Robinhood lowers interest rate on margin loans in growth push


FILE PHOTO: The logo of Robinhood Markets, Inc. is seen at a pop-up event on Wall Street after the company's IPO in New York City, U.S., July 29, 2021. REUTERS/Andrew Kelly/File Photo

(Reuters) - Trading app Robinhood Markets is lowering the rate of interest it charges on its margin loans, it said on Tuesday, to encourage more customers to avail this facility that allows them to borrow against securities they hold.

WHY IT'S IMPORTANT

The company has rolled out a series of features recently as it looks to grow into a full-fledged broker and meet the demands of retail investors for sophisticated products.

The renewed structure could increase its popularity among such investors, who have often used Robinhood for their social media-fueled campaigns against Wall Street.

Margin loans allow customers to borrow funds against their investment portfolio, which can then be used for trading.

BY THE NUMBERS

The company will charge rates ranging from 5.70% to 6.75%, depending on the amount of funds borrowed. It had previously charged 12% interest for customers who had not subscribed to its premium service, Robinhood Gold. For its Gold customers, the rate was 8%.

The first $1,000 borrowed will continue to be free of interest for Gold subscribers.

In comparison, Charles Schwab's rates range from nearly 11.83% to 13.58%.

Robinhood's shares have gained 27% since the brief resurgence of the meme-stock frenzy last week.

CONTEXT

California-based Robinhood had launched a new credit card for its Gold customers in March. It offers 3% cash back in the form of reward points on spends and has no annual fee or foreign transaction fees.

The company is also offering an account for customers to set aside funds for their retirement, and would match eligible contributions into the account if users hold the funds for at least five years.

KEY QUOTES

"We have to reward our customers for being more engaged with us," Robinhood's Chief Brokerage Officer Steve Quirk said.

(Reporting by Niket Nishant in Bengaluru; Editing by Arun Koyyur)

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