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Comment by modeless

2 years ago

The big news in credit card rewards (that I was hoping this article would address) is that Robinhood just announced a 3% flat cash back card, highest I've ever seen, where the only catch is that the money is deposited into your Robinhood account.

At 3% they are clearly losing tons of money on every transaction. There is an annual fee but it is only $60. The money can be withdrawn from Robinhood as soon as it is deposited. How can they possibly afford this? What are people doing with their money in Robinhood that they are willing to pay people over 1% (I'm assuming) just to deposit money there in a roundabout way?

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vl  2 years ago

Fidelity has flat 2% no fee "deposit to fidelity" card since forever. Probably Robinhood is competing in "small customer" segment and just passes all rewards to customers since it's attractive for their target customer?

Sohcahtoa82  2 years ago

They take a loss from every transaction and make up for it with volume. /s

My guess is that since Robinhood Gold gives you a lower margin interest rate, enticing people to use more margin, they hope to reap all the money back and then some.

Since the rebate money goes directly into your Robinhood account, rather than a checking account, they encourage it to stay in Robinhood.