Understanding the Risks and Benefits of Robinhood Saving Account

Robinhood's saving account offers a unique way to earn interest on your cash balance, but there's a catch - you can only earn interest if you keep a minimum balance of $1. This requirement might seem small, but it's essential to consider the impact on your overall financial goals.

With no fees for ATM withdrawals, you can access your money when you need it. However, keep in mind that you'll still be charged a fee by the ATM operator.

The interest rate on Robinhood's saving account is competitive, but it's not the highest available. According to the article, the APY is 4.05%, which is lower than some other high-yield savings accounts.

While the interest rate might not be the best, the account's low minimum balance requirement makes it an attractive option for those who want to start saving with minimal fuss.

Suggestion: Is Robinhood a Brokerage Account

Robinhood's instant access savings account now pays its Gold customers 4.65% on uninvested brokerage account cash.

This is a significant increase from the previous rate, and it's available to those who opt in to the brokerage cash sweep feature.

Gold members pay $5 a month for a subscription, which includes other benefits.

Nonsubscribers with Robinhood accounts will earn 1.5% APY, which is still a decent rate but lower than what Gold members get.

There are even better options out there, though - 14 high-yield savings accounts pay even better, with 5.02% APY being the best in our rankings right now.

Here are the interest rates for Robinhood customers:

Robinhood's checking and savings accounts may not be insured, which means if the company fails financially, you could lose your money.

The Securities Investor Protection Corporation (SIPC) protects investors from losses at member brokerage firms, but it only covers cash deposited for the purpose of purchasing securities.

You may be out of luck if Robinhood goes belly up and you have money in their checking or savings accounts.

Additional reading: Transfer Brokerage Account to Robinhood

Robinhood is not registered as a bank, so any deposits you make with the company are not protected by the Federal Deposit Insurance Corporation (FDIC).

You'll still get a debit card with your Robinhood account, but it's in partnership with Ohio-based Sutton Bank.

The SIPC insurance only provides protection if Robinhood fails financially, it would not cover investment losses for any assets you have in your Robinhood accounts.

The interest rate on Robinhood's cash account is 5.00% APY, but only for Gold customers who opt in to the brokerage cash sweep feature.

To qualify for the 5.00% rate, you need to have the Gold plan, which costs $5 per month and offers other perks.

Cash held in retirement accounts doesn't qualify for the 5.00% rate, and the rate for non-Gold customers is just 1.50% APY.

The 5.00% rate is only available on uninvested cash held in brokerage accounts, not on invested cash.

If you already hold a large sum at one of the banks in Robinhood's network, you won't be covered for the full $2.25 million cap.

Robinhood has raised the interest rate on its cash sweep account for Gold customers four times this year, starting at 4.00% APY in January.

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If you're not a heavy Robinhood user, you might want to consider a high-yield savings account instead. These accounts pay more than Robinhood's 5.00% APY rate, and you can easily transfer funds between your bank and Robinhood account.

You can boost your earnings even more by choosing one of the best high-yield savings accounts, which can pay higher rates than Robinhood's 5.00% rate.

Avoiding the $60 annual expense of a Robinhood Gold membership can also increase your earnings. Even if you put your uninvested cash in a savings account paying the same 5.00% rate, you'd earn $60 more with the bank savings account than the Robinhood Gold account.

For another approach, see: One - Mobile Banking

If you're not a Robinhood Gold member, you can earn more on your uninvested cash by depositing it into a high-yield savings account, which can pay more than Robinhood's 5.00% APY rate.

You'd also avoid the $60 annual expense of a Gold membership, which could add up to an extra $60 in earnings if you put your cash in a savings account paying the same 5.00% rate.

Considering the best high-yield savings accounts can out-earn the 5.00% rate, using one might be a better option for maximizing your annual earnings.

However, if you only want to stick with your primary bank's savings account, which is likely paying less than 5.00%, the Robinhood option could still be a good value for you, even with the $60 annual fee.

Expand your knowledge: Difference between Annual Percentage Yield and Interest Rate

If you're looking for alternatives to Robinhood's cash account, you have several options. Wealthfront currently pays a 5.00% APY, making it a strong competitor.

Betterment's cash account pays 4.75% APY, which is still a great rate. Empower, formerly known as Personal Capital, offers 4.70% APY.

Traditional brokerage firms tend to pay less, with Vanguard offering 3.70% APY and Fidelity only paying 2.72% APY.

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