[peter_l_downs]

> On top of that, Robinhood is on the hook for 5% APY on uninvested cash. Yes, the uninvested balance is cash that Robinhood can invest and profit from, but will they clear the 5% hurdle every time?

Just one example, of many, that shows this author doesn’t know what they’re talking about. At all.

[zie]

Exactly.

On the 3% Cash back CC, they talk about how they will lose money, and they absolutely won't.

The APR on balances > 30 days will almost certainly be in the high 20's like every other credit card. Banks don't look at the interchange fees fed to them separate from the rest of the CC business. 3% is easy to pay when most people hold balances on their CC's and they are charging 20+% and getting 2+% on interchange fees from Visa/MC/etc.

Probably though Robinhood isn't handling the CC themselves, and has contracted it out to some bank to handle for them, as banks are very good at that sort of thing and brokerages generally are not. Other than Schwab, which owns a bank, I'm not aware of any brokerage CC that isn't contracted out. Fidelity famously uses Elan.

The author of the post clearly doesn't understand how modern finance works.

[minhduong243]

If you scroll down the page of this product, you will see that the card is issued by Coastal Community Bank. It's common that a popular technology firm partners with a bank to issue credit cards.

Yes, APR is going to be 20%+ and even 30%+, but not all cardholders will revolve. Some, if not many, will be transactors and won't pay any interest at all. There is also cost of funds and losses. There is a reason why there is no other 3% cash back card on the market. The most popular set-and-forget card out there is 2% cash back.

[zie]

On CCB running the card for Robinhood, that's very expected, my last paragraph was about them probably outsourcing it.

Yes, not all accounts will revolve and be charged interest, many will. credit card balances have been going up for decades: https://fred.stlouisfed.org/series/REVOLSL (This is ALL revolving credit, not only credit cards, but it's mostly credit cards). It's well over 1 trillion dollars now. Yes there are cost(s), but credit is a very strong and well run business now and is absolutely a profit center for banks. If they get too many freeloaders that don't carry balances to hit their income targets, they will add some fine print to curtail freeloader use-cases enough that they can hit their income targets. This has been going on for decades now.

[minhduong243]

I agree with you that RH may put a cap on rewards earnings or change the program later. We have seen issuers take away travel benefits before, but I haven't seen a lot, if any, cards that roll back rewards.

For me, because the RH CEO in an interview (https://www.youtube.com/watch?v=QT5OMUdaZtg) said he wanted the card to be profitable on a standalone basis, I just don't see it that way, but you can be right for all I know.

I got one part, at least it seems, wrong in my blog, that was my bad. I just want to say I did not forget about the interest income side of the card, I just don't think it will be profitable. Again I can be wrong. But thanks for the interaction.

[zie]

https://www.bitsaboutmoney.com/archive/anatomy-of-credit-car...

[paholg]

Can you explain?

[xur17]

The fed funds rate / tbill rate is above 5% right now.