Personal Finance

Robinhood offers 3% interest, a rate comparable to many CDs out there but lacking protections most banks offer

Key Points
  • Returns on certain certificates of deposits and savings accounts are on the ascent.
  • That trend is likely to only pick up if the Federal Reserve acts as expected and raises rates next week.
  • Here are the best deals.
FilippoBacci | E+ | Getty Images

If you're looking for a safe place to park some of your money as stock market returns taper, not all "savings" options are risk-free.

Robinhood announced Thursday it's offering "checking and savings accounts" with a 3 percent return. The company says you'll have access to some 75,000 free ATMs and won't be dinged any maintenance or overdraft fees. However, questions have been raised over how accounts from stock trading app Robinhood are protected.

Since Robinhood is a broker, the accounts are not protected by the Federal Deposit Insurance Corp., a government agency that provides insurance for up to $250,000 per depositor for most banks. Instead, brokerage accounts are insured by the Securities Investor Protection Corporation, an industry-funded organization that says it covers a customer's cash up to $250,000 if the firm fails.

Robinhood's new checking account products raise regulatory questions

And it still has not been determined if assets held in Robinhood's checking and savings feature would be covered under SIPC rules. SIPC President and CEO Stephen Harbeck told CNBC on Friday that he had serious concerns about the plan.

"We want to make sure that investors know there's some risk there," he told CNBC.

Still, investors on the hunt for a safe place to park their cash aren't without options.

Yields on certain certificates of deposits and savings accounts are on the ascent, a trend that is likely to pick up if the Federal Reserve acts as expected and raises rates next Wednesday.

"Everyone should start comparing what they can get risk-free to what they're investing in," Nick Clements, co-founder of financial website MagnifyMoney, told CNBC in a previous interview.

(Remember, you'll pay ordinary income tax rates on any earnings).

Certificates of deposit

MutualOne Bank, headquartered in Framingham, Massachusetts, offers a 19-month online CD with a 3.04 percent return. You'll need to deposit at least $500.

Virtual Bank has a 2-year CD with a 3.06 percent annual return. The minimum deposit is $10,000.

Synchrony Bank offers a 2-year CD with a 2.8 percent return, and a minimum deposit of $2,000.

Capital One and American Express have 2-year CDs with no minimum deposit and a 2.7 percent interest rate.

People generally can withdraw their CD interest at any time, but there are penalties for digging into your principal. That can be useful, according to Patricia Seaman, senior director of marketing and communications at the National Endowment for Financial Education.

"If it helps you to think, 'I can't get that money,' it's worth it," Seaman told CNBC in a previous interview.

Still, savers should look for CDs with the lowest penalties, said Allan Roth, founder of financial advisory firm Wealth Logic. That way, they can match the benefit of a high-interest savings account without the restrictions of a CD. "If you need the money, you break the CD," Roth said.

Savings accounts

Online bank My Savings Direct has a savings account with a 2.4 percent annual return. If you can deposit $25,000, or $100 a month, CIT bank offers a 2.25 percent interest rate.

Barclays and Marcus — the consumer bank of Goldman Sachs — are now offering a 2.05 percent annual return, too.

Roth said to be wary of savings accounts unprotected by the government.

"If a major brokerage firm went under, people would be lucky to get a few pennies on the dollar back," he said.

Rewards checking

One of the best rates currently, according to NerdWallet, is at Redneck Bank, a division of All America Bank. The FDIC-insured Redneck Rewards Checkin' Account offers 2.75 percent for balances up to $10,000.

On the credit union side, Consumers Credit Union has a Free Rewards Checking account with rates of of 3.09 percent, 4.09 percent or 5.09 percent on balances of up to $10,000. Which rate a user earns depends on the value of purchase transactions made each month, among other qualifiers.

(The National Credit Union Administration, which charters and supervises credit unions, insures member deposits in a similar fashion to banks' FDIC coverage.)

The catch with rewards checking accounts: You'll have to jump through hoops every month to get that top rate.

Stock-trading app Robinhood takes aim at banks

Users typically must meet several requirements every month. Terms vary, but it's not unusual to see conditions such as receiving digital statements, making a minimum number of debit card transactions, and having at least one direct deposit.

Fail to meet all the conditions, and you can expect to receive only a pittance. At Redneck Bank, for example, the rate reverts to 0.25 percent if requirements aren't met; at Consumers Credit Union, it's 0.01 percent.

Most accounts cap balances eligible for the top rate, too. Any assets above that limit earn rates more in line with the national average (roughly 0.10 percent, according to

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