Robinhood Markets Inc HOOD is offering interest rates on uninvested cash at 18 times the national savings rate.
What Happened: Robinhood raised its “Robinhood Gold” interest rate to 4.15% APY, while the national average interest rate on savings accounts stands at 0.33%.
The retail brokerage noted that the new rate went into effect last week and is available to new and existing Gold customers enrolled in cash sweep.
Robinhood's cash sweep program automatically moves uninvested brokerage account cash into deposit accounts at a network of six program banks. Some of the banks in Robinhood's network include Goldman Sachs Group Inc GS, and Citigroup Inc C. The cash deposited in-network banks are covered by FDIC insurance up to a maximum of $1.5 million.
“With Robinhood Gold, customers get one of the best interest rates available at 4.15% APY on their uninvested cash and they receive up to 5x more protection than they’d typically receive from a traditional bank with up to $1.5 million in FDIC insurance across a network of program banks,” said Steve Quirk, chief brokerage officer at Robinhood.
“Our cash sweep program allows customers to earn passive income when they’re not investing and is another example of how we’re leveling the playing field for investors regardless of their background, account balance, or where they are on their financial journey,” he added.
For example, if a Robinhood user had a $1.5 million cash balance, $250,000 would be "swept" or moved to Goldman Sachs, while the next $250,000 would be swept to Citigroup. Robinhood's partner banks will sweep up to $250,000 each.
Robinhood users who opt into the cash sweep program still have access to their capital for withdrawing, spending, and investing through their brokerage account.
With the interest rate compounded daily, users will be able to earn even more income on their uninvested cash, with no cap. Robinhood said the interest is paid out monthly.
Robinhood Gold subscribers also get access to several other benefits, such as bigger instant deposits and margin investing at 7.25%.
With the latest interest rate hike doled out by the Federal Reserve, Robinhood said it is “doing what’s best for customers by passing those savings along.”
The retail brokerage offers an APY of 1.5% for users who are not enrolled in its premium "Robinhood Gold" product.
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