Robinhood Launches Free Checking, Saving Accounts With 3% Interest

Trading app Robinhood has found tremendous success in disrupting the discount broker market, and the company is now setting its sights on the traditional banking business.

What Happened?

Robinhood announced Thursday it is launching checking and savings account services that are free of charge and pay an industry-leading 3 percent interest rate.

Why It’s Important

Robinhood is taking an aggressive approach to its new banking services, offering much higher rates on checking and savings accounts than most traditional banks. 

Robinhood is hoping to replicate the success it has had with commission-free stock and cryptocurrency trading services.

Robinhood’s 3-percent interest rate is roughly 30 times the national average interest rate for a savings account.

Co-CEO Baiju Bhatt said Thursday that the 3-percent rate is not a teaser, and the company believes it is sustainable given the economic environment.

Robinhood plans to sacrifice near-term profit for the sake of growing its user base — and is hoping federal interest rates will continue to rise, Bhatt said. 

“We fully intend to make money off of this, but we do not need it to be profitable on day one,” he told CNBC.

In addition to the 3-percent rate, Robinhood offers users access to 75,000 free ATMs nationwide, 24/7 customer support and a personalized debit card.

Robinhood accounts are not FDIC insured, but cash balances up to $250,000 in Robinhood accounts are covered by Securities Investor Protection Corporation insurance.

What’s Next

Banking customers and investors will be watching to see how much success the new Robinhood banking services have. They will also be watching to see if Robinhood’s 3-percent interest rates drive interest rates higher at other banks as well.

Social media users are already threatening to switch from their personal banks if they are unable to match Robinhood’s 3-percent rate.

Dear @Chase If you don't offer 3% on my checking/saving accounts, I'm gone.

Your move. https://t.co/6A13tOk1XB

— Open Outcrier (@OpenOutcrier) December 13, 2018

Related Links:

Robinhood Responds To Allegations Of Shortchanging Customers

Why—And How—Did Robinhood Decide To Clear Its Own Trades?

Photo courtesy of Robinhood.