Why I’m (mostly) bullish on Robinhood’s first credit card

Citi is an promoting associate.

Robinhood introduced a brand new money again bank card this week, and I for one am very intrigued.

I’ve all the time been an enormous fan of money again playing cards. I like the simplicity of each incomes and redeeming money rewards, particularly since I by no means have to fret about calculating level values or weighing redemption choices to make sure I’m getting the perfect deal.

Flat-rate money again playing cards are the inspiration of any good money again card technique, so when a brand new flat-rate card hits the scene, I take discover — much more so when the cardboard’s rewards fee beats the two % again typical of even the perfect flat-rate money again playing cards.

Enter the Robinhood Gold Card*, the web brokerage’s first foray into bank cards. Just like the Apple Card* earlier than it, the Robinhood Gold Card might stand out for its glossy, numberless design, tech-forward method and gold metallic type issue. However not like that card, the Robinhood Gold Card additionally impresses on the subject of incomes rewards.

I signed up for the cardboard’s waitlist quickly after it was introduced. My first impression is the Robinhood Gold Card can greater than pull its weight, however there are a number of pink (or possibly beige?) flags that make me suppose twice.

Why I’d get the cardboard

Whereas the Robinhood Gold Card could also be greatest suited to current Robinhood Gold customers and followers of luxurious-looking metallic playing cards, I believe it could possibly be a strong addition to any money again lover’s pockets. That is thanks principally to its terrific base rewards fee and its potential to slim down the everyday money again card stack.

It provides the perfect flat money again fee on the market (for now, no less than)

The Robinhood Gold Card’s greatest promoting level is unquestionably its base money again fee: Limitless 3 % again in all classes. You’ll additionally earn 5 % again on journey booked via the Robinhood journey portal, however since we nonetheless don’t have many particulars on that facet of issues but, this issue doesn’t but tip the scales for me.

A 3 % money again fee is well the perfect flat fee I’ve seen on a (technically) no-annual-fee card, with even the perfect flat-rate money again playing cards principally topping off at 2 % again. It caught the eye of Bankrate’s Senior Business Analyst Ted Rossman for a similar purpose: “Proper now, no less than, the Robinhood card’s 3 % money again fee tops the market.” Certainly, the speed is so good that some business consultants have questioned how Robinhood will make it value their whereas.

However except and till that fee adjustments, the cardboard ought to enable you to earn money again on common purchases quicker than any of its opponents.

The primary catch is the cardboard’s oblique price: You have to be a Robinhood Gold member to get the cardboard, which implies paying $50 per yr or $5 per 30 days in membership charges. I are likely to keep away from membership and annual charges except I’m positive I’ll squeeze a ton of worth out of a suggestion, so I did the maths on how a lot I’d must spend with the cardboard to make it a greater choice than the 2-percent-flat-rate playing cards I have already got.

Taking the $50 membership price under consideration, it’ll take $5,000 in annual spending on common purchases for the Robinhood Gold Card to earn extra total than a no-annual-fee card that earns a flat 2 % again. In different phrases, so long as I’m spending round $416 per 30 days with the cardboard, will probably be a greater deal — even with the membership price.

That will sound like quite a bit, however bear in mind: I received’t simply earn 3 % again in a single or two classes, however on all purchases, together with on a regular basis bills like groceries, eating, fuel and on-line procuring. It’s all too simple to succeed in $416 in month-to-month spending on these alone.

The associated fee is simple to offset

Even when I couldn’t meet the $5,000 annual spending threshold that makes the Robinhood Gold Card a extra profitable choice than 2-percent-flat-rate playing cards, I’m unsure the $50 annual membership price could be a dealbreaker for me.

I’d solely must spend a bit of over $1,600 per yr (or round $150 per 30 days) to earn $50 money again and break even by offsetting the annual price of Robinhood Gold membership. That’s virtually assured even when I solely use the cardboard for a number of common payments like automotive insurance coverage, web and electrical energy.

In that sense, I don’t really feel there’s a lot danger in including the Robinhood Gold Card to my pockets. Worst-case state of affairs, I simply offset the price of Robinhood Gold and transfer on from the cardboard after the primary yr.

That mentioned, there are additionally different perks that include Robinhood Gold membership that might assist offset and justify the associated fee.

Specifically, Robinhood at the moment provides a really beneficiant 5 % Annual Proportion Yield (APY) for Robinhood Gold members on uninvested brokerage money that’s swept to the banks in its program. Primarily based on Bankrate’s financial savings calculator, I’d solely must deposit $1,000 to my Robinhood account as a part of its money sweep program to earn $50 in my first yr as a Robinhood Gold member getting 5 % APY.

I don’t have a Robinhood IRA, however Gold subscribers additionally get a 3 % IRA match on eligible contributions, which is actually value a $50 price given all the opposite advantages.

It might significantly streamline my card stack

Even when you follow money again over factors and miles, maximizing your earnings nonetheless takes some effort. When you received’t have to fret about redemption values or transferring factors, one card isn’t normally sufficient to get you a high fee in all of your main spending classes.

In the event you go for a single flat-rate money again card that earns 1.5 or 2 % again, you’ll probably be lacking out on no less than 1 % again in a number of on a regular basis classes — and when you go for a tiered bonus class card, you’ll probably need to accept a 1 % money again fee on common purchases.

Plus, it’s unlikely anyone card will cowl all of your bigger spending classes. In my expertise, bank card rewards observe the rule of “You possibly can solely decide two,” however as an alternative of “Good,” “Low cost” and “Quick,” you could have “Groceries,” “Eating places” and “Fuel.”

As such, even a fundamental money again card stack sometimes requires no less than two — extra probably three — playing cards: One flat-rate rewards card to cowl common purchases, and one or two playing cards to cowl key on a regular basis spending classes like groceries, eating and fuel. However this could simply develop to 4, 5 or much more playing cards, relying on how devoted you might be to maximizing your money again.

For reference, right here’s my present go-to stack for on a regular basis money again:

  • Citi Double Money® Card: My card for all purchases not lined by different card bonus classes. It earns as much as 2 % again on all purchases (1 % once you purchase, then 1 % once you repay purchases)
  • Citi Customized Money® Card*: My card for groceries, and solely groceries. It earns 5 % again in your high eligible spending class (on as much as $500 in spending per billing cycle), and groceries are simply one of many card’s choices.
  • Capital One SavorOne Rewards Credit score Card: My card for eating and leisure. It earns 3 % again in these classes and contains good perks like a complimentary Uber One membership (price lined via Nov. 14, 2024).
  • Blue Money On a regular basis Card from American Categorical: My card for fuel and on-line procuring. It earns 3 % again at U.S. fuel stations and with choose on-line retailers.
  • Financial institution of America® Personalized Money Rewards bank card: My card for wholesale golf equipment and different eligible bonus classes like residence enchancment and drugstores. It earns 3 % again in a single eligible class of your selection, and a couple of % at wholesale golf equipment (on as much as $2,500 in mixed purchases throughout the three and a couple of % classes every quarter, then 1 %).
  • Prime Visa: My card for purchases (my major on-line procuring cease). It earns 5 % again at and in a number of different classes.

Even for me, that’s quite a bit to juggle. And one factor you’ll discover: A 3 % rewards fee is quite common throughout no-annual-fee money again playing cards and is about as excessive as you’ll discover for classes like eating, fuel, on-line procuring and leisure.

Because the Robinhood Gold card earns 3 % again on all purchases, it might assist me “consolidate” the rewards charges on 4 of these playing cards: The Double Money, SavorOne, Blue Money On a regular basis and Personalized Money. The Robinhood Gold beats the Double Money after a $5,000 annual spend, and the opposite playing cards all earn at most 3 % again within the on a regular basis classes I care about.

That drops my “on a regular basis” stack in half, from six playing cards to a few. As a substitute of utilizing one flat fee card and a handful of bonus class playing cards, I might use the Robinhood Gold Card to cowl common purchases and all my on a regular basis classes besides groceries.

Right here’s what my stack might seem like if used the Robinhood Gold to consolidate charges:

  • Robinhood Gold card: My “every thing else” card (3 % again on all purchases).
  • Citi Customized Money: My grocery card (5 % again in my high eligible spending class, on as much as $500 in spending per billing cycle).
  • Prime Visa: My Amazon card (5 % again on purchases).

That’s a a lot, a lot simpler stack to handle. Not solely does it embrace fewer playing cards to maintain monitor of, however it additionally includes fewer potentially-missed due dates (all the time a danger once you’re juggling a number of playing cards from a number of issuers).

Making use of is a low-stakes affair

Just like the Apple Card, the Robinhood Gold Card allows you to apply with no exhausting credit score pull (assuming you’re already a Robinhood Gold member). You’ll solely face a tough pull when you settle for the issuer’s supply. Which means that, whereas it’s not a full-fledged delicate pull bank card, the Robinhood Gold Card could possibly be value an software when you’ve had a tough time getting accepted for different flat-rate money again playing cards. You received’t be placing your credit score rating in danger simply making use of.

My credit score is nice sufficient that I’m not particularly involved about not getting accepted for the cardboard, but when I’ve the choice, I’d nonetheless prefer to keep away from a tough credit score pull (and the ensuing credit score rating ding) if I can. Approval selections shock you typically!

Why I’d move on it

Whereas I see a ton of potential worth within the Robinhood Gold Card, it’s positively not a match for everybody. I’ve loads of considerations that might make me determine towards making use of ultimately — particularly, the opportunity of the money again fee dropping and the dearth of a bonus.

It could possibly be a bait-and-switch

If it weren’t for its 3 % flat money again fee, the Robinhood Gold Card would hardly be on my radar. So long as that fee is on the market, the cardboard might be within the combine as one of many greatest bank cards on the market.

The unhealthy information: We don’t know the way lengthy that fee will stick round. The cardboard’s Rewards Program phrases clarify that Robinhood can revise its program guidelines at any time, so it’s possible you’ll solely get a style of a 3 % fee earlier than it drops to one thing extra acquainted.

Whereas nobody from Robinhood has mentioned the three % money again fee goes away any time quickly, the corporate hasn’t performed a lot to alleviate these fears.

Within the latest New York Occasions piece concerning the Gold card, Vlad Tenev, Robinhood’s CEO, was requested if he might assure the cardboard’s money again fee would keep at a flat 3 % again for no less than 18 months. He couldn’t. His clarification: “I can’t actually renege on the phrases and situations.”

Altering up the rewards fee received’t earn the already-maligned brokerage any new followers. However that doesn’t imply it may well’t occur.

“The dearth of a agency dedication is ominous,” Rossman says. “For the correct of individual, this card could be the perfect money again card available on the market (no less than for now). However you do must be snug working with Robinhood, and never everyone seems to be.”

Richard Kerr, VP of Journey at Bilt Rewards, can also be skeptical. Reacting to the cardboard’s 3 % flat fee on Twitter, he predicted the speed would final “six months, max.”

If I get wind of such a brief timeline, I don’t suppose I’ll apply for the cardboard. And if the speed drops after lower than two years, I could shut my account on principal. So whereas the cardboard might supply nice worth, I’ll be retaining my present playing cards useful.

I’ll miss out on bonuses and intro APR provides

Whereas a sign-up bonus is rarely assured on a no-annual-fee, flat-rate money again card, it’s all the time an enormous promoting level.

Providing a sign-up bonus was one factor that set the Wells Fargo Lively Money® Card other than flat-rate money again opponents when it launched (it at the moment comes with $200 money rewards after you make $500 in purchases inside the first three months). Even the Citi Double Money and Paypal Cashback MastercardⓇ* typically supply a money again bonus for brand spanking new cardholders (normally within the $150 to $200 vary).

If I’m going to knock a number of factors off my credit score rating by accepting the Robinhood Gold Card supply, I’d ideally prefer to get an opportunity at a bonus, particularly given the price of Gold membership. In my expertise, each card software you submit makes it much less probably you’ll be accepted for a special card within the quick time period, so I wish to select rigorously, and a sign-up bonus may be the tipping level if I’m contemplating two choices.

Whereas long-term worth is what’s most vital, you shouldn’t overlook the worth of a sign-up bonus that provides an excellent return on spend. For instance, to earn $200 money again with the Robinhood Gold Card (a standard bonus worth for no-annual-fee money again playing cards), you’d must spend over $6,500 on common purchases. With different playing cards, you’d solely must spend $500 to $1,500 to get the identical worth again as a bonus.

The Robinhood Gold card additionally provides no intro APR. Whereas I’m not in want of a stability switch, having the flexibleness to repay bigger purchases over time with out curiosity is all the time welcome, even when solely so I don’t really feel the hit of an enormous cost fairly a lot.

The underside line

Robinhood has entered the world of bank card rewards with a bang. The Robinhood Gold Card boasts the perfect flat rewards fee available on the market — one which’s nonetheless a terrific worth regardless of the Robinhood Gold membership price. For now, I’m cautiously optimistic, and I believe I’ll submit an software once they open up later this yr.

However I’m moving into with open eyes. The cardboard’s nice rewards fee might not stick round for lengthy, and Robinhood has loads of work to do to regain consumer belief given its shenanigans lately.

Rossman is on the identical web page: “It’s a danger, and it’s not for everybody, however I believe the Robinhood card could possibly be value attempting,” he says. “Worst case, when you’re not proud of it in six months or a yr or every time, you would all the time swap to one thing else.”

If it involves that, I’ll be a bit aggravated, positive. However that’s the lifetime of a money again maximizer.

The details about the Robinhood Gold Card, Apple Card and Paypal Cashback Mastercard has been collected independently by Bankrate. The cardboard particulars haven’t been reviewed or accepted by the issuer.

The details about the Financial institution of America® Personalized Money Rewards bank card was up to date on March 29, 2024.

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