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Updated on Monday, October 22, 2018
Investing app Robinhood has finally unveiled its new cash management feature. With Robinhood’s Cash Management account, consumers will be able to earn a variable APY of 0.30% on uninvested cash that is sitting in their Robinhood brokerage accounts that will be automatically “swept” into deposit accounts at partner banks.
Robinhood’s foray into online banking has been widely seen as an effort by the fintech company to diversify its offerings, as more traditional brokerages (like Charles Scwhab and TD Ameritrade) have also nixed commission fees for online stock trades. While a launch date has yet to be announced, the waitlist for Robinhood’s Cash Management feature is currently open.
What is the Robinhood Cash Management account?
If you’re experiencing a little deja vu, you’re not wrong: In December 2018, Robinhood announced plans for a checking account with an eye-popping 3.00% APY. However, the company’s plans swiftly fell apart after it faced regulatory disapproval.
Now, Robinhood’s taking another stab at it, this time with the promise of FDIC-insured deposits. Robinhood’s Cash Management feature will take the uninvested cash sitting in Robinhood accounts, automatically “sweeping” it into savings accounts at its partner banks. The account will pay a variable 0.30% APY and also offer FDIC insurance on those deposits.
Robinhood is partnering with six banks to hold deposits: Marcus by Goldman Sachs, HSBC, Wells Fargo, Citibank, Bank of Baroda and U.S. Bank. Funds up to $1.25 million will be insured by the FDIC up to the federal limit per bank. Consumers can spend their cash via Mastercard debit cards issued by Sutton Bank.
Robinhood is not the first fintech company to break into the banking business. Other competing firms offering similar cash management accounts include Betterment, SoFi and Wealthfront.
Robinhood Cash Management fees
A main selling point of Robinhood’s Cash Management feature is that it adopts the same fee-free approach Robinhood used for investing. There are no minimum requirements, and the fees are as follows:
Account opening fees
Account maintenance fees
Inactive account fees
New card fees
Foreign transaction fees
|$0 (Mastercard may charge foreign transaction fee)|
In-network ATM fees
Out-of-network ATM fees
|$0 (ATM operator may charge a fee)|
|“Gold” accounts with margin enabled will incur interest if transactions are funded from margin|
Robinhood Cash Management pros and cons
As with most financial products, there are both pros and cons to Robinhood’s Cash Management account.
Robinhood Cash Management pros:
- Access to 75,000 in-network ATMs.
- Compatible with Apple Pay, Google Pay and Samsung Pay.
- Quick access to cash from stock sales.
- Cash is FDIC insured up to the legal limit per partner bank.
- Debit card will decline any transactions that would result in an overdraft.
- Ability to get notifications and emails for your transactions.
- Ability to lock card from the app if you suspect fraud.
Robinhood Cash Management cons:
- The 0.30% APY is significantly below the 3% initially advertised.
- APY is a variable rate, so it could drop lower in the future.
- If funds at one partner bank climb above $250,000 that money will not be insured, so customers need to monitor their accounts closely.
Robinhood Cash Management vs. competitors
Robinhood’s Cash Management account does not reinvent the wheel. Here’s how competing products stack up in comparison to Robinhood’s Cash Management account.
Is Robinhood Cash Management right for you?
Robinhood’s latest addition to its growing portfolio of products isn’t a bad bet—especially if you already have a Robinhood account. It’s a convenient way to earn interest on your uninvested cash, and with FDIC insurance, you know it’s safe. However, accounts from other fintech companies are strikingly similar, and also offer convenient ways to earn interest on cash without having to pay fees or meet minimums. The Robinhood Cash Management is certainly a solid product, but it shouldn’t have you scrambling to abandon your current checking account.