Robinhood Markets Inc (NASDAQ: HOOD) is now paying users 1% interest for holding their uninvested money on the app.
What Happened: The online brokerage announced the new feature on Tuesday to “eligible” users of the app. The interest rate eclipses the 0.06% provided by the average U.S. savings account.
Robinhood says ahead of today’s announcement, its brokerage cash sweep program offered an interest rate of 0.5% and was only available to customers enrolled in Cash Management. Any user who is already enrolled in that program will be automatically transitioned into the new brokerage cash sweep program with their interest rate increasing to 1% due to higher rates available in the market.
Also Read: Robinhood Allows Users To Lend Stock
How It Works: Customers who opt into the brokerage cash sweep will have their uninvested account cash automatically “swept,” or moved, into deposit accounts at a network of six program banks.
Robinhood says cash deposited to these banks will be covered by FDIC insurance up to a total maximum of $1.25 million. These banks will pay interest on the swept cash, and customers will receive an APY of 1% as of May 10.
Tuesday’s announcement comes after Robinhood last week said it will begin allowing users to earn income on the stocks they own by lending out their shares.
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