is no-fee. Can make it on payment-for-order-flow, but that seems to be under attack. Then you can make it on the 0% money sitting around, but that’s harder if you also want to be high yield.

nixass• 4 years ago

They make money by being a middle man between investors and market makers, giving market makers precious real time data

travisjungroth2• 4 years ago

They don’t just give the market makers data, they match them with customers. That’s payment for order flow. This model is slightly threatened since some people don’t like it and even the SEC chairman has spoken against it (I said “under attack” above and that’s a bit dramatic).

CameronNemo6• 4 years ago

wdym make money??

-- vlad, probably

_Algernon_• 4 years ago

Combined with inflation that makes for -7.3%/year. Generous!

d23• 4 years ago

I'll never trust them with another dollar of my money after what happened last year. Letting people buy options and then turning off the ability to sell them to anyone else on the platform.

zionic• 4 years ago

Wasn’t it the other way? They stopped letting people buy but let them sell.

Some say this was deliberate as their major investors/partners were short and getting obliterated.

Robinhood aims to court users with 1% interest rate on cash

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