In December last year fee free mobile trading platform Robinhood announced they would be launching a 3% APY high yield checking account. The account came with no FDIC or NCUA insurance (usually standard for a checking or savings account), Robinhood claimed that SIPC insurance would cover this account only for the head of SIPC to say that this is not true and that Robinhood had not only not cleared this product with SIPC but hadn’t even approached them to see if this type of account would be covered.
According to Fortune the company’s COO Gretchen Howard said that “We’re going to come out with a cash management account soon” at the recent Fortune’s BrainstormTech conference in Aspen. Howard says that the new product isn’t a bank account at all and will be a cash management feature within the existing brokerage account that all Robinhood customers have. Howard also said that the company had filed for a federal bank charter (needed to offer a traditional banking product such as a checking account).
At this stage a number of things are still incredibly unclear:
- Will this new account still offer 3% APY? In recent times we’ve seen high yield saving account rates drop.
- What insurance if any will this product provide? I assume Robinhood is trying to position this as a cash management account so that it’s covered by SIPC but it will be interesting to see if they have actually consulted anybody at SIPC to ensure this type of account does qualify.
I’m skeptical until we get some firm details. I personally wouldn’t be leaving a large amount of funds in an uninsured account and I think Robinhood’s original botched roll out should have alarm bells ringing for consumers. That being said, a 3% rate is significantly higher than anything else on the market and I can easily see some consumers taking this risk.
