[Robinhood to offer 3% cash management program, not a bank account]

MindTheGAAP · Post by **MindTheGAAP** » Thu Dec 13, 2018 9:11 am

[Thread title clarified - These accounts may not have SIPC protection. See updates on Page 3. --admin LadyGeek

Further update - Robinhood has clarified the intent of this offering. See this post on Page 3. --admin LadyGeek]

Announcement from Robinhood today - https://www.cnbc.com/2018/12/13/robinho ... ounts.html

"Popular stock trading app Robinhood, which disrupted Wall Street with zero-fee transactions, is taking aim at an even bigger market: banks.

The five-year old company unveiled "Robinhood Checking & Savings" on Thursday, which offers checking and savings accounts with no fees and pays an interest rate roughly thirty-times the national average. Customers will earn 3 percent annually on money in either accounts, paid out on a daily basis."

Thought the yield-chasers might be interested in knowing about this one - pretty good rate.

Edie · Post by **Edie** » Thu Dec 13, 2018 9:25 am

Thanks for the heads up. I'm 16,xxx in line

Pretty happy about that number tbh, considering how many Robinhood customers there are.

ridebikeseveryday · Post by **ridebikeseveryday** » Thu Dec 13, 2018 9:38 am

Relevant details are:

* no minimum balance
* no ATM fee reimbursement, but a network of 75k atms they say
* has bill pay (no details on how it'll actually work)
* no foreign transaction fee for ATM withdrawl

JAD · Post by **JAD** » Thu Dec 13, 2018 9:39 am

I just saw this as well and am 21,877 on the waiting list. I'm curious about the fine print. I don't see any reference to FDIC and in fact it says "Robinhood Checking and Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account." That's a little disconcerting. Thoughts?

I was on the verge of switching from AMEX to Ally Bank to get their 12 month cd rates, which seem better than average, though I'm waiting for the expected rate hike next week from the Fed.

JamesSFO · Post by **JamesSFO** » Thu Dec 13, 2018 9:49 am

Intriguing to see how this develops. My credit union is 2% on all checking and savings...

cutterinnj · Post by **cutterinnj** » Thu Dec 13, 2018 9:50 am

Very interested in this.

I keep WAY too much money in a TD Bank checking account earning about 0.1%.

I'm not quite sure how this will work;
if I have a check I want to deposit, do I mail it to them?
If I need cash, I guess I have to pay an ATM fee?

Maybe it makes sense to keep TD with a very small balance and just move money into Robinhood.

vk_217 · Post by **vk_217** » Thu Dec 13, 2018 9:55 am

[Thread merged into here, see below (next Page). --admin LadyGeek]

Too good to be true?
https://www.forbes.com/sites/jeffkaufli ... 86ba13341a
"Robinhood’s checking and savings accounts have no account minimums, no monthly fees, no overdraft fees and no foreign transaction fees. The new Mastercard debit card can be used for free at 75,000 ATMs around the country"

bgf · Post by **bgf** » Thu Dec 13, 2018 9:55 am

JAD wrote: ↑Thu Dec 13, 2018 9:39 am I just saw this as well and am 21,877 on the waiting list. I'm curious about the fine print. I don't see any reference to FDIC and in fact it says "Robinhood Checking and Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account." That's a little disconcerting. Thoughts?

I was on the verge of switching from AMEX to Ally Bank to get their 12 month cd rates, which seem better than average, though I'm waiting for the expected rate hike next week from the Fed.

i dont think its FDIC, but it is SIPC.

pennylane · Post by **pennylane** » Thu Dec 13, 2018 9:58 am

I would imagine other banks like discover, ally etc will just bump their rates up to compete..

bgf · Post by **bgf** » Thu Dec 13, 2018 9:59 am

interesting how people are upset about app v desktop. my wife hasnt had a computer in years and mine if often duplicative for everything but word processing.

TylerS7 · Post by **TylerS7** » Thu Dec 13, 2018 10:01 am

cutterinnj wrote: ↑Thu Dec 13, 2018 9:50 am Very interested in this.

I keep WAY too much money in a TD Bank checking account earning about 0.1%.

I'm not quite sure how this will work;
if I have a check I want to deposit, do I mail it to them?
If I need cash, I guess I have to pay an ATM fee?

Maybe it makes sense to keep TD with a very small balance and just move money into Robinhood.

I bank with Alliant Credit Union and if I want to deposit a check I do a mobile deposit taking pictures of it with my phone. And if need cash, Alliant has 80k+ ATMs you can go to that are free, but they also reimburse me up to $20 per month for ATM fees. Right now that Alliant account is getting 2% interest for the savings and 0.65% for the checking. I'm not a huge fan of their website, and an extra percent of interest would definitely make up for ATM fees when I can't find a free one. I will be looking into Robinhood.

quantAndHold · Post by **quantAndHold** » Thu Dec 13, 2018 10:02 am

38,912. I would hope it’s FDIC insured, if they’re advertising it as a checking account. I’ll read the docs when I get the invite.

I used Robinhood for a short time a couple of years ago. It was not a bad platform, but it was missing some basic features (the ability to see bid/ask), and at the time, you had to use mobile for everything, which has since been addressed. Mobile only was fine for trading, but when I wanted to download tax documents onto my laptop, that was a pain. We’ll see what this is.

aristotelian · Post by **aristotelian** » Thu Dec 13, 2018 10:03 am

JAD wrote: ↑Thu Dec 13, 2018 9:39 am I just saw this as well and am 21,877 on the waiting list. I'm curious about the fine print. I don't see any reference to FDIC and in fact it says "Robinhood Checking and Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account." That's a little disconcerting. Thoughts?

I was on the verge of switching from AMEX to Ally Bank to get their 12 month cd rates, which seem better than average, though I'm waiting for the expected rate hike next week from the Fed.

Ah, so it won't be FDIC insured.

Also, doesn't their brokerage account have a hefty fee for transfers out?

vwgrrc · Post by **vwgrrc** » Thu Dec 13, 2018 10:05 am

I have used Robinhood for trading for many years and absolutely love it! I don't think the rate is too good to be true but probably won't last too long.

Where can I sign up? I would love to park some extra cash there

neoptolemus412 · Post by **neoptolemus412** » Thu Dec 13, 2018 10:11 am

I signed up for the waitlist as I like to try these products. Here's a disclosure from their footnotes.

Users of Robinhood Checking and Savings earn 3% interest annually on each of their Checking and Savings balances. Robinhood does not charge account maintenance, account minimum, overdraft, ATM, transaction, foreign transaction, transfer, or card replacement fees for Robinhood Checking and Savings. Robinhood Checking and Savings is offered through Robinhood Financial LLC. Robinhood Checking and Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account. The Robinhood Debit Card is issued by Sutton Bank pursuant to a license from Mastercard International, Inc. Neither Sutton Bank nor Mastercard International, Inc. are members of FINRA or SIPC.

No mention of FDIC insurance on the main page on Robinhood's website. This is disconcerting to say the least. Sutton Bank is primarily an agriculture bank based in OH that is very small with less than $1 billion in Total Assets. They have a strong safety and soundness rating and 9 locations/100 employees in OH. This does not sound like a big operations that could handle millions of Robinhood customers with deposit accounts.

https://www.suttonbank.com/about-us/abo ... -bank.html

The bigger issue is how are they obtaining 3% interest? Per Forbes this is the model...

To help fund the sky-high 3% rate, Bhatt says the startup will invest customers’ deposits into other securities like Treasurys. But short-term Treasury yields are well below 3%, so Robinhood will initially take a loss on that spread. It will make up for some of that difference on the interchange fees (charged to merchants) it will collect when someone uses a Robinhood debit card to make a purchase. But the program likely won’t be profitable in the short term.

Translated another way, Robinhood is taking Venture Capital money to subsidize rapid growth. The "checking/saving" account product is a loss leader for a growth opportunity. Personally, I believe Robinhood/SOFI/name random Fintech company are going to realize the US banking market is highly regulated for good reason. If people are trusting you to hold their money, you can't just offer products without appropriate insurance.

Lastly, there is no mention of deposit insurance front and center. They mention SIPC, which I'm certain the vast majority of their users do not know the difference between SIPC and FDIC coverage. I find it disingenuous to call these accounts checking/savings products as most will assume they are referencing traditional bank accounts. 3% interest is great, but you don't have to put a common term out there to fool people into thinking these products are the same as holding money at a local bank branch.

willthrill81 · Post by **willthrill81** » Thu Dec 13, 2018 10:14 am

It looks to be legit, but the question is how long will they be paying .75% higher than anyone else?

Ren · Post by **Ren** » Thu Dec 13, 2018 10:14 am

Apparently there is a waiting list for the checking and savings accounts.

https://checking.robinhood.com/

neoptolemus412 · Post by **neoptolemus412** » Thu Dec 13, 2018 10:20 am

I posted a longer reply in another thread, but in short, this is not a bank account nor does it have FDIC insurance. The product will invest your money in short-term, highly safe securities (US treasuries) to obtain 3%. It is likely a huge loss leader for them if adopted at any scale by their users. They are working with Sutton Bank, a $500 million bank out of OH with 9 locations. I'm testing it out, but would not use this product as a primary checking or savings account as the interest rate is a clear loss leader meant to show their investors rapid growth rather than a business model that has any sustainability.

neoptolemus412 · Post by **neoptolemus412** » Thu Dec 13, 2018 10:20 am

I posted a longer reply in another thread, but in short, this is not a bank account nor does it have FDIC insurance. The product will invest your money in short-term, highly safe securities (US treasuries) to obtain 3%. It is likely a huge loss leader for them if adopted at any scale by their users. They are working with Sutton Bank, a $500 million bank out of OH with 9 locations. I'm testing it out, but would not use this product as a primary checking or savings account as the interest rate is a clear loss leader meant to show their investors rapid growth rather than a business model that has any sustainability.

Slacker · Post by **Slacker** » Thu Dec 13, 2018 10:25 am

The app answers many of people's questions mentioned above.

1. They have SPIC insurance up to $250,000
2. They are investing the money in treasuries and using the kickbacks from Mastercard to cover interest
3. 75,000 Fee free atms in their network (they mention ATMs at Target, Walgreens, 7-11 and Costco

One of my questions - is SPIC insurance just as good as FDIC?

App vs Desktop - I agree that I find it a little annoying to only have an app and no desktop presence. I prefer all financial transactions on desktop, but don't have a problem using an app; especially since this will only be my savings account initially and not have our main checking account yet (when it opens up for actual sign up).

bgf · Post by **bgf** » Thu Dec 13, 2018 10:25 am

b0B wrote: ↑Thu Dec 13, 2018 10:18 am
bgf wrote: ↑Thu Dec 13, 2018 9:59 am interesting how people are upset about app v desktop. my wife hasnt had a computer in years and mine if often duplicative for everything but word processing.
We don't use smartphones at all. They are useless to us, and the recurring and one-time costs extremely expensive.

Also, doing financial transactions on such a miniscule gadget is completely insane. You really can't see what you're doing on those teeny tiny screens. They don't even have a keyboard and mouse, so you're dependent on squidging your thumbs into this teeny rectangle and hoping for the best. That's no way to handle finances.

to each his own. i think you are in a shrinking minority though. i have no problem using my bank of america, capital one, and mint apps.

vwgrrc · Post by **vwgrrc** » Thu Dec 13, 2018 10:27 am

neoptolemus412 wrote: ↑Thu Dec 13, 2018 10:20 am I posted a longer reply in another thread, but in short, this is not a bank account nor does it have FDIC insurance. The product will invest your money in short-term, highly safe securities (US treasuries) to obtain 3%. It is likely a huge loss leader for them if adopted at any scale by their users. They are working with Sutton Bank, a $500 million bank out of OH with 9 locations. I'm testing it out, but would not use this product as a primary checking or savings account as the interest rate is a clear loss leader meant to show their investors rapid growth rather than a business model that has any sustainability.

Agree. This is more like a modified version of Money Market than bank account. Still, I have not problem using it as our primary checking account since we only keep our paychecks there for a short time before paying credit card bills (aka "float"). Any excess amount will be sweep into ST bond.

Way to go Robinhood. Just signed up and here's my number 54,650

Thegame14 · Post by **Thegame14** » Thu Dec 13, 2018 10:28 am

[Thread merged into here, see below (next page). --admin LadyGeek]

Has anyone heard of them? Any Experiences?

https://finance.yahoo.com/news/trading- ... 20776.html

RickBoglehead · Post by **RickBoglehead** » Thu Dec 13, 2018 10:30 am

b0B wrote: ↑Thu Dec 13, 2018 10:18 am
bgf wrote: ↑Thu Dec 13, 2018 9:59 am interesting how people are upset about app v desktop. my wife hasnt had a computer in years and mine if often duplicative for everything but word processing.
We don't use smartphones at all. They are useless to us, and the recurring and one-time costs extremely expensive.

Also, doing financial transactions on such a miniscule gadget is completely insane. You really can't see what you're doing on those teeny tiny screens. They don't even have a keyboard and mouse, so you're dependent on squidging your thumbs into this teeny rectangle and hoping for the best. That's no way to handle finances.

GET OFF MY LAWN! Sorry, could not resist.

I guess you don't do e-check deposits then, which are quite easily done on many bank apps. I love not having to drive to the bank to deposit a check.

I do prefer a desktop (actually a laptop in a docking station with two screens) for most things I do, but a tablet and a smartphone are essential nowadays. If you don't use it, you'll lose it!

Hukedonfonix4me · Post by **Hukedonfonix4me** » Thu Dec 13, 2018 10:30 am

Interesting! I signed up for the list this morning. We shall see!

RickBoglehead · Post by **RickBoglehead** » Thu Dec 13, 2018 10:30 am

viewtopic.php?f=1&t=266276

greg24 · Post by **greg24** » Thu Dec 13, 2018 10:35 am

Sounds like they got 40k identities to spam just by announcing a possible future product.

LiterallyIronic · Post by **LiterallyIronic** » Thu Dec 13, 2018 10:36 am

bgf wrote: ↑Thu Dec 13, 2018 9:59 am interesting how people are upset about app v desktop. my wife hasnt had a computer in years and mine if often duplicative for everything but word processing.

I have a smartphone, but I refuse to use apps. My phone is primarily for calling people, with some texting thrown in. I'll use the phone's browser if I want to access a website, but I will not do anything important on my phone (e.g., logging into the website of one of my financial institutions).

Even if I wanted to use my phone more, it can't come anywhere near touching my desktop. Typing documents or creating spreadsheets on my phone? Not going to happen. Updating my Microsoft Access database of NFL statistics on my phone? Impossible. AAA gaming on my phone? Impossible. Playing a blu-ray disc on my phone? Impossible. Developing software via Visual Studio on my phone? Impossible.

There are people with computing needs way beyond playing webgames and checking e-mail.

bgf · Post by **bgf** » Thu Dec 13, 2018 10:41 am

LiterallyIronic wrote: ↑Thu Dec 13, 2018 10:36 am
bgf wrote: ↑Thu Dec 13, 2018 9:59 am interesting how people are upset about app v desktop. my wife hasnt had a computer in years and mine if often duplicative for everything but word processing.
I have a smartphone, but I refuse to use apps.

alrighty then.

Patzer · Post by **Patzer** » Thu Dec 13, 2018 10:46 am

greg24 wrote: ↑Thu Dec 13, 2018 10:35 am Sounds like they got 40k identities to spam just by announcing a possible future product.

They say it is launching in January, so it seems like a real product to me.
3% on savings is good, but not hugely different than where Online Savings accounts will be in a year, assuming a few more rate changes. I currently get 2.05%.
Offering 3% on checking though is insanely good, and saves losing money on the time money sits in an account as Checking, before transferring to Savings or other Investments.

Daendrew · Post by **Daendrew** » Thu Dec 13, 2018 10:52 am

[Thread merged into here, see below (next page). --admin LadyGeek]

Commission-free trading startup Robinhood has launched U.S. checking and savings accounts that pay a 3 percent interest rate, broadening the suite of financial products it offers, the company said on Thursday.

The accounts, which come with a debit card, will require no minimum balance, will have no monthly fees or deposits requirements and no foreign transactions and overdraft fees, Robinhood said.

The company, which is popular with young consumers for its commission-free stock trading app, will begin rolling out the accounts on Thursday and expects the majority of cards to start shipping in January 2019.

https://www.cnbc.com/2018/12/13/reuters ... =robinhood

neoptolemus412 · Post by **neoptolemus412** » Thu Dec 13, 2018 10:52 am

Slacker wrote: ↑Thu Dec 13, 2018 10:25 am The app answers many of people's questions mentioned above.

1. They have SPIC insurance up to $250,000
2. They are investing the money in treasuries and using the kickbacks from Mastercard to cover interest
3. 75,000 Fee free atms in their network (they mention ATMs at Target, Walgreens, 7-11 and Costco

One of my questions - is SPIC insurance just as good as FDIC?

App vs Desktop - I agree that I find it a little annoying to only have an app and no desktop presence. I prefer all financial transactions on desktop, but don't have a problem using an app; especially since this will only be my savings account initially and not have our main checking account yet (when it opens up for actual sign up).

It's not and they are very different. SIPC covers if the brokerage goes under. SIPC does not provide blanket coverage. Instead, SIPC protects customers of SIPC-member broker-dealers if the firm fails financially. Coverage is up to $500,000 per customer for all accounts at the same institution, including a maximum of $250,000 for cash.

FDIC insurance covers one if the bank fails. In the case of this product, it is very clear there is no FDIC insurance, but it is more unclear where the money will be housed. IE, will Sutton Bank hold millions of deposits for all customers at a point in time. If that's the case, there's a real risk that Sutton fails and everyone who used the Robinhood product loses their funds. What's most likely is Robinhood takes your money, invests it in Treasurys. The liquidity of the process is very opaque. IE how will Robinhood handle a run if mass adopters of this product want all of their money at once.

Also, marketing this as a 'checking/savings' product is disingenious. Yes, it has those features, but such terminology is that of a bank account and Robinhood only addresses this product is not a bank account in the fine print. Lastly, Robinhood has some issues with customer service and the trading product. I know the subreddit lost their collective minds yesterday as the trading platform stopped working yesterday and they could not get a response from customer service. Interesting product. I'm going to try it. However, I will not hold any funds that I'm not willing to lose.

akhilsam · Post by **akhilsam** » Thu Dec 13, 2018 10:53 am

[Thread merged into here, see below (next page). --admin LadyGeek]

Roninhood just launched 3% checking and saving!
Any catches?

https://checking.robinhood.com/

arf30 · Post by **arf30** » Thu Dec 13, 2018 10:54 am

People who don't use smartphones are a shrinking demographic (sorry Dad) and not who this product is targeted at. If the checking account is really 3% it could be interesting if they can sort out their customer service and technical glitches.

bengal22 · Post by **bengal22** » Thu Dec 13, 2018 10:54 am

Money goes to the poor.

akhilsam · Post by **akhilsam** » Thu Dec 13, 2018 10:57 am

I would hate to waste time like Consumer Credit Rewards checking..
You need to do many transactions, open credit card etc. and eventually they brought down upper limit from 20,000 $ to 10000.
Hoping it's a straight forward checking/savings...

JoMoney · Post by **JoMoney** » Thu Dec 13, 2018 11:11 am

PNC has a FDIC insured No-Fee High Yield Savings account offered at 2.35% available today...
https://www.pnc.com/en/personal-banking ... vings.html

And there are lots of "Rewards Checking" accounts out there that will pay a high rate (some >3%) if you jump through hoops like using the Visa debit card several times a month and direct deposit.

The Wizard · Post by **The Wizard** » Thu Dec 13, 2018 11:13 am

b0B wrote: ↑Thu Dec 13, 2018 10:18 am
bgf wrote: ↑Thu Dec 13, 2018 9:59 am interesting how people are upset about app v desktop. my wife hasnt had a computer in years and mine if often duplicative for everything but word processing.
We don't use smartphones at all. They are useless to us, and the recurring and one-time costs extremely expensive.

Also, doing financial transactions on such a miniscule gadget is completely insane. You really can't see what you're doing on those teeny tiny screens. They don't even have a keyboard and mouse, so you're dependent on squidging your thumbs into this teeny rectangle and hoping for the best. That's no way to handle finances.

Are you sure about all this?
I use my 5" Android smartphone for everything, from paying CC bills, to moving $$ to Vanguard, to controlling my robot vacuum cleaner, to displaying my ticket code to get into Fenway Park.
It's not the 1990s anymore...

CDub · Post by **CDub** » Thu Dec 13, 2018 11:16 am

It says "Robinhood Checking & Savings is fee-free, commitment-free, surprise-free, and pretty much every other kind of free, too."

Seems almost too good to be true.

abner kravitz · Post by **abner kravitz** » Thu Dec 13, 2018 11:20 am

While 3% is tempting, a waiting list is a non-starter for me.

lakpr · Post by **lakpr** » Thu Dec 13, 2018 11:21 am

I am tempted, and went to their website to look around. No mention of any FDIC insurance on their website. I will pass for now, will stick with my LMCU Max Checking account along with its 10 debit card transactions per month. This is my emergency fund, I do not want to take any chances with it.

leonidas · Post by **leonidas** » Thu Dec 13, 2018 11:22 am

I got my invite:

Hi peter,

You're #42,989 on the list!

Robinhood Checking & Savings launches in early 2019. We'll let you know when your invite is ready.

l1am · Post by **l1am** » Thu Dec 13, 2018 11:40 am

Patzer wrote: ↑Thu Dec 13, 2018 10:46 am They say it is launching in January, so it seems like a real product to me.
3% on savings is good, but not hugely different than where Online Savings accounts will be in a year, assuming a few more rate changes. I currently get 2.05%.

It is +46% - how is that not hugely different. People rant every time savings shifts .1%.

l1am · Post by **l1am** » Thu Dec 13, 2018 11:41 am

greg24 wrote: ↑Thu Dec 13, 2018 10:35 am Sounds like they got 40k identities to spam just by announcing a possible future product.

Cynical much? It will launch.

Why are people so bitter about this product.

Imbros · Post by **Imbros** » Thu Dec 13, 2018 11:55 am

I like that Vanguard Prime MM account yields about 2.3% right now. No need for a separate savings account. But if Robin Hood actually goes live with this 3% plan, I would give it a shot. I am in the waitlist..

MichCPA · Post by **MichCPA** » Thu Dec 13, 2018 11:58 am

l1am wrote: ↑Thu Dec 13, 2018 11:40 am
Patzer wrote: ↑Thu Dec 13, 2018 10:46 am They say it is launching in January, so it seems like a real product to me.
3% on savings is good, but not hugely different than where Online Savings accounts will be in a year, assuming a few more rate changes. I currently get 2.05%.
It is +46% - how is that not hugely different. People rant every time savings shifts .1%.

We were having a civil war over the 4 bp difference between fidelity and VG TSM earlier this year. 95 bp should be Boglehead Armageddon.

car733 · Post by **car733** » Thu Dec 13, 2018 11:58 am

Very interesting!
I added myself to the queue

indexlover · Post by **indexlover** » Thu Dec 13, 2018 12:02 pm

lakpr wrote: ↑Thu Dec 13, 2018 11:21 am I am tempted, and went to their website to look around. No mention of any FDIC insurance on their website. I will pass for now, will stick with my LMCU Max Checking account along with its 10 debit card transactions per month. This is my emergency fund, I do not want to take any chances with it.

Since the feature is run within Robinhood’s brokerage, it’s ensured by the SIPC instead of the FDIC, but you still get the same insurance on up to $250,000 cash.

investor4life · Post by **investor4life** » Thu Dec 13, 2018 12:13 pm

[Thread merged into here, see below. --admin LadyGeek]

Robinhood is rolling out both checking and savings accounts paying 3% annually. The catch: Insured by SIPC not FDIC.

Flyer24 · Post by **Flyer24** » Thu Dec 13, 2018 12:19 pm

viewtopic.php?f=1&t=266276