As reported on Tuesday (Oct. 8), the feature will enable customers to earn 2.05 percent APY on any money in the account – and they will be able to spend it with a distinctive Mastercard debit card.
The waitlist for the new feature starts on Tuesday (Oct. 8).
“If you have $5,000 in your account while you’re thinking about what to invest in, you’d have an extra $105 at the end of the year,” noted Robinhood Co-CEO Baiju Bhatt.
Robinhood is valued at around $7.6 billion. The last time it tried to offer a checking feature, the Securities Investor Protection Corporation – which is intended to insure investors’ funds – said the company was ineligible to provide the service because a checking account was never originally agreed upon.
The new option, Bhatt said, was “built from the ground up” and will have use at a network of 75,000 ATMs. Investors’ money will be covered by the Federal Deposit Insurance Corporation (FDIC) up to $1.25 million. The usual limit is $250,000, but it will be spread across a number of banks.
Advertisement: Scroll to Continue
Robinhood makes money from taking a piece of the interchange fees on debit card transactions with Sutton Bank, and from fees when the other banks get cash.
“We decided the best thing to do is [to give] people the peace of mind that their money is held at these banks, while trying to pay back the very best interest rates,” Bhatt said.
Users are eligible to earn interest as soon as they deposit cash and opt into the program. Any money, including from sales of securities or cryptocurrency, gets put into the partner banks, which include well-known institutions like Wells Fargo, Citibank and Goldman Sachs.
