Robinhood Checking and Savings Coming out 2019

[DaveInAZ]

I saw an article on this on my Google News feed this morning and signed up for their "early access". I'm #137,845 on the list, so not holding my breath. And not sold on it, I'll just check it out and decide then.

EDIT: I just saw an article on this at Doctor of Credit: Checking & Money Market accounts ar NOT FDIC insured, Robinhood just invests your funds and he notes: "As I see it, if the market tanks, it’s entirely possible Robinhood could go under (if there are enough deposits on hand to sink them) and you’ll lose your money."

So, I'm pretty skeptical on this. I already get 2.5% on my Memory Bank Money Market FDIC insured, and as my last name isn't Walton I don't have 10 digit savings accounts.

[Anonymous]

I have a habit of making a lot of potentially risky financial moves (I've never lost money yet) and I dont trust this. Perhaps it's a risk/hassle vs. rewards thing. Either way, not doing it. Collectively with the internet reviews and what I can see I will NOT be participating.

[rprisco]

Look, these are similar but not exactly to checking or savings accounts offered at banks or credit unions, in that you get (free) checks and debit card.

The differences are both the checking and savings appear to be linked to your trading account, these accounts offer 3% based upon treasury rates, which could go up or down. I believe the accounts will act as a sweep account, so the accounts will actually be a sort of money market type accounts (see CNBC article on main page) and cash not invested can be swept into the account of choice and will earn 3%.

They are not FDIC insured, but they are SIPC insured upto 250/500k. No different than etrade, Schwab, etc.

This was in the email from Robinhood:

"Users of Robinhood Checking & Savings earn 3% interest annually on each of their Checking & Savings balances. Robinhood does not charge account maintenance, account minimum, overdraft, ATM, transaction, foreign transaction, transfer, or card replacement fees for Robinhood Checking & Savings. Robinhood Checking & Savings is offered through Robinhood Financial LLC. Robinhood Checking & Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account. Robinhood Financial is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash)."

Right now the market is crazy and a 3% return is not bad. These accounts may not be for everyone, but they are high quality safe accounts backed by SIPC. Assuming the worst is a disservice to everyone without having all the facts. Informed, responsible use is the key.

If your on chex, this appears to be an exceptionally safe opportunity.

Personally, I can't wait.

[Anonymous]

Yipes!! Just saw this:

https://www.usatoday.com/story/money/2018/12/14/robinhood-checking-and-savings-features-not-insured-...

[DaveInAZ]

Yes, there's quite a discussion on Doctor of Credit about this. First of all, SPIC is not a US Government insurance like FDIC for banks or or NCUA for credit unions. FDIC is a private organization involving most/all brokerages so that if one fails, they’ll have to collectively reimburse the customers of the failed brokerage. These Robinhood checking/MM accounts are openly investing your funds, but Robinhood claims they'll only make "safe investments"; I believe I've heard that before. The purpose of SIPC is obviously not to mitigate an individual’s risk in investment – many investors take big losses when they make poor choices. SIPC is to ensure against the insolvency of the firm, not an individual's investments, and no doubt in the fine print Robinhood will claim you are authorizing them to make investments on your behalf. So if Robinhood makes some bad investments and you loose value of your funds it's not at all clear SPIC would cover that, only if Robinhood pulls Lehman Brothers and makes such bad investments it goes completely under.

I would say Robinhood is a "probably safe investment", but not an "exceptionally safe" opportunity. And with 2% FDIC insured savings easy to get and 2.5% FDIC insured savings available, and even higher for CDs, everyone needs to make their own decision if it's worth any slight risk for 3% from Robinhood.

And @rprisco - What does one's report on Chex have to do how safe accounts in Robinhood might be?

[rprisco]

@daveinaz, chex systems does not appear to be a factor for opening these accounts. Thereby giving folks on chex a possible opportunity for a checking account with a debit card

Maybe my "exceptionally safe" comment was to strong or perhaps I should have said imo. Because I admit I was wrong in that comment, especially since I read an article on CNBC entitled "
Robinhood didn't give key industry watchdog a heads-up about the launch of its free checking account"

Turns out government may have some serious issues with Robinhoods new checking/savings model.

For me, if/when this gets going, I look forward to the 3%. As I said, this appears to be like a money market account, so it's no surprise to me that they would invest my $ in treasuries. Would I stick my life savings in, oh heck no. I would not do that with any one bank or CU.

When the market is crazy like it is now, moving 25k (min for day trading) to a 3% account for a few weeks as a safe harbor is a nice return on idle money and a heck of allot better return than the Dow or S&P at this point and certainly better than any bank.

[DaveInAZ]

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@rprisco wrote:
@DaveInAZ, chex systems does not appear to be a factor for opening these accounts. Thereby giving folks on chex a possible opportunity for a checking account with a debit card

Maybe my "exceptionally safe" comment was to strong or perhaps I should have said imo. Because I admit I was wrong in that comment, especially since I read an article on CNBC entitled "
Robinhood didn't give key industry watchdog a heads-up about the launch of its free checking account"

Turns out government may have some serious issues with Robinhoods new checking/savings model.

For me, if/when this gets going, I look forward to the 3%. As I said, this appears to be like a money market account, so it's no surprise to me that they would invest my $ in treasuries. Would I stick my life savings in, oh heck no. I would not do that with any one bank or CU.

When the market is crazy like it is now, moving 25k (min for day trading) to a 3% account for a few weeks as a safe harbor is a nice return on idle money and a heck of allot better return than the Dow or S&P at this point and certainly better than any bank.

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Ah, OK, just a misunderstanding of phrasing. Most folks who have ever opened a checking or savings account are "on Chex", meaning anyone pulling their Chex report would see the inquiry for opening the account. You mean folks with a "bad" Chex report, a report of overdrafts and/or an account closed with a negative balance.

But the USA Today article ExtraCredit posted clears things up, the SPIC CEO is saying Robinhood checking/savings account would not be guaranteed by the SPIC:

"SIPC protects cash that is deposited with a brokerage firm for one limited purpose ... the purpose of purchasing securities," according to a statement from SIPC President and CEO Stephen Harbeck. "Cash deposited for other reasons would not be protected," he said in the statement. "SIPC does not protect checking and savings accounts since the money has not been deposited for a protected purpose."

[Anonymous]

Here's an article from TechCrunch:
https://techcrunch.com/2018/12/14/robinhood-insurance-sipc/
"If Robinhood checking and savings is indeed ineligible for insurance coverage from the SIPC, and since it doesn’t qualify for FDIC protection like a standard bank, users’ funds could be at risk."

Regardless of how you feel, it's always good to have as much info as possible in making decisions as to where to leave your hard earned money.

[Anonymous]

The article I read said not SIPC nor FDIC insured.  

[Anonymous]

Exactly. That's what I quoted from the article