Although Robinhoodis recognized for its no-commission trading account, the firm has also grown into other sectors, such as banking. You may now use your Robinhood trading account with a new cash management account that combines some of the most significant aspects of checking and savings accounts.
Review of Robinhood Cash Management
You may earn income on your uninvested funds with Robinhood Cash Management, available to current Robinhood brokerage account users. Let's take a look at how and why Robinhood Cash Management works!
What is the Robinhood Cash Management?
The Cash Management function of Robinhood operates as a combination between a savings account and a checking account. " APY is comparable to a savings account's (higher than the national average), plus you get a debit card that you may use to make purchases and withdraw cash from over 75,000 ATMs globally. Both are similar to a checking account.
With a Robinhood Cash Management account, you consent to have your brokerage account's "cash" balance deposited in one of their programmer banks, even if you haven't made any investments yet. A high-yield savings account's interest rate will be comparable to what you'll get from this account.
On average, the APY will be 0.30 percent more than the national average at the end of March 2020. A measure of interest that considers the impacts of compound interest is APY (annual percentage yield).
You'll get a debit card that you may use to make purchases and withdraw money from ATMs, in addition to collecting interest on your uninvested funds. There aren't many places where you can get such an impressive annual percentage yield (APY) on your savings while still having easy access to your funds, but that's what the Cash Management account gives you.
Robinhood Cash Management serves whom?
Some elements of Robinhood Cash Managementmake it better or worse for some Robinhood users. If you're looking for a paperless experience that includes an excellent APY and doesn't want to pay foreign transaction fees when you travel, Cash Management is an attractive option. A free stock worth up to $225 if this sounds like you and you don't already have a Robinhood account!
Customers who need to deposit cash or actual paychecks or conduct wire transfers may not find Robinhood Cash Management an attractive option. Let's take a closer look at these advantages and disadvantages.
All transactions in the Robinhood Cash Management account are conducted electronically. There are no brick-and-mortar branches of Robinhood, and all transactions are done through the smartphone app and the company's website.
This is also true for Robinhood Cash Management, which is not a bank and does not have any physical facilities where you may go to complete your banking. It can handle all transactions digitally. When withdrawing cash from a partner bank's ATM, you would only need to go to the bank in person.
Is My Money Secure?
Yes! The FDIC ensures all of Robinhood's partner banks. A federal entity, the Federal Deposit Insurance Corporation (FDIC), protects your bank savings up to a total of $250,000 per institution.
The $250,000 maximum per bank includes the money that Robinhood has swept for you, so you may want to keep track of the amount you have in each bank. The FDIC will only cover up to $1.25 million in Robinhood Cash Management funds.
Additionally, Robinhood is a Securities Investor Protection Corporation (SIPC) member, which protects investors' securities and uninvested funds. For up to $500,000, Robinhood's stocks and cash would be insured if the company went under.
How Robinhood Cash Management Makes Money
Whenever Sutton Bank delivers the debit card for the cash management account, Robinhood earns an interchange fee from Sutton Bank. In return for transferring money to its partner banks, the firm makes fees from those institutions.
To put it another way, Robinhood makes money from the banks that provide its debit cards and the banks to which it transfers your uninvested funds. You may feel confident that Robinhood is not charging you for utilizing the Robinhood Cash Management service because none of these monies come out of your wallet.
·Before Signing Up
After the turmoil that erupted over Robinhood's platform in early 2021, some users may be wary of using it. To prevent its customers from investing in GameStop and AMC, the corporation took the unusual step of halting all stock purchases on January 28.
Some praised the action to protect novice investors from losing money on inflated equities. In contrast, others derided it as an elite maneuver to keep institutional investors from losing money on short sales they were making.
SEC also accused Robinhood of misrepresenting clients about its trade execution processes in 2020. Before making a decision, you might want to check out these stories.
Conclusion
Suppose you currently have a Robinhood brokerage account and want to earn above-average interest on your uninvested cash while still being able to spend money straight from your Robinhood account.
In that case, Robinhood Cash Management may be the perfect option for you. This app is for you if you don't mind doing your banking online and want to keep track of your money in one place.
