In This Month's Edition of "If it sounds too good to be true..."

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Dec 18, 2018
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Brought to you by Robinhood:

My inbox filling up last Thursday with the news that Robinhood, the no-fee broker, was now offering a savings and checking account earning 3.0%. Well, it wasn't really offering a checking and savings account, at least not yet. You could give them your email address and you would presumably be notified when these accounts were available. A quick scan of depositaccounts.com leads to the discovery that the best savings and checking products (the 1%ers) were yielding under 2% (1.94% and 1.65% respectively) as of 12/17/18:

My skeptical brain kicked into gear with questions, lots of questions:

  • Would these deposits be FDIC-insured? Turns out the answer is they will be insured by SIPC, except Robinhood forgot to ask for permission, so that is still a question. 
  • What were the maximum deposits allowed for this offer?
  • Would these rates be "subject to change" at any time or would Robinhood guarantee the rate for a period of time?
  • What would be the minimum deposit required? 
  • What would the fees be on the checking accounts? 

Before all these questions could be answered, a day later, Robinhood had another big announcement that read in part (from MarketWatch):

“We realize the announcement may have caused some confusion. As a licensed broker-dealer, we’re highly regulated and take clear communication very seriously. 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... [S]tay tuned for updates.”

And their Cash Management image (above) had been replaced with...

Stay tuned...will the 3% introductory savings interest rate offer survive the regulators? I have my doubts but the 24 hours that Robinhood had the 3% offer advertised was a marketer's dream with the incredible volume of emails they were able to hoover up from people looking for a good deal. That's what is known in marketing parlance as no-cost lead generation!  May have cost a little bit in the reputation department though. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.