Robinhood (#HOOD) is often regarded as a trading platform for new or inexperienced investors, but the company has a solid history of moving the industry forward through innovation. That holds true with its latest feature, which is fee-free instant deposits and instant withdrawals (which carry a 1.5% transaction fee).
How Robinhood Instant Transfers Work
Traders should notice when they login into their account an offer to “link” an external debit card to their brokerage account. Doing so enables access to the instant transfer options.
- Instant Deposits. Naturally, Robinhood wants to make it as easy and affordable as option to add money to your brokerage account. Thus, you can initiate an instant transfer from your linked debit card at no cost. Though you get a message indicating it may take longer, the deposit should appear in your Robinhood account in a matter of moments.
- Instant Withdrawals. Like deposits, you can instantly move money from your Robinhood brokerage account to an external banking account. There is a 1.5% transaction fee. For instance, to transfer $100, the total pulled from Robinhood is $101.50 (including a $1.50 fee).
Instant Transaction Benefits
Instant transfers have become increasingly common across a range of financial and non-financial industries. However, this feature has yet to penetrate the investing arena. A lot of brokers, including Robinhood, offer traders an “instant access” option when making traditional deposits via ACH, wire or another method. However, traders are unable to withdraw these funds for several days (until the cash is fully settled) and there are often trading restrictions (such as no options trades).
In 2023, a lot of traders want the flexibility and convenience to move funds in and out of a brokerage account as quickly as possible. This capability creates a more seamless financial structure for people who keep separate accounts for investing and checking/savings.
The following are some key benefits of the new instant transfer features offered by Robinhood:
- Immediate liquidity. Through the conventional ACH transfer, you can’t withdraw your unsettled cash deposit for several days. With the instant transfer, Robinhood receives the funds immediately from your bank, and it is therefore immediately available to you as cash. Similarly, RH allows you to immediately take cash from unsettled stock sales, so if you instant deposit and then buy/sell, you can still access the cash.
- Simplified account management. With an ACH transfer, there is a delay in the time when you submit the transfer to the time funds are pulled from your account. This delay can cause issues in reconciliation or forgetting the pending withdrawal from checking. Funds are pulled right away with an instant transfer.
- Faster response to market conditions. More liquidity and transfer speed makes it easier to move in and out of investments based on opportunities and risks.
While this article centers on the new Instant Transfer features at Robinhood, this move will likely spark a trend in the brokerage sector. Most brokers will likely offer this deposit and withdrawal option at some point. The 1.5% withdrawal fee is in line with many other industries that allow customers to facilitate instant account withdrawals. However, more competition may cause brokers to eliminate this fee as well.