The New Best Place to Park Your Money Short Term @ 3% interest?

[Austin Petrie]

Robinhood announced today that they will be offering a checking & savings account that offers 3% interest compounded daily. Prior to this, I know a lot of people on BP recommended Ally Bank who offers 2% interest. Will this be the new best place to store rental income and other money you're saving for your next property purchase?

This is pretty crazy when you consider that 1 year US Treasury Bonds have a 2.67% yield right now. So you actually get a better guaranteed return that is completely liquid by using Robinhood.

Some of the other key features about Robinhood's checking & savings account:

• 75,000 free-to-use ATMs throughout the US
• No minimum monthly balance
• No monthly, overdraft, or foreign fees
• SIPC insured up to $250,000 in cash

So what do you think? Will you start using this? What downsides do you see to it?

[Aaron K.]

The downside is that it is not a savings account but rather a money market fund meaning it is not insured by the FDIC. I got excited when I first read about it too, but after seeing some money market funds "break the buck" during the recession I wouldn't call it 100% safe. It may be low risk but so are the bonds that they invest in. I haven't done the math but short term bonds may be better albeit less liquid.