Robinhood says it is putting the brakes on the rollout of a new free checking and savings account that promised to pay just about the highest interest rate anywhere on your money at 3%. The announcement was made in a Friday blog post by the founders.
You may already know Robinhood as the free stock trading app that democratized Wall Street by making it completely free to buy and sell stocks on your phone.
Now, the fintech startup had said it was moving into the banking arena with the anticipated launch of their Checking & Savings product in January 2019.
Robinhood had said it was going to pay you 3% on your money, you’d never pay any fees and you’d have access to over 75,000 free ATMs. Many of the ATMs are located conveniently within Costco, Target, Walgreens and 7-Eleven stores across the country.
The 3% interest alone, which compounds and is paid out daily, could amount to an estimated $240 extra a year in your pocket on a $8,000 balance.
They’d also promised:
- No account maintenance fees
- No account minimum
- No overdraft fees
- No ATM fees
- No transactions charges
- No foreign transaction fees
- No account transfer fees
- No card replacement fees
That January date appears to no longer be in play, nor does the Checking & Savings name:
“We plan to work closely with regulators as we prepare to launch our cash management program, and we’re revamping our marketing materials, including the name.”
The controversy over Robinhood’s Checking & Savings plan
Robinhood had said the money deposited into their new checking and savings account product “is insured up to $250,000 by the Securities Investor Protection Corporation (SIPC).”
That’s was a bit of an eyebrow-raiser considering it’s normally the Federal Deposit Insurance Corporation (FDIC) that protects bank deposits up to $250,000.
Complicating matters is the fact that, the SIPC has disavowed any responsibility for insuring checking and savings account deposits from Robinhood.
“SIPC protects cash that is deposited with a brokerage firm for one limited purpose … the purpose of purchasing securities,” SIPC President and CEO Stephen Harbeck said in a statement.
“Cash deposited for other reasons would not be protected,” he said. “SIPC does not protect checking and savings accounts since the money has not been deposited for a protected purpose.”
“As a licensed broker-dealer, we’re highly regulated and take clear communication very seriously,” the Robinhood founders said in the Friday post. “Stay tuned for updates.”