Key Takeaways
- Robinhood customers with a paid Gold membership can earn 4.00% APY on all of their uninvested cash held in brokerage accounts.
- Though 4.00% is competitive, the best high-yield savings accounts pay much more—up to 5.00%—and don’t require a subscription.
- If holding cash at Robinhood for potential investing is useful to you, a smart strategy could be keeping some money at Robinhood while moving other funds to a higher-paying savings account.
- Stashing some savings in one of today’s best CDs is also smart to consider, as it lets you lock in a return up to 4.50% for 3 months to 5 years.
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How Robinhood’s 4.00% Cash Rate Works
Robinhood (HOOD) is one of a handful of online brokerages that pay 4.00% on uninvested cash. It’s certainly competitive considering the national average savings account rate is just 0.41%. But is it enough to make Robinhood’s cash account a smart place to keep your savings?
It depends. Robinhood’s 4.00% rate is only available to people with a paid Gold membership. If you’re already a member because you value the other premium Robinhood benefits, earning 4.00% on your cash savings is both competitive and convenient.
But if you won’t benefit from the investing perks of a Gold membership, you’d be better off with one of today’s best high-yield savings accounts. These currently pay as much as 5.00% APY—and have the added advantage of charging no monthly membership fee.
The Fine Print of Robinhood’s Cash Account
Robinhood’s 4.00% rate is only available on uninvested cash held in brokerage accounts—cash held in retirement accounts does not qualify. It’s also only available while you are a Gold customer, a service tier that carries a $5 per month subscription fee and offers other perks. If you’re a Robinhood customer without the Gold plan, the interest rate you’ll receive on cash balances is near zero at 0.01% APY.
The 4.00% rate applies to Gold customers who opt in to Robinhood’s brokerage cash sweep feature, which automatically moves (or “sweeps”) any uninvested brokerage account funds into a separate deposit account. Because Robinhood deposits these sweep balances into a network of multiple banks, the FDIC coverage for each customer is $2.5 million (instead of the standard FDIC limit per bank of $250,000).
Warning
If you hold a very large sum at one or more banks, you’ll want to check which banks Robinhood is currently using in its network for sweep account balances. That’s because FDIC coverage is tied to individual banks, providing you with a $250,000 coverage limit per institution. So if you already hold a lot of cash at one of the banks in Robinhood’s network, you won’t be covered for the full $2.5 million cap that’s advertised.
Robinhood vs. a High-Yield Savings Account
If a Robinhood Gold membership isn’t useful for your purposes, you can significantly boost what you’d earn on your uninvested cash by transferring it to a top-paying savings account. Dozens of these accounts pay more than Robinhood’s 4.00% APY—with 17 options in our daily ranking of the best high-yield savings accounts paying 4.35% to 5.00% APY. And because electronic transfers between a bank and your Robinhood account are easy to do, having all or some of your cash savings in a separate institution shouldn’t pose much problem.
Your earnings would also be boosted by avoiding the $60 annual expense of a Gold membership. Even if you put your uninvested cash in a savings account paying the same 4.00% rate that Robinhood offers, you’d come out $60 ahead with the bank savings account. And by choosing one of the best savings accounts, you can out-earn the 4.00% to maximize your annual earnings even more.
Tip
Another good option for boosting your return on cash is socking a portion of your savings away in one of today’s top-paying CDs. Unlike savings and cash management account rates that can change at any time—and will begin falling once the Fed begins lowering interest rates—a CD’s rate is locked and guaranteed for the full term of the certificate. Right now, that means you can lock in between 4.28% and 4.50% on terms ranging from 3 months to 5 years.
A Smart Strategy for Robinhood Investors
Though it’s true there is a convenience advantage to holding your uninvested cash at the same place as your investment accounts, the reality of the convenience is slight. That’s because electronic transfers to and from a bank account, while not instantaneous, can usually be executed by your brokerage or robo-advisor firm in a single day.
Also, if you don’t plan to invest the cash anytime soon, the case is even stronger for keeping it in a high-yield savings account earning a much higher interest rate.
Of course, for some investors, the ultimate strategy will be a hybrid one: Keep a cushion of uninvested cash where you have your investment accounts so you can make a quick trade if desired, and move a good portion of the funds into a nation-leading savings account or CD to maximize your earnings.
Daily Rankings of the Best CDs and Savings Accounts
We update these rankings every business day to give you the best deposit rates available:
Important
Note that the “top rates” quoted here are the highest nationally available rates Investopedia has identified in its daily rate research on hundreds of banks and credit unions. This is much different than the national average, which includes all banks offering a CD with that term, including many large banks that pay a pittance in interest. Thus, the national averages are always quite low, while the top rates you can unearth by shopping around are often 5, 10, or even 15 times higher.
How We Find the Best Savings and CD Rates
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000. It also cannot specify a maximum deposit amount that’s below $5,000.
Banks must be available in at least 40 states to qualify as nationally available. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.
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