Robinhood Gold Card offers 3% cashback – but will it stay that way?

Robinhoodan investment platform for stocks and ETFs, rose to prominence at the height of the pandemic. While Americans were flooded with stimulus money and plenty of free time, millions of newbies entered the stock market as new retail investors.

Today, Robinhood has become the preferred platform for millions of investors to buy and trade stocks. But as the stock era waned, Robinhood expanded its portfolio of financial products, including its first credit card: The Robinhood Gold Card.

The Robinhood Gold card’s groundbreaking value proposition is striking: 3% cashback on all purchases. While it brings notable benefits, it raises the question of how exactly the digital trading platform benefits from it.

Here is the secret: the platform loses money with this card advantage. However, like any financial institution, Robinhood offsets the loss through other sources of revenue. when users interact with the larger platform.

Here’s what you should know about the Robinhood Gold card, how it fits into the broader Robinhood product lineup, and how it can be integrated into your credit card rewards strategy.

Overview of the Robinhood Gold Card

The Robinhood Gold card is currently only available on a waitlist. There are straightforward spending categories and a wide range of benefits for a card with no annual fee… so to speak. However, you will need to Robinhood Gold Member to apply for the card. The membership fee is 5 USD per month or 50 USD per year, after a 30-day free trial.

Here is an overview of the card’s earnings:

• 3% cashback on all purchases
• 5% cashback on travel bookings via the travel portal Robinhood

It also comes with no foreign transaction feesand a range of cardholder benefits including:

However, there are some limitations associated with the cash back you get with this card. First, you cannot convert the cash back directly into dollars in your wallet:

• Reinvest cashback into your Robinhood brokerage account
• Book trips via the travel portal Robinhood
• Shop in stores through the Robinhood shopping portal
• Buy virtual gift cards

Each of these redemption options will bring you 1 cent per point. If you want a direct cashback option, the only way is to exchange it for a credit. You will receive less than 1 cent in value per point. Unfortunately, the closest thing to cashback is Redeem for gift cards at a preferred retailer.

Benefits of a Robinhood Gold Membership

Nowadays, almost every platform encourages its users to sign up for the subscription model, and Robinhood is no different.

When you sign up for Gold membership, you can apply for the Robinhood Gold card and get access to benefits such as a high-interest savings account, 1% bonus on all assets transferred from other brokers and 3% IRA matching, among other technical tools for stock trading.

If you are looking for a new place to keep your retirement accounts and get a higher return on your savings, It might be worth getting a Robinhood Gold membershipPlus, if you prefer to accumulate cash back on your spending, the Robinhood Gold card’s earning rates are nothing to sneeze at.

How Robinhood makes money with its credit card

In a CNBC interview in March, CEO Vlad Tenev didn’t hold back on his opinion on credit cards. When asked about the profitability of the 3% cashback model, he said, “Credit cards are one of the most profitable segments in financial services, possibly the most profitable.” Therefore, there are two ways Robinhood makes money with its credit card:

• Interchange revenueThese are card processing fees that issuers charge merchants when consumers pay with credit cards.
• Interest burdenwhich are incurred in the event of late payment of the credit card bill.

Tenev also added that once someone joins Robinhood Gold, they are more likely to use more products with Robinhood, making them a far more profitable user.

While the While cashback categories cost them a pretty penny, Robinhood has revenue from its user base elsewhere to make up for it.

I previously worked at a fintech company that also offered a credit card with excellent cashback categories. It was common knowledge that the card was a lure offer for the companyHowever, the company was able to collect interest on outstanding amounts and encourage users to purchase additional products.

Are cashback credit cards worth it?

One of the most common questions I have been asked as a credit card expert for years is: “Should I earn cashback or points?” The best analogy I can think of is baseball – Cashback is great for hitting singles and doubles, while points and miles can help you hit triples and home runs.

However, if you don’t travel a lot or are looking to save money for your financial goals, consider taking advantage of cashback credit cards. When I was little, my mom would save her credit card cashback from January to November and then redeem the rewards to buy our Christmas presents. Sure, it wasn’t a first class trip, but it worked for them and their financial goals — what single-handedly the most important factor when choosing a credit card.

So, if you are considering using the Robinhood Gold card for your purchases, you may ask yourself the following:

1. Are you interested in investing cashback rewards in your brokerage account?

You can invest the cash back earned with the Robinhood Gold card directly into a brokerage account. This could be a great option for someone who doesn’t necessarily need credit card rewards to help their finances but wants to invest in the stock market.

Due to the possible compound interest effect, you could turn this amount into an even larger amount. Remember to choose investments in which you want to invest your money, instead of leaving the money in the brokerage account.

2. How much will you spend per year with the card?

Although the Robinhood Gold card doesn’t have an annual fee, you do need to have a Gold membership, which costs $50 per year. If you’re considering signing up for the Robinhood Gold card to get 3% cash back, you’ll need to have a certain spending range to make it worth it.

Compare that to the popular Citi Double Cash^® Card that really has $0 Annual fee. With the card you get 2% cash back on every purchase – unlimited 1% cash back on purchases plus an additional 1% when paying for those purchases.

To offset the $50 Robinhood Gold membership fee, You must spend at least $5,000 per year on the Robinhood Gold card to break evenYes, you can offset the annual fee by using other Robinhood products, but it’s important to be mindful of the value you’re getting for your money when using any financial product.

3. Would you rather maximize your cashback potential?

Cashback credit cards offer two different reward formats: flat rate and category specificThe Robinhood Gold card is mostly a flat rate card, with the exception of the 5% cash back on travel booked through the Robinhood portal.

However, there are cards with multiple categories, such as the Blue Cash Preferred^® American Express Card:

• 6% cashback in US supermarkets on purchases up to $6,000 per year (1% thereafter)
• 6% cashback on selected US streaming subscriptions
• 3% cashback at US gas stations
• 3% cashback on public transport (including taxis/rideshares, parking, tolls, trains, buses and more)
• 1% cashback on other purchases

If you want to earn the most cashback possible, You could benefit from 2 cashback credit cards. You would use a category-oriented card if you spend within the categories and use the latter for everything else. To keep track of them, you can label them and keep them handy in your wallet when you spend them.

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Final thoughts

There are an endless number of credit cards on the market. To make choosing easier, ask yourself a simple question: What are my current goals? Whether you want to travel more or save on everyday expenses, there is probably a card that meets your needs.

Remember that the Robinhood Gold card is only available on a waitlist basis. You can secure a spot on the waitlist here.

All in all, you shouldn’t be afraid to choose a newer card from a fintech company. They have several financial advantages over traditional banks and can offer you great perks like 3% cash back.