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Comment by dublidu | Hacker News Reader

I’m not sure why other banks haven’t followed. One month treasury rate is already up to 2.3% now and banks can certainly lend it out at higher than treasury rate.

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Because there is basically no competition. Plenty of credit unions around my area offer 3% or sometimes 4% checking, but the best bank rate I could find was under 1%.

But credit unions and especially new small players like Robinhood aren't going to threaten PNC or BoA or Chase. So why would they give up free money if they don't have to?

Which credit union offers 4% on all money with them? I know of a few CUs that will offer much higher interest on the first X dollars. Ex: inspiruscu.org

There is usually a cap on those high interest rates - at my CU, its $25k. They pay 2% though, not 4% - it used to be a pretty good deal, but these days its easy to get a money market fund elsewhere that pays more than that with no maximum.

Mind sharing the name of your CU?

I don't know of any that offer 4% on all money, but one near me offers 3% on the first $3k. After $3k though, you might as well get a CD or invest it in something higher return than a checking account.

Yeah when I started looking at one of my local credit unions I almost jumped at the 10% interest rate before I realized it was only 10% on the first $1k then less than 1% on everything after that

I hear this argument a lot, but is a checking account really the best place to invest your money? In my view it's better to get 10% on $1k than 0.1% on unlimited, and then take anything over that $1k (or whatever you need in your checking account) and put it in a real investment.

Remember we're talking about checking accounts, not mutual funds. It's not a real investment. You might as well get something even if it's small.

I'm by no means an expert in this, but here's my rough understanding. Banks don't really touch the money in your consumer savings account. It's just used to expand their reserve. As a result, your money can only grow at the Fed fund rate. This is the interest rate of what a bank would get from lending money overnight and is targeted at 2-2.25% right now. The highest interest rate a bank can support without operating at a loss is about 2%, which is what most online-only banks like Marcus and Ally offer.

Basically, Robinhood is subsidizing this 3% interest rate with investor dollars. Of course, there having a higher reserve lets banks lend out more money, but I'm not sure that's worth paying a 1% premium over.

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