Robinhood Gold Card Offers 3% Cash-Back on Everything — But Will It Last?

Robinhood, an investing platform for stocks and ETFs, came into the public eye during the depths of the pandemic. As Americans were flushed with stimulus cash and ample free time, millions of newbies entered the stock market as new retail investors.

Fast forward to now, Robinhood has become the go-to platform for millions of investors to buy and trade stocks. But as the stock era has slowed, Robinhood has expanded its portfolio of financial products, including its first-ever credit card: the Robinhood Gold Card.

The landmark value proposition of the Robinhood Gold card is eye-catching: 3% cash-back on all purchases. While it comes with notable benefits, it brings forth the question of how exactly the digital trading platform benefits from it.

Here’s the secret: the platform is losing money on this card benefit. However, like any financial institution, Robinhood makes up for the loss in other revenue streams when users engage with its greater platform.

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

Overview of the Robinhood Gold Card

The Robinhood Gold card is only available on a waitlist right now. There are straightforward spending categories and a wide array of benefits for a no annual fee card … of sorts. That said, you need to be a Robinhood Gold member to apply for the card. The membership fee is $5 per month or $50 per year, after a 30-day free trial.

Here’s an overview of the card’s earnings:

• 3% cash-back on all purchases
• 5% cash-back when you book travel through the Robinhood travel portal

It also comes with no foreign transaction fees, and a variety of cardholder benefits, including:

• Trip interruption protection
• Rental car insurance
• Extended warranty protection
• Return protection
• Visa Signature concierge
• Roadside dispatch

However, the cash-back earned on this card comes with a few caveats. First, you can’t redeem the cash-back directly to greenbacks in your wallet:

• Reinvest cash-back into your Robinhood brokerage account
• Book travel through the Robinhood travel portal
• Shop at stores through the Robinhood shopping portal
• Buy virtual gift cards

Each of these redemption options will earn you 1 cent per point. If you want a straightforward cash-back option, the only choice is to redeem them for a statement credit. However, you will get less than 1 cent per point in value. Unfortunately, the closest thing to cash-back is redeeming for gift cards at a preferred retailer.

Robinhood Gold Membership Benefits

Nearly every platform today encourages its users to sign up for its subscription model, and Robinhood is no different.

When you sign up for Gold membership, you’re able to apply for the Robinhood Gold card, along with access benefits like a high-yield savings account, a 1% bonus on all assets transferred from other brokerages, and 3% IRA matching, among other technical stock trading tools.

If you’re looking for a new place to store your retirement accounts and earn a higher yield on your savings, signing up for a Robinhood Gold membership could be worth it. Additionally, if you prefer to rack up cash-back on your expenses, the earning rates with the Robinhood Gold card are nothing to scoff at.

How Robinhood Makes Money From Its Credit Card

In a March CNBC interview, CEO Vlad Tenev didn’t hold back about his opinions on credit cards. When he was asked about the viability of the 3% cash-back model, he said “Credit cards are one of the most profitable segments in financial services, possibly the most profitable.” As such, there are 2 ways Robinhood makes money on its credit card:

• Interchange revenue, which are the card processing fees that issuers charge to merchants when consumers pay with credit cards.
• Interest charges, which are incurred if the credit card statement is past due.

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

So while the cash-back categories may be costing them a pretty penny, Robinhood has revenue in other places from its user base to offset it.

I previously worked at a fintech company, which similarly offered a credit card with excellent cash-back categories. However, it was well known that the card was a loss leader to the business. However, the company had the ability to collect interest on unpaid balances and getting users to adopt additional products.

Are Cash-Back Credit Cards Worth It?

One of the top questions I’ve been asked for years as an expert in the credit card space is, “Should I earn cash-back or points?” The best analogy I’ve been able to come up with is baseball — cash-back is great for hitting singles and doubles, while points and miles can earn you triples and home runs.

That said, if you’re not much of a traveler, or you’re focused on saving money for your financial goals, you should lean into cash-back credit cards. Growing up, my mom would save up her credit card cash-back from January to November, and then redeem the rewards to buy our Christmas presents. Sure, it wasn’t first class travel, but it worked for her and her financial goals — which is singlehandedly the most important factor when selecting a credit card.

So, if you’re thinking about the Robinhood Gold card for your purchases, here’s what you can ask yourself:

1. Are You Interested in Investing Cash-Back Rewards Into 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 with their finances but wants to invest in the stock market.

With potential compound interest, you could grow that cash back to something even larger. Just remember to select investments to put your funds into, rather than letting the cash back sit inside the brokerage account.

2. How Much Will You Spend on the Card in a Year?

Although the Robinhood Gold card has no annual fee, you must have a Gold membership, which costs $50 per year. If you’re considering signing up for Robinhood Gold card to earn the 3% cash-back, there’s a delta in spending to make it worth it.

Compare that to the popular Citi Double Cash^® Card, which truly has $0 annual fee. The card earns 2% cash-back on every purchase — unlimited 1% cash-back when you buy, plus an additional 1% as you pay for those purchases.

To make up for the $50 Robinhood Gold membership fee, you need to spend at least $5,000 per year on the Robinhood Gold card to break even. Yes, you can make up for the annual fee by using Robinhood’s other products, but it’s important to be mindful of using financial products to get your money’s worth.

3. Would You Rather Maximize Your Cash-Back Potential?

Cash-back credit cards come in 2 different formats for their rewards: flat-rate and category-specific. The Robinhood Gold card is mostly a flat-rate card, except for the 5% cash-back on travel booked through the Robinhood portal.

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

• 6% cash-back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%)
• 6% cash-back on select U.S. streaming subscriptions
• 3% cash-back at U.S. gas stations
• 3% cash-back on transit (including taxis/rideshare, parking, tolls, trains, buses and more)
• 1% cash-back on other purchases

If you want to earn the most amount of cash-back possible, you could benefit from having 2 cash-back credit cards. You would use a category-focused card when you spend within the categories, and use the latter for everything else. To stay organized, you could label them, and have them readily available in your wallet as you spend.

Final Thoughts

There’s an endless number of credit cards on the market. To simplify the choice, there’s one easy question to ask yourself: What are my goals right now? Whether you’re trying to travel more or save on daily expenses, there’s likely a card that will meet your needs.

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

All told, don’t be afraid to go for a newer card from a fintech company. They have several financial advantages over traditional banks, allowing them to offer outstanding perks like 3% cash-back.