MW Robinhood wants to be 'a one-stop shop' with its new credit card. Is the Robinhood Gold card a good deal?
By Andrew Keshner and Hannah Erin Lang
Here's who should consider applying for Robinhood's 3% cash-back Gold card
Robinhood was once an upstart brokerage platform giving investment powerhouses a run for their money by appealing to a new generation of traders and investors.
Now the financial-services company is continuing its bid to become an integral part of all the money decisions of its users - by rolling out its own credit card.
The company best known for its trading app has unveiled the Robinhood Gold card, which offers 3% cash back on all spending categories.
Reward points can go toward travel, shopping and gift cards. They can also convert to cash or go straight into a Robinhood brokerage account. The card has no annual fee, though you need to be a paying member of Robinhood Gold, the app's membership program, to apply.
The card is a bid by the company to get customers to move more of their financial lives into the Robinhood (HOOD) ecosystem.
"It's the only credit card you'll need," Deepak Rao, the general manager of Robinhood Money, told MarketWatch in a statement. "All your financial needs are now served by a one-stop shop, and all money movement is instant instead of taking days or weeks."
Robinhood isn't the only brokerage firm working to convince customers to use multiple services at their institution.
Fidelity Investments and Charles Schwab Corp. $(SCHW)$ already have credit cards enabling users to send cash-back rewards to investment accounts. SoFi $(SOFI)$ has a range of banking, lending and investment products. The cash-back rewards in SoFi's own credit card can be applied to investing, if that's what the user wants.
Like Robinhood, Fidelity is clear that it wants to serve all sorts of customer needs. The asset-management giant said in a statement that it's spent decades helping "investors simplify their financial lives, with solutions for trading and investing as well as everyday saving and spending." The aim is "to develop a lifelong partnership with every customer," Fidelity said.
This "one-stop shop" goal doesn't just apply to brokerages: bank customers who keep their savings and checking accounts at one institution are often served up ads to apply for a loan or a credit card there too, for example.
But just because you can do just about everything from credit-card purchases to high-yield savings and retirement investing in one spot, should you? Here's what the experts told MarketWatch.
To bundle or not to bundle?
Bundling financial services at one institution can build customer relationships and unlock better terms and offers, experts say. There's also the powerful pull of convenience.
"The truth is that a lot of times you can get better returns and better rates if you work with a financial institution you already have a relationship with," said Matt Schulz, chief credit analyst for LendingTree and author of "Ask Questions, Save Money, Make More: How to Take Control of Your Financial Life." "That's not just for the high end, that is for folks that are just getting started."
Schulz often recommends that consumers who are applying for their first credit card do so at the bank where they already have a savings or checking account.
Indeed, that might be a dynamic at work with Robinhood's new card, he said: The card is being issued only to Gold members, who presumably have a history with the company and assets already invested there.
For years, customer satisfaction has tended to be stronger for people who have several services at one place instead of those who have just one product at a financial institution, according to John Cabell, J.D. Power's managing director of payments intelligence.
Convenience is one driver, he said. Consumers have also reported getting better pricing and service when they stick with one institution, as well as having more trust in that institution. But bundling financial services is still "a mental calculus that consumers have to do," he said.
That's because a great place to invest might not also be a great place to bank, and vice versa. Grouping financial services may also cause someone to overlook more competitive services elsewhere.
And it's rare that a consumer can get their every financial need met at one institution, said Dave Grossman, founder of the credit-card rewards website MilesTalk - sometimes the bank that offers the best brokerage account to suit your needs doesn't offer the right credit cards or savings accounts for your financial goals.
"No one financial institution is generally right in all areas for one person," he said "The bottom line is, I think you really need to look at each product individually."
If your entire financial life is parked in one spot, it may also be too easy to make snap spending and investing decisions instead of taking a beat, some experts caution.
Though Jarrod Sandra, owner of Chisholm Wealth Management in Crowley, Texas, likes the one-stop-shop approach, he knows there can be a downside.
"Is it too easy to slide that emergency fund money over for a quick purchase?" Sandra said. "If someone struggles with that, then I like to build a barrier - so to speak - and have those accounts at different institutions."
Here's who should consider the Robinhood Gold card
If you're thinking of applying for the Robinhood Gold card, there are a few things you should consider first, experts said.
First off, you'll need to be a member of Robinhood Gold. That subscription costs $5 a month. That's effectively an annual fee if you're thinking of buying a membership just to apply for the credit card, Grossman said.
On the surface, the 3% cash-back rate on all spending categories sounds great, Grossman said - and in fact, it's one of the best such rates on the market.
But unlike many other cards, he noted, Robinhood's doesn't appear to offer any kind of signing bonus. That means a different card with a lower cash-back rate - but a signing bonus - might be comparable with Robinhood's, depending on your spending.
His take? If getting the card would require you to reshuffle your finances, it might not be worth it.
"There's one audience this card is really good for," Grossman said. "If you're already in the Robinhood ecosystem, you love the Robinhood ecosystem, you're not a travel points or miles person.... And you want your card to earn cash back, this is your card."
Schulz seconded that consumers should take a closer look before jumping at what seems like a good deal.
"It's important not to get starstruck by things like 3% cash back or gold credit cards and make sure to take the time to look into the terms," Schulz said. "It's always worth taking a little bit of extra time to look at the fine print."
It's also worth asking yourself what you want to do with those cash-back rewards, according to Charles Rotblut vice president of the American Association of Individual Investors, a nonprofit organization promoting long-term investing.
If a Robinhood Gold user will turn the rewards into cash sitting in their brokerage account, Rotblut worries it could encourage speculative trading from users who view the cash back as free money to play with.
A risky bet could pay off, or it could bomb, he said. "It's still money you have. The question is what else could you do with it."
But Rao, the Robinhood executive, noted that few credit cards offer the option to immediately funnel cash back toward investments.
Robinhood Gold-card points can be redeemed as cash that can be transferred to brokerage accounts to invest, earn interest or withdraw. The uninvested cash has a 5% yield, Rao said.
Customers can also transfer the money to a Robinhood retirement account, where Gold customers receive a 3% match on Robinhood Retirement IRA contributions.
"Traditionally when you earn cash back it just goes to your checking account and does nothing," Rao said in a statement.
Customers can join a waitlist for the Robinhood Gold card, which is expected to be available later this year, according to the Wall Street Journal. The card is issued by Coastal Community Bank $(CCB)$ and licensed by Visa (V).
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-Andrew Keshner -Hannah Erin Lang
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March 28, 2024 16:21 ET (20:21 GMT)
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