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Robinhood Cuts Margin Interest Rates by Half to 2.5%

Robinhood Cuts Margin Interest Rates by Half to 2.5%

The new rates will apply to premium accounts with a monthly fee of $5.

Commission-free broker, Robinhood announced on Monday that it has slashed the annual margin interest rates on its premium accounts from the previously charged 5 percent to 2.5 percent.

The updated rates will be available to ‘Robinhood Gold’ traders who pay a monthly fee of $5 for the premium services.

This move came as the California-based company is considering to cut investment rates further: it already disrupted the retail trading industry with its commission-free model, which forced the established platforms to offer zero-fee services.

“By lowering our margin rate, we’re taking another step in passing the most value back to our customers,” Robinhood stated.

Disrupting the Retail Trading Industry

Founded in 2013, Robinhood lured a new bread of retails traders, mostly from the young generations. The mobile-based trading app gained massive popularity during the Coronavirus lockdown when many ideal youngsters steered towards the volatile stock market.

The reading platform has around 13 million customers and is valued at $11.7 billion. Additionally, it is gearing up for an initial public offering (IPO) next year with the appointment of investment banking giant Goldman Sachs and is looking at a listing valuation of $20 billion.

Despite the massive success, Robinhood attracted massive criticisms. The app was blamed for the ‘gamification’ of retail trading that is attracting inexperienced traders. Moreover, it is facing a probe by the Massachusetts securities regulators for failures in protecting inexperienced traders and aggressively promoting its products.

Furthermore, the US Securities and Exchange Commission (SEC) slapped a $65 million fine on the brokerage app recently over its failure to fully disclose its practice of selling clients’ orders to market makers.

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