Robinhood Introduces 3% APY Checking and Savings Account (No FDIC Insurance)

Robinhood has announced the new Robinhood Checking and Savings accounts which earn 3% APY interest and come with no fees. The checking account also has a debit card attached to it.

There are no monthly fees, no foreign transaction fees, no minimums, no card replacement fees, and no overdraft fees. Free ATM withdrawals with the linked debit card at AllPoint and Moneypass ATMs. Mobile check deposit. Bill pay. No hard pull for opening, apparently.

Join the waitlist here.

Basically, Robinhood is taking your money and investing it while giving you a steady 3% return. Funds are not FDIC insured. They are SIPC-insured, like most brokerages.

SIPC coverage provides protection to customers who hold cash and securities such as stocks, bonds or mutual funds in an account at SIPC-member brokerage firms in the event the brokerage firm fails. SIPC does not cover losses due to a decline in value of securities. SIPC coverage applies if the brokerage firm fails and customer assets are lost or misappropriated by the firm. FDIC is backed by the US government while SIPC is backed by the collective power of all member brokerage firms.

There’s some risk that in a major downturn the entire SIPC can go under. Other than that, if Robinhood goes under, the funds should be covered by the SIPC, but I’m not 100% sure due to the nature of the account.

From the information given by Robinhood, it appears they plan on investing in safe investments like US treasuries, so there may not be a huge amount of risk.

Note, there are FDIC-insured options available with rates as high as 2.50% APY, and rates continue to climb. Also worth noting that we don’t know when these new Robinhood accounts will be publicly available as they are currently rolling it out slowly via waitlist. It’s entirely possible that part of their strategy is to slowball this until interest rates rise naturally, similar to what Beam did. I’m not saying that’s the whole deal, and my guess is their rate will remain above average, but the wow factor may not be that strong by the time we can actually get in on this.

Where the Robinhood accounts shine especially is for someone who uses Robinhood anyway and has a chunk of funds sitting and waiting to invest. Could make sense to put it in the 3% account meanwhile. Another interesting usage of the account is that this is another no-foreign-transaction fee debit card available.

(Post has been updated.)

Hat tip to reader Ali and Meshilem

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Steve
akjohnny
akjohnny

over 576k people in waiting list for 3% deal… wow!

james
james

i wonder what happen to meetbeam. are they still around. they said up to 4% interest

gly
gly

Looks like nobody here knew what Robinhood did to its clients on this Wednesday…

Jack - NJ
Jack - NJ

Hey Doc, would you allow for a Robinhood referral link, or at least for those of us that are loyal DoCers?

Gadget
Gadget

DoC already has a referral page… for loyal DoCers. And non-loyal ones.

Jack
Jack

Ah, you’re right. I didn’t notice it. Should have left a link for that page.

David Smith
David Smith

Since they are paying interest daily won’t this be more than 3% with the compounding built in?

Gar
Gar

It’s 3% APY, not 3% APR

Ann
Ann

Usually it means they adjust down the actual interest rate (APR) so that the advertised rate is what you get after compounding (APY). For example, I have a 3% CD that is actually 2.97% before compounding.

Hari
Hari

Any idea if this will result in a Hard Pull?

Gadget
Gadget

Unlikely. But you could argue either way, as brokerages, in general, like to do a HP for new customers. I am sure after the 10 million SIPC questions, someone will answer this – when they actually open up for business.

Chucks
Chucks

Ick, the extraordinary risk aversion here is perplexing. The risk of Robinhood AND it’s insurance going under is far less than the marginal returns here. The notion that the only risk you’d be willing to entertain is the collapse and dissolution of the Federal government with no regards for the returnss kind of silly.

Not enthused overall as I’d put large sums in a total market ETF (gasp, totally uninsured but higher expected value). But dismissing this because of some esoteric insurance risk EXISTS is silly.

linda
linda

attn doc: ”SIPC coverage applies if the brokerage firm fails and customer assets are LOST or missappropriated ” what do you mean when you say they cover lossess ? you just finished saying A sentence before That d”SIPC does not cover losses due to a decline in value of securities.”s so what the heck does this mean?? PLEASE BE CLEAR SOMETIMES YOUR POSTS ARE TO VAGUE FRUSTRATING TO UNDERSTAND

Frank
Frank

If Apples stock goes down then you are f***ed. If someone steals your Apple stock you are covered.

Lrdx
Lrdx

>>> SPIC **DOES NOT INSURE DEPOSITS** <<<

It only insures your *ownership* of stocks and mutual funds (if the event of e.g. fraud, all records of the broker being destroyed, etc), and cash deposited *for the intent of purchasing securities*. If you have money for "checking" purposes, SPIC will not bat an eye if you lose it in case of a RH going bankrupt.

If the "cash" in this account were a money market fund, *then* would SPIC insurance cover the shares. (It's not. No MMF has any guaranteed interest, even 0.001%, yet alone 3%.)

You don't care here if SPIC could go under, because they are not insuring against the events you are interested for.

TL:DR: do not put your savings here. It might be still worthwhile to keep it with low balance and use it for paying where you can't use credit but can use debit cards and/or checks. Keep your actual savings / emergency money in insured savings accts, CDs, I bonds, treasury notes/bills, etc. – but at that point, why bother, 3% per $1000 deposit is just $30 per year.

Lrdx
Lrdx

https://www.sipc.org/for-investors/what-sipc-protects

“SIPC protects cash in a brokerage firm account from the sale of or for the purchase of securities. Cash held in connection with a commodities trade is not protected by SIPC.”

Wilson
Wilson

The account is linked to an investing account, and will probably be where most customers keep any cash for investing, so “intent” will not be clear. I’m sure when the account is available the coverage will be clarified by Robinhood, which is a reputable enough business, even if it can’t be trusted not to go bankrupt