A Short Guide to Robinhood’s Cash Management

While Robinhood’s newest addition to their suite of brokerage options still has hundreds of thousands wait-listed, many more are still interested in adding to that list. What about this option is so lucrative and where does it differ from other investment vehicles offered by financial institutions?

Robinhood’s Cash Management Account offers the qualities of a money market account combined with the popular features of Robinhood’s trading platform. A money market account is essentially a savings account with checking features, such as Robinhood’s debit card. I opted for the trademark Robinhood green, though they offer black, white, and patriotic United States flag colors.

FDIC Insurance

The Robinhood Cash Management account partners with Sutton Bank to move the balance in your Robinhood account to their storage where it is invested by the bank and insured by the FDIC for a value of up to $1.25 million. The card itself is facilitated by MasterCard which gives it strong international utility.

Interest Rates

The initiation of Robinhood’s Cash Management features were not without their speed bumps. The company originally touted a 3.00% APY, but could not secure backing from banks or accredited financial institutions to bring this to reality. Further down the line they announced that the account would come to fruition but now with 2.05% APY, though this was not to be either. After a few hang-ups, the account found its way to a respectable offering which is on par with other lucrative money market accounts and savings accounts available on the market.

Robinhood’s Cash Management account offers a 1.8% APY, calculated and depostited into your account monthly. According to a previous review of the top money market accounts by Nerdwallet, this rate is on par with the top tier candidates on the list such as the BMO Harris Platinum Money Market Account which offers a 1.95% rate. There are a large number of money market accounts in the financial sector owned and operated by seasoned brokerages and banks alike, each with their own entry terms and charges for using their services.

Robinhood knows its brand and while not not overtly dissimilar to other money market accounts, it knows what it does well and sticks to it. users will have all the benefits of a 1.8% APY, calculated and deposited monthly into your account which generates ease of access for banking activity. This centralization of funds eliminates the need for one to keep cash in a checking account where that money is incapable of working for you. One risk of this account is the psycho-social factor that is often seen on Wall Street, when users are accessing their brokerage accounts more often, they are more likely to invest more capital. This is a boon for the broker like Robinhood, but something to be wary of for the aspiring investor.

One benefits of Robinhood’s cash management versus other MMA’s is its lack of a minimum initial investment. Additionally, many brokerages that offer MMA’s require a minimum investment in your portfolio before agreeing to take you on as a client. Robinhood’s Cash Management is as free to enter as their brokerage accounts. Robinhood’s leadership, such as co-founder Baiju Bhatt, likely realize they have high potential to stimulate trade activity on their platform through the combination of banking and personal investment opportunities.

Cash Access and Payment Options

Similar to a checking account, Robinhood’s Cash Management gives you access to a network of 75,000 ATM’s worldwide. Should one choose to opt outside of this ATM network, they would simply pay an ATM operator fee as is the norm. In addition to the ATM network, users can also use Cash Management to pay through Apple Pay, Google Pay, and Samsung Pay.

This is what it looks like when funds are clearing in the Cash Management Account, available to trade but not withdraw or spend.

One caveat of this system is a short clearing period between when you can access your deposited funds on Robinhood in the real world or to trade on the app, 3 business days. While this creates some inconvenience for users, Robinhood allows 75% of this money to be traded in the market, but not spent so plan accordingly.

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