Investing app Robinhood is on a roll with announcing new features as it looks to appeal to more customers amid dwindling transaction revenue. Less than a week after unveiling plans to allow users to lend out their stock, the company announced that it has introduced a "revamped" brokerage cash sweep program that will be rolled out to customers today.
What that means is that all "eligible" Robinhood users will be able to earn 1% interest on cash sitting uninvested in their accounts (though the company did not define which customers are eligible).
1% APY (annual percentage yield) may not sound like a particularly sexy return, but compared to the average rate a U.S. investor earns on cash in a savings account of 0.06% today according to Bankrate, it looks like a pretty sweet deal --16 times higher than average. The interest, which will accrue on funds users have in their accounts from depositing cash or from proceeds they earn after selling a stock, will be paid out monthly, the company says.
The cash from these customer accounts will be "swept," or transferred into deposit accounts at one of six partner banks, according to Robinhood. Any cash deposited made will be covered by FDIC insurance up to $250,000 per bank, they noted.
Robinhood's brokerage cash sweep program used to offer an interest rate of 0.5% to customers that were enrolled for its Cash Management feature, according to the company. Those previously enrolled for that Cash Management program will be automatically transitioned into the new one and see their interest rate increase to 1%.
New customers can opt into the feature as long as they have the latest version of the Robinhood app, the company says.