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Trading app Robinhood Markets said on Tuesday it was lowering interest rates on its margin loans to encourage more customers to take advantage of the tool and borrow against securities they hold.
why it’s important
The company has recently launched a series of features as it looks to grow into a full-fledged broker and meet the needs of retail investors for sophisticated products.
The new structure could boost its popularity among such investors, who often use Robinhood to campaign against Wall Street through social media.
Margin loans allow clients to borrow funds based on their investment portfolio and then use them for trading.
From a numerical perspective
The company will charge an interest rate of 5.70% to 6.75%, depending on the amount of funds borrowed. Previously, the company charged 12% interest to customers who did not subscribe to its premium service, Robinhood Gold. For gold customers, the tax rate is 8%.
Gold subscribers will continue to be interest-free on the first $1,000 they borrow.
By comparison, Charles Schwab’s interest rates range from nearly 11.83% to 13.58%.
Robinhood shares have risen 27% since the meme stock craze briefly revived last week.
context
California-based Robinhood launched a new credit card for its Prime customers in March. It offers 3% cash back in the form of reward points on purchases, and there are no annual fees or foreign transaction fees.
The company also offers customers an account to set aside funds for retirement, into which it deposits eligible contributions if users hold the funds for at least five years.
Key Quotes
“We have to reward our customers for more interactions with us,” said Steve Quirk, Robinhood’s chief brokerage officer.
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