Robinhood’s new debit card will automatically invest in stocks and crypto as you spend

2022-03-22

Robinhood has announced a new debit card, branded as the Robinhood Cash Card. The card will be linked to a spending account separate to users’ brokerage accounts, and work for in-person and online payments as well as ATM withdrawals. The new card will replace Robinhood’s current Cash Management debit card, originally announced in 2019.

The card’s big new feature is the option for users to automatically invest in assets like stocks and crypto when spending money. Robinhood will round up transactions made using the card to the nearest dollar, and use that extra money to buy assets chosen by the user. So, you might spend $10.55 on a burrito bowl with your Cash Card, and Robinhood will round the payment up to $11 and use the extra $0.45 to buy Dogecoin or Ethereum (if you like).

Similar “spare change” investing features are already offered by companies like Acorns.com and Stash.com.

To encourage use of this feature, Robinhood will gift people an extra 10 to 100 percent of their weekly round-up money (capped at $10 per week). In an interview with The Verge’s Decoder podcast, Robinhood’s chief product officer Aparna Chennapragada said the exact figure contributed by the company would be decided by a “variable reward algorithm.”

Chennapragada said the round-up feature “incentivizes folks to do the good thing more. Again, that [money] can be invested in cash, in crypto, in stocks, in expenses, and so on.”

Chennapragada did not say if users will be offered any insight into how the reward algorithm works, and it may prove to be a slightly controversial feature. Random reward mechanisms are often denounced for their addictive nature — they encourage users to keep playing in casinos or video games, for example. And while gifting users a few dollars is not in itself dangerous, for critics of Robinhood (who say the company encourages dangerous trading habits) it could be another example of the firm gamifying investment in what can be risky and volatile markets.

The card’s key feature is automatic investment based on rounded-up payments.
Image: Robinhood

Other features of Robinhood’s new debit card include unspecified “rewards and additional cash back” at certain stores (Robinhood says these will include H&M, Chevron and Chipotle. but did not say when the savings will be available or how large they will be). There will also be an option for users to send their paycheck to their account via direct deposit, and get access to the funds “up to two days early,” and automatically invest a portion of that deposit in chosen assets.

The card has no subscription fees, no account minimum, no overdraft fees, and no in-network ATM fees. It’s not clear what network Robinhood is using for the debit card, but its previous Cash Management card used Mastercard.

Speaking to Decoder, Chennapragada said the company wanted to update its debit card rather than launch a credit card because of changing spending habits, particularly among younger, Gen-Z consumers.

“A lot more younger folks are debit-primary, first of all, either because their credit score is not built up or, with the credit card companies, they can see how they can get bogged down, they want to be more in control of their cash flows,” said Chennapragada. “So we said ‘Why shouldn’t the debit card or a cash card have the same kind of rewards? And on top of that, actually put a line of sight on investing.’ Which none of these products today enable you to do.”

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