Published on December 13th, 2018 | by Chuck82
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.
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.
- See our follow-up post on for a longer discussion about the insurance aspect: How Safe is the New Robinhood Checking Account with SIPC Insurance
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