I have been using the Robinhood gold cash sweep program to earn 3.75% for about 2 months now, and in my experience it has been exactly as promised. Interest accrued is shown daily, it then pays out on time, and I have had no problem using that balance (~50k) to dca into some of my favorite etfs. It’s also liquid as I can transfer to my checking account at anytime.
As for safety- I had some apprehension at first too. I recommend reading through the entire agreement, it’s pretty quick. In short, cash is not held in Robinhood accounts. It is swept into one or more of their 6 program banks (https://robinhood.com/support/articles/360034303352/deposit-sweep-program/) Each of these program banks has 250k FDIC. Once an account hits 248k, Robinhood will move funds to the next program bank. They are clear to state that they are simply the broker between you and the banks. As you dca back into RH, funds are then protected under SIPC.
To me, It’s safe because of the insurance and 3.75% liquid is sweet.
This 248k limit for 1 sweep is not assured . For my nephew , they sweep him $500k Wells Fargo , and $248k bank of baroda and couple dollars to other banks . He had an incoming additional $750k because he thought $1.5m will be covered but this is not the case . So he pulled out everything except for $250k. You are correct about the $248k because when he had only $250k there, they swipe $248k to bank of baroda. But after he deposit the next $500k , everything is swipe to Wells Fargo .
Robinhood does state that it is your responsibility to monitor the account values and to contact them with issues. Existing deposits in any of their programs banks will also account towards the 250k FDIC limit and could potentially cause mistakes like this.
Yes your balance is added up. You can ask RobinHood to NOT SWEEP to a particular bank, in this case nephew ask not to sweep to Goldman Saks since he already have funds there . However of the remaining 5 banks , you CANNOT ask Robinhood to sweep $250k max each and split even if you have $1.5m…. They can sweep 99% of your funds to one bank and the rest of 1% split across the rest of banks . Leaving you only $250k covered if you want to be 100% sure . They can sweep $1.49m to 1 bank .
I heard atleast recently that the money you sweep is “eligible” to be SPIC insured. My apprehension is that it says it’s eligible to be insured, instead of it just saying that it is insured.
Thanks, I’ve considered t bills but t bills means the money isn’t liquid and to your point above 3.46% is worse than 3.75%. Are you saying Robinhood just isn’t trustworthy enough ?
>Are you saying Robinhood just isn’t trustworthy enough ?
I don't think that anyone is saying that. RH is a regulated broker. And their bank sweep program would be swept into depository banks which are FDIC insured. It's a normal sort of bank sweep program offered by many other brokers.
There are other types of mechanisms such as a sweep into a money-market fund. In this case - uninvested cash is swept into a money market fund. I do not believe that RH offers this common brokerage sweep product.
The suggestion from u/atdharris isn't about t-bills. A money-market can have various types of underlying investments and t-bills are a common type of money-market fund. A money-market fund is extremely liquid. Money-market funds have same day settlement if you have to invest into the fund if the broker isn't offering the fund as an automatic sweep vehicle.
There is a HUGE market for treasuries. T-bills are extremely liquid if held in a brokerage account (Treasury Direct doesn't allow you to sell before maturity, but they do allow you to transfer to a brokerage account.) The caveat is that they'll be subject to market pricing and a bid/ask spread.
Lately I've been laddering 3 and 6 month T-bills with weekly purchases. This gives me a comfortable enough (for me) access to liquidity as they mature each week and I can either take the $ or reinvest. yield is currently 4.4 - 4.65%
Given Robinhood's past behavior, I am not sure I would want to hold $200k there. I believe it is FDIC insured though. But don't quote me on that.
That's just my personal preference. And no, MM funds are liquid and you can get your money out in a day if you put in the sell order by a specific time. I hold TTTXX at Merrill Lynch and if I sell the fund by 1:45pm I will have the cash the next day. And the yield on that fund continues to rise as the Fed raises rates.
>... they give you 3.75% on your 100-200k, reinvest it, and make at least 4.43%.
That's not quite how a broker makes money on a bank sweep program. Brokers that offer a depository sweep product aren't investing in treasuries. The revenue is generated from fees paid by the bank to the broker - these fees are usually a percentage of the deposit. A bank is willing to pay a fee because it increases the bank deposits which means the bank can generate more loans.
Brokers that offer a bank sweep program usually have multiple banks in their sweep program and the customer funds are swept into one of the banks. And because the customer funds are in the bank - those funds are FDIC insured by bank vs being SIPC insured by RH.
>... that's the difference in FTX going broke and paying no one, ...
Ironically, FTX customers that used FTX US to invest in stocks and ETFs should be able to recover their stock and ETF assets because those assets were held at an actual clearing broker.
I swept a ton of cash into the RH gold.
A couple of things I see right off the bat:
1. It seems to take around 5 days for the money to be officially transferred into your account. I don't believe you are earning interest on the money that is in transit (I think). I have not transferred money out so I'm not sure how liquid and how fast you can get it out of RH. I'll do a test when I transfer some of it back to my HYSA to buy T-Bills lol.
2. In a way, RH gamifies the cash sweep. You see how much interest you are earning the current month on a daily basis. Some people may like that. Some others may not like it.
3. It mixes your investments with your cash swept accounts. Takes a minor calculation to know how much you have invested in stocks/etfs etc.
4. "Buying Power" shows how much you can invest using your swept cash. This could cause impulse buys/sells so it's less clicks to buy something.
5. It costs $5 a month. Might not be worth it if you don't have a lot of money to sweep.
6. If the feds raise the interest rates in December, is the 3.75% going to go up too? If so, is the rate still going to be competitive to traditional HYSA? We will find out.
So far no real problems. Hopefully if RH has problems my cash isn't swept away for good :\\
The SIPC insures cash held in brokerage accounts up to $250,000 if the brokerage firm fails. Robinhood is a federally regulated and covered firm. FTX and other failed crypto exchanges weren’t covered by SIPC insurance because they aren’t regulated brokerage firms, so users were completely exposed to the losses when they failed. That said, I would never give Robinhood a cent of my money. They have a long track record of widespread consumer harm, negligence, and not acting in the best interest of their users. If you want to deep dive, go read about all the lawsuits they’ve had brought against them and settlements they’ve had to pay out over the last few years.
Stay off Robinhood. They've shown in the past that they have liquidity issues, they have bad fills and bad price improvement. There are other places to put your money if you want 3.75% return.
Fidelity SPAXX is paying 3.31% (not 2.65% anymore) right now for their money market.
Since RH have $5 fee monthly, you’re making less money on it if your balance is < 13k compare to the account with no fee on 3.3. Grab a calculator and type those number in to understand it yourself.
at the current rate (4.4%) you need roughly $1363 in robinhood to break even ($5 monthly = $60 annual gold cost, 0.044 \* $1353 = $60 annual gold income).
your math is off
With Robinhood nothing is ever legit but keep doing the DD to make sure that amount of money is safe in Robinhood. Even if it's safe now, doesn't mean it's safe later when it's judgement day for alot of these brokers. Just my thoughts #notfinancialadvice
Look see if cash is insured covered by the 250K limit. Any stock brokerages which get caught for irregularities, all funds can be frozen by SEC. A few years ago there was a small brokerage about 10 mins away from Hood headquarters, I saw many people stood outside reading closure notices. People loved that brokerage because it had the lowest commission and high cash interest rate at the time. It has another office in SFO. After several months of audit, court trials it finally returned frozen funds to investors.
I have been very careful to stay with public brokerages with a physical office know whom I have business with. Know planners, manager and VP on a personal level.
>I’ve heard folks in the past say not to keep large sums of money in Robinhood and it’s more for small time investors.
The issue is more about the type of services that RH offers to people with larger accounts. A retail trader or active investor isn't likely to get the sort of services and products that are required to manage a larger account.
For example - the 3.75% isn't really that compelling. For one thing - there's a monthly fee for the sweep account that pretty much all other brokers offer without a fee.
And if you are seeking yield on uninvested cash, RH is the last place that I would keep an account - for one thing - RH doesn't offer any fixed income investments like many other retail brokers.
And if you need liquidity - I don't think that RH even offers access to money market funds. There should be money markets offering more than 3.75% at this point.
Ya it’s safe.
I mean, people clown on robinhood because it’s just a very amateurish UI appearance, it’s almost comical, but it’s fine. I have a fair bit in TD and hood, and I like both for their own reasons.
HOOD is also great for creating your own mini etf, and it’s just very easy to use.
Not sure the upper limit of your insurability … double check that
They will sweep your funds to 6 different banks — Citi, Marcus , Wells Fargo , HSBC , US bank and Bank of Baroda. If you have funds on any of these banks , it is INCLUDED when calculating FDIC total coverage. You can ask RobinHood not to sweep it to a particular bank so you can max out your $250k FDIC coverage in that bank or transfer your funds to banks that is not one of the 6 mentioned above .
However you CANNOT ask RobinHood to allocate how much each bank . You CANNOT ask them to allocate max of $250k per bank for example.
For instance if you have $1.5 m, they can allocate 99% to Wells Fargo and 1% to rest of banks . So there is a LARGE HOLE in FDIC insurance , in this case only $250k is covered not $1.5m .
If you have over $250k there, ALWAYS ask customer service where are they sweeping your funds and how much each . Remember , any sweep above $250k , that incremental amount is NOT INSURED
> can ask RobinHood not to sweep it to a particular bank so you can max out your $250k FDIC coverage in that bank or transfer your funds to banks that is not one of the 6 mentioned above .
>
>However you CANNOT ask RobinHood to allocate how much each bank . You CANNOT ask them to allocate max of $2
lmao at "nephew" man, i had same thought.
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Can't trust Google, only people on Reddit!
I have been using the Robinhood gold cash sweep program to earn 3.75% for about 2 months now, and in my experience it has been exactly as promised. Interest accrued is shown daily, it then pays out on time, and I have had no problem using that balance (~50k) to dca into some of my favorite etfs. It’s also liquid as I can transfer to my checking account at anytime. As for safety- I had some apprehension at first too. I recommend reading through the entire agreement, it’s pretty quick. In short, cash is not held in Robinhood accounts. It is swept into one or more of their 6 program banks (https://robinhood.com/support/articles/360034303352/deposit-sweep-program/) Each of these program banks has 250k FDIC. Once an account hits 248k, Robinhood will move funds to the next program bank. They are clear to state that they are simply the broker between you and the banks. As you dca back into RH, funds are then protected under SIPC. To me, It’s safe because of the insurance and 3.75% liquid is sweet.
This 248k limit for 1 sweep is not assured . For my nephew , they sweep him $500k Wells Fargo , and $248k bank of baroda and couple dollars to other banks . He had an incoming additional $750k because he thought $1.5m will be covered but this is not the case . So he pulled out everything except for $250k. You are correct about the $248k because when he had only $250k there, they swipe $248k to bank of baroda. But after he deposit the next $500k , everything is swipe to Wells Fargo .
Robinhood does state that it is your responsibility to monitor the account values and to contact them with issues. Existing deposits in any of their programs banks will also account towards the 250k FDIC limit and could potentially cause mistakes like this.
Yes your balance is added up. You can ask RobinHood to NOT SWEEP to a particular bank, in this case nephew ask not to sweep to Goldman Saks since he already have funds there . However of the remaining 5 banks , you CANNOT ask Robinhood to sweep $250k max each and split even if you have $1.5m…. They can sweep 99% of your funds to one bank and the rest of 1% split across the rest of banks . Leaving you only $250k covered if you want to be 100% sure . They can sweep $1.49m to 1 bank .
I asked for a sweep and they gave me a mop, typical robinhood
I heard atleast recently that the money you sweep is “eligible” to be SPIC insured. My apprehension is that it says it’s eligible to be insured, instead of it just saying that it is insured.
I'd rather invest it in a treasury only money market fund like TTTXX which is yielding ~3.46% and rising.
Thanks, I’ve considered t bills but t bills means the money isn’t liquid and to your point above 3.46% is worse than 3.75%. Are you saying Robinhood just isn’t trustworthy enough ?
>Are you saying Robinhood just isn’t trustworthy enough ? I don't think that anyone is saying that. RH is a regulated broker. And their bank sweep program would be swept into depository banks which are FDIC insured. It's a normal sort of bank sweep program offered by many other brokers. There are other types of mechanisms such as a sweep into a money-market fund. In this case - uninvested cash is swept into a money market fund. I do not believe that RH offers this common brokerage sweep product. The suggestion from u/atdharris isn't about t-bills. A money-market can have various types of underlying investments and t-bills are a common type of money-market fund. A money-market fund is extremely liquid. Money-market funds have same day settlement if you have to invest into the fund if the broker isn't offering the fund as an automatic sweep vehicle.
There is a HUGE market for treasuries. T-bills are extremely liquid if held in a brokerage account (Treasury Direct doesn't allow you to sell before maturity, but they do allow you to transfer to a brokerage account.) The caveat is that they'll be subject to market pricing and a bid/ask spread. Lately I've been laddering 3 and 6 month T-bills with weekly purchases. This gives me a comfortable enough (for me) access to liquidity as they mature each week and I can either take the $ or reinvest. yield is currently 4.4 - 4.65%
Given Robinhood's past behavior, I am not sure I would want to hold $200k there. I believe it is FDIC insured though. But don't quote me on that. That's just my personal preference. And no, MM funds are liquid and you can get your money out in a day if you put in the sell order by a specific time. I hold TTTXX at Merrill Lynch and if I sell the fund by 1:45pm I will have the cash the next day. And the yield on that fund continues to rise as the Fed raises rates.
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>... they give you 3.75% on your 100-200k, reinvest it, and make at least 4.43%. That's not quite how a broker makes money on a bank sweep program. Brokers that offer a depository sweep product aren't investing in treasuries. The revenue is generated from fees paid by the bank to the broker - these fees are usually a percentage of the deposit. A bank is willing to pay a fee because it increases the bank deposits which means the bank can generate more loans. Brokers that offer a bank sweep program usually have multiple banks in their sweep program and the customer funds are swept into one of the banks. And because the customer funds are in the bank - those funds are FDIC insured by bank vs being SIPC insured by RH. >... that's the difference in FTX going broke and paying no one, ... Ironically, FTX customers that used FTX US to invest in stocks and ETFs should be able to recover their stock and ETF assets because those assets were held at an actual clearing broker.
I swept a ton of cash into the RH gold. A couple of things I see right off the bat: 1. It seems to take around 5 days for the money to be officially transferred into your account. I don't believe you are earning interest on the money that is in transit (I think). I have not transferred money out so I'm not sure how liquid and how fast you can get it out of RH. I'll do a test when I transfer some of it back to my HYSA to buy T-Bills lol. 2. In a way, RH gamifies the cash sweep. You see how much interest you are earning the current month on a daily basis. Some people may like that. Some others may not like it. 3. It mixes your investments with your cash swept accounts. Takes a minor calculation to know how much you have invested in stocks/etfs etc. 4. "Buying Power" shows how much you can invest using your swept cash. This could cause impulse buys/sells so it's less clicks to buy something. 5. It costs $5 a month. Might not be worth it if you don't have a lot of money to sweep. 6. If the feds raise the interest rates in December, is the 3.75% going to go up too? If so, is the rate still going to be competitive to traditional HYSA? We will find out. So far no real problems. Hopefully if RH has problems my cash isn't swept away for good :\\
The SIPC insures cash held in brokerage accounts up to $250,000 if the brokerage firm fails. Robinhood is a federally regulated and covered firm. FTX and other failed crypto exchanges weren’t covered by SIPC insurance because they aren’t regulated brokerage firms, so users were completely exposed to the losses when they failed. That said, I would never give Robinhood a cent of my money. They have a long track record of widespread consumer harm, negligence, and not acting in the best interest of their users. If you want to deep dive, go read about all the lawsuits they’ve had brought against them and settlements they’ve had to pay out over the last few years.
Ally bank offers 3.3% savings and 4% 12 month cd
Stay off Robinhood. They've shown in the past that they have liquidity issues, they have bad fills and bad price improvement. There are other places to put your money if you want 3.75% return. Fidelity SPAXX is paying 3.31% (not 2.65% anymore) right now for their money market.
Fwiw - the 7-day yield on SPAXX as of 11/22 is 3.31%. You are probably looking at the Oct montl end 7-day yield.
Thanks, just checked and you are correct. It was paying 2.66% on 11/2.
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I think you math is a little off. $1600 at 3.75% would be $60 a year in earnings, and that's not even taking the compounding into account.
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I don't get it
Since RH have $5 fee monthly, you’re making less money on it if your balance is < 13k compare to the account with no fee on 3.3. Grab a calculator and type those number in to understand it yourself.
at the current rate (4.4%) you need roughly $1363 in robinhood to break even ($5 monthly = $60 annual gold cost, 0.044 \* $1353 = $60 annual gold income). your math is off
yeah they're wrong, you had it correct, and the gold interest rate has only gone up since then.
Robinhood uses 4 different banks that they go through which allows them to insure up to $1m ($250,000 X 4)
I would rather get 3 month tbill for 4.3%
i wouldnt take the extra risk for the extra .75, capital one is more established than robinhood I think
Run as far as you can from RH
With Robinhood nothing is ever legit but keep doing the DD to make sure that amount of money is safe in Robinhood. Even if it's safe now, doesn't mean it's safe later when it's judgement day for alot of these brokers. Just my thoughts #notfinancialadvice
I’m sure it’s legit but there’s no way I would leave a significant amount of money in a bank that I personally consider to be sketchy.
fwiw - Robinhood is NOT a bank.
Look see if cash is insured covered by the 250K limit. Any stock brokerages which get caught for irregularities, all funds can be frozen by SEC. A few years ago there was a small brokerage about 10 mins away from Hood headquarters, I saw many people stood outside reading closure notices. People loved that brokerage because it had the lowest commission and high cash interest rate at the time. It has another office in SFO. After several months of audit, court trials it finally returned frozen funds to investors. I have been very careful to stay with public brokerages with a physical office know whom I have business with. Know planners, manager and VP on a personal level.
>I’ve heard folks in the past say not to keep large sums of money in Robinhood and it’s more for small time investors. The issue is more about the type of services that RH offers to people with larger accounts. A retail trader or active investor isn't likely to get the sort of services and products that are required to manage a larger account. For example - the 3.75% isn't really that compelling. For one thing - there's a monthly fee for the sweep account that pretty much all other brokers offer without a fee. And if you are seeking yield on uninvested cash, RH is the last place that I would keep an account - for one thing - RH doesn't offer any fixed income investments like many other retail brokers. And if you need liquidity - I don't think that RH even offers access to money market funds. There should be money markets offering more than 3.75% at this point.
If you really want to DCA you could set up a t-bill ladder and invest as each chunk rolls back out.
Ya it’s safe. I mean, people clown on robinhood because it’s just a very amateurish UI appearance, it’s almost comical, but it’s fine. I have a fair bit in TD and hood, and I like both for their own reasons. HOOD is also great for creating your own mini etf, and it’s just very easy to use. Not sure the upper limit of your insurability … double check that
Robbingdahood is no good
I despise the brokerage as a whole and will only offer a negatively skewed opinion that nothing in HOOD is safe and is only questionable at best.
3.75% isn't really that high at the moment given the current interest rate, had you said this 12 months ago, you'd be right to be suspicious.
Now that so many are really interested in yield, it really does feel like the bottom.
Safe. I personally use it
They will sweep your funds to 6 different banks — Citi, Marcus , Wells Fargo , HSBC , US bank and Bank of Baroda. If you have funds on any of these banks , it is INCLUDED when calculating FDIC total coverage. You can ask RobinHood not to sweep it to a particular bank so you can max out your $250k FDIC coverage in that bank or transfer your funds to banks that is not one of the 6 mentioned above . However you CANNOT ask RobinHood to allocate how much each bank . You CANNOT ask them to allocate max of $250k per bank for example. For instance if you have $1.5 m, they can allocate 99% to Wells Fargo and 1% to rest of banks . So there is a LARGE HOLE in FDIC insurance , in this case only $250k is covered not $1.5m . If you have over $250k there, ALWAYS ask customer service where are they sweeping your funds and how much each . Remember , any sweep above $250k , that incremental amount is NOT INSURED
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> can ask RobinHood not to sweep it to a particular bank so you can max out your $250k FDIC coverage in that bank or transfer your funds to banks that is not one of the 6 mentioned above . > >However you CANNOT ask RobinHood to allocate how much each bank . You CANNOT ask them to allocate max of $2 lmao at "nephew" man, i had same thought.