Robinhood Is Now Paying 5.00% on Your Cash. Is It a Smart Place for Savings?

Should You Keep Your Savings in Robinhood?

On Wednesday, Robinhood (HOOD) upped the rate it's paying its best customers on their uninvested cash, boosting the return to 5.00% APY. That's significantly higher than the 4.00% rate the brokerage offered at the beginning of the year. But is the rate enough to make the cash account a smart place to keep your savings?

The answer depends. Robinhood's 5.00% rate is only available to those with a paid Gold membership. If you're already a member because you value the other premium benefits, earning 5.00% on your cash savings is very competitive, not to mention convenient.

But if you're not already paying for Gold, you'd be better off with one of the best high-yield savings accounts. These are currently paying 5.25% to 5.40% APY—and have the added advantage of charging no monthly membership fee.

The Fine Print of Robinhood's Cash Account

Robinhood's 5.00% rate is only available on uninvested cash held in brokerage accounts—cash held in retirement accounts does not qualify. It's also only available to Gold customers, a service tier that carries a $5 per month subscription fee and offers other perks. If you're a Robinhood customer without the Gold plan, the interest rate you'll receive on cash balances is just 1.50% APY.

The 5.00% rate applies to Gold customers who opt in to Robinhood's brokerage cash sweep feature, which automatically moves (or "sweeps") any uninvested brokerage account funds into a separate deposit account. Because Robinhood deposits these sweep balances into a network of multiple banks, the FDIC coverage for each customer is $2.25 million (instead of the standard FDIC limit per bank of $250,000).

This is the fifth time this year that Robinhood has raised the interest rate on its cash sweep account for Gold customers. Starting the year out at 4.00% APY, it was raised to 4.15% APY in February, 4.40% in March, 4.65% in May, and 4.90% in July.

Robinhood vs. a High-Yield Savings Account

If you're not a Robinhood Gold member—and wouldn't significantly benefit from the other perks you'd gain with a Gold subscription—you can boost what you'd earn on your uninvested cash by depositing it into a high-yield savings account instead. Dozens of these accounts pay more than Robinhood's 5.00% APY rate. And because electronic transfers between a bank and your Robinhood account are easy to do, having all or some of your cash savings in a separate institution shouldn't pose much problem.

Your earnings would also be boosted by avoiding the $60 annual expense of a Gold membership. Even if you put your uninvested cash in a savings account paying the same 5.00% rate, you'd earn $60 more with the bank savings account than the Robinhood Gold account. Add to it that you can out-earn the 5.00% rate by choosing one of the best high-yield savings accounts and you've maximized your annual earnings even more.

That said, if you only want to stick to your primary bank for a savings account—which is likely paying less than 5.00%—then the Robinhood option could be a good value for you. It may also be a worthy choice if you're a heavy Robinhood user who stands to gain from the other premium features a Gold membership provides.

Robinhood vs. Other Brokerage Cash Accounts

Other brokerage companies have implemented similar models for depositing their customers' uninvested cash in a network of banks. Wealthfront is currently paying a comparable 5.00% APY, while Betterment's cash account pays 4.75% APY and Empower (formerly Personal Capital) offers 4.70% APY. In contrast, traditional brokerage firms tend to pay less: Vanguard currently offers 3.70%, while Fidelity only pays 2.72% APY.

Other personal finance apps have also gotten into the game. Last spring, Apple launched a new high-yield savings account. Called Apple Card Savings, it currently pays 4.15% APY, but is only available to customers with an Apple credit card account.

Consider Moving Some Savings to a Record-Rate CD

Like savings accounts, rates on certificates of deposit (CDs) have skyrocketed this year. This is due to the Federal Reserve's aggressive fight against decades-high inflation. With 11 hikes to the federal funds rate between March 2022 and July 2023, the Fed's campaign has pushed bank deposit rates to their highest levels in 20 years.

We rank the best CD rates every business day, and today's top rates range from 5.20% for longer-term CDs to a nation-leading high of 5.80% APY on 1-year and 18-month certificates. Many of these are offered by smaller banks and credit unions, but your money is safe with any institution that is federally insured—by the FDIC for banks or the NCUA for credit unions—regardless of its size.

Where CDs provide a real advantage over savings and cash accounts is in the ability to lock up a guaranteed rate for months or years down the road. Savings and brokerage rates, in contrast, can go down at any time. When interest rates are exceptionally high (like they are now) but are expected to come down in the future (as many predict for 2024), it's a very smart time to sock away some of your savings in a CD, letting you extend the time you earn one of today's historically high rates.

Rate Collection and Methodology Disclosure

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer savings accounts to customers nationwide. We determine daily rankings of the top-paying savings accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the savings account's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best high-yield savings accounts, read our full methodology.