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Interest (APY)

Interest (APY)

How are you paying 0.30% APY*?

Robinhood doesn’t pay interest—instead, we move your money into our network of FDIC insured program banks that hold and invest your cash. These FDIC insured program banks pay interest on deposits, which you receive as part of Cash Management.

The banks in our program pay rates above the Fed’s benchmark interest rate, and we are committed to continuing to pass this higher interest rate on to you.

What does it mean to earn 0.30% APY*?

You’ll earn 0.30% APY* on your uninvested cash that is swept to the banks in our program. This means that if you start January 1st with $1,000 in uninvested cash that is swept to the program banks and don’t deposit or withdraw any funds for the entire year, you’ll earn $3.00 by January of the following year, compounding included.

You’ll be paid interest by the program banks monthly, and you can keep track of how much interest you’ve earned in the Cash Management tab of the app.

Could the interest rate change?

The Cash Management Annual Percentage Yield (APY) paid by program banks is 0.30% as of March 16, 2020. The APY your cash earns is determined by the program banks, and is subject to change at any time.

What could cause the rate to change?

In short, the Federal Reserve Bank (or “the Fed”) and market conditions are the biggest factors in APY fluctuations.

Congress assigns three main goals to the Fed: maximum sustainable employment, stable prices, and moderate long-term interest rates. The Fed has various tools it uses to meet these goals, but interest-rate changes often get the most attention since they have a direct impact on how much interest you can earn and how much it costs to borrow.

When you upgrade your brokerage account to Cash Management, your money is held at one or more of the banks in our program. These banks pay interest rates that are determined in part by the federal funds rate, which moves up and down as mandated by the Fed. When the federal funds rate fluctuates, so does the rate you receive through Cash Management. This also means that the rate would go up if the Federal Reserve announces an increase to the federal funds rate.

Additionally, the impact of a fed funds rate decrease isn’t all bad: when the rate goes down, mortgage rates and other loan rates often do as well.

How would a rate change affect how much interest I earn?

A rate change of 1.00% would mean that for every $1,000 held at the program banks for a year, you’d earn a difference of $10.00 in annual interest.

What balance am I earning interest on?

You earn interest on your uninvested cash that’s swept to the program banks. You only start earning interest once those banks receive your cash. This could be affected by the timing of trades, deposits, or withdrawals.

For example, if you purchased a stock, the cash might not be taken out of your account until two business days later when the trade settles. In this case, you would continue to earn interest during those two days, even if that cash is no longer available to spend.

The reverse is true as well—if you sell a stock, you may not get the cash until two days later, after the trade settles. In this case, you would only start earning interest on that cash after it settles and is swept it to the program banks.

What’s uninvested cash?

Uninvested cash is any available cash that you have in your brokerage account that you have not yet invested or spent. This money is what is swept (or moved) to program banks where it starts to earn interest.

For those with a Robinhood Gold account, this doesn’t include margin.

You can find the amount of swept cash in your app under “Swept Cash.”

Is there a minimum or maximum amount I can earn interest on?

No, you’ll start earning interest on your first cent. There’s also no maximum cash sweep balance that you can earn interest on, but cash deposited to these banks will only be covered by FDIC insurance up to a total maximum of $1.25 million (up to $250,000 per program bank, inclusive of deposits you may already hold at the bank in the same ownership capacity).

How is daily interest calculated?

Interest is accrued daily based on your end of day balance at the program banks. Your balance is multiplied by the daily interest rate, which is derived from the 0.30% annual percentage yield (APY)*. For example, at 0.30% APY* and $1000 end of day balance, the daily interest accrual can be calculated as follows:

Daily interest rate = (1 + 0.003)^(1/ 365) - 1 = 0.0008206%

Daily interest accrual = $1000 * 0.0008206% = $0.0082

This means someone with $1000 would earn about $0.01 in interest that day. With daily compounding, the next day's interest would be calculated on a $1000.01 balance, and assuming no deposits or withdrawals, the account would end the year with $1003 at 0.30% APY.

For leap years, we would use the same formula as above for daily interest but divide by 366 days instead of 365.

Will my interest be compounded daily?

Yes, interest on your uninvested cash that is swept to the program banks will be compounded daily. Each day, you earn interest on your balance, and that earned interest itself also earns interest. Over time, your uninvested cash multiplies and grows on its own. Compound interest is a powerful tool to help build and accumulate wealth over time. Interest is paid on a monthly basis.

When do I get paid?

You’ll be paid interest once a month on the last business day of the month, which will include interest through the end of the month. If the last day of the month falls on a non-business day, you will be prepaid interest for those days on the last business day.

For example, if the last day of the month is a Sunday, that month’s interest will be paid on the preceding Friday, along with what you would earn on Saturday and Sunday.

Do I need to make purchases with my debit card to earn interest on my money?

No. You don’t need to make purchases with your debit card to earn interest. You’ll earn 0.30% APY* on all of your uninvested cash swept to program banks.

*The Annual Percentage Yield (APY) paid by program banks is 0.30% as of March 16, 2020. APY might change at any time at the program banks’ discretion.

Reference No. 20191030-997740-3007214
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