Right here’s the very first thing to know concerning the new Robinhood bank card that guarantees 3 p.c money again on all purchases, with out limits: Yesterday, after I requested Vlad Tenev, the corporate’s chief government, to ensure that it will keep at that stage for 18 months, he wouldn’t.

I hope it sticks. It’s extremely beneficiant as these items go. Money-back gives from massive card issuers like Citibank typically high out at about 2 p.c, and it’s arduous to earn money even at that stage. Charles Schwab gave up on its 2 p.c card in 2010.

The Robinhood Gold Card is the corporate’s first bank card with its personal branding. So what does it assume it is aware of that no person else does, and what precisely does it hope to perform?

There are a number of methods to earn money with bank cards. The primary is from charges retailers pay to simply accept them. The second is from curiosity when folks carry a stability.

Then there are annual charges, which could be a number of hundred {dollars} for essentially the most beneficiant playing cards. Robinhood’s card has no annual charge, although you could pay $5 monthly or $50 per yr to be a part of the corporate’s gold program, which gives higher rates of interest and different perks.

Large-spending system-beaters take nice enjoyment of transferring, say, $100,000 of their annual bills to a brand new card, not carrying a stability, incomes $3,000 in money again every year and declaring themselves victors over silly firms.

However Mr. Tenev goals to attract greater than his fair proportion of people who find themselves comparatively new to bank cards and intends to approve practically each gold member who applies. If these clients borrow, with out defaulting on their loans altogether, they may very well be worthwhile for the corporate. Time will inform whether or not Robinhood has the underwriting abilities to make this work.

There’s at the least one different technique to earn money with a card like Robinhood’s, and that’s when you have different wares to hawk.

That 3 p.c money again should go into an organization brokerage account earlier than you’ll be able to switch it to, say, your checking account elsewhere. Folks could make investments the money quite than withdrawing it.

That pit cease within the brokerage account isn’t the one try at creating friction. There’s a pleasant 5 p.c return that gold clients can earn on money, and a pair of bonuses for individuals who transfer extra money to the corporate. And that cash — and the buying and selling folks may do with it — is the place Robinhood could make extra.

Mr. Tenev mentioned that his group had examined loads of potential edge instances, and that they didn’t anticipate to see an amazing variety of rewards hounds pulling their winnings from the corporate.

Some outsiders eyeballing the cash-back provide don’t see how the cardboard generally is a moneymaker. They embody Joanne Bradford, who was a senior government at SoFi when it was contemplating credit-card choices and is now the chief cash officer on the monetary planning start-up Area Cash. “Having been somebody who ran and runs a funnel for an organization, you’ll attempt a number of alternative ways to get new clients,” she mentioned.

So how quickly may Robinhood yank the three p.c provide when it desires to attempt different methods to get new clients?

The corporate doesn’t mince phrases. “Robinhood could make adjustments to the Rewards Program (together with termination of the Rewards Program) or change the phrases of this settlement at any time,” reads the third sentence of its rewards guidelines.

It’s not keen on you system-beaters, both. The principles go on to say the corporate can cancel your card if you happen to have interaction in “gaming” or if it believes you “could try to take action.” There’s a wait record for the cardboard, and the corporate will roll out gives within the coming months.

Let’s return to that promise that I did not extract from Mr. Tenev. In 2014, I put an analogous problem to a Constancy government as a result of I used to be suspicious of its cash-back card that supplied a mere 2 p.c. He accepted, the rewards remained and the cardboard exists to at the present time.

However Mr. Tenev wouldn’t make the pledge. “I respect the train,” he mentioned, including that it was not his intent to decrease the cash-back price quickly. “However I can’t actually renege on the phrases and situations.”

In 2020, Robinhood froze buying and selling in sure shares throughout a interval of maximum volatility. In 2021, it paid what the Monetary Business Regulatory Authority described as the most important penalty it had ever levied for “vital hurt suffered by tens of millions of shoppers.”

Why ought to clients belief the corporate now? Mr. Tenev was not defensive.

“We’ve gone by these trials and tribulations and constructed up scar tissue,” he mentioned. “That may hopefully give clients some confidence. And we’re persevering with to roll out merchandise which have simple worth that clients received’t have the ability to ignore.”

Certainly, that’s the very last thing you need to know concerning the new card. It does have simple worth. You shouldn’t ignore it.

However that 3 p.c? Robinhood’s going to need to show that it may well make it work.