Robinhood has become an increasingly popular service for trading stocks. A few days ago, the company behind Robinhood announced no-fee checking and savings accounts, with an incredibly-high 3% interest rate. It seemed too good to be true, and sure enough, it was — accounts weren’t insured by the SIPC.
“We’re furthering our mission to democratize America’s financial system,” Robinhood wrote in a now-deleted blog post, “by introducing Robinhood Checking Savings. […] Robinhood Checking Savings earns you 3% interest, the highest rate currently offered in the market, features no fees, access to over 75,000 free ATMs, 24/7 customer support, and a personalized debit card.”
Robinhood claimed the checkings and savings accounts were insured for up to $250,000 by the SIPC, but that turned out not to be true. Stephen Harbeck, the president and CEO of the SIPC, wasn’t informed about Robinhood’s plans. “Money that is doing nothing but earning interest looks like a loan,” he told Axios. “We do not protect loans to a broker-dealer.”
Following this confusion, Robinhood pulled the announcement and published a new blog post. “we realize the announcement may have caused some confusion,” co-CEOs Baiju Bhatt and Vlad Tenev wrote. “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.”