Is Robinhood luring young traders with their $0 commissions and unimaginable leverage? From Richard Dobatse, who lost $860,000 in March, and Alex Keans, who took his life due to astronomical losses, Robinhood is not without controversy. Are you wondering if or how you can delete your Robinhood account? Are you ready to finally move to a well-established broker with free commissions like Webull?
You might also like Cash App if you’re more of a mobile trader.
The short answer is: Sure, you can deactivate it, but it’s not quite deleting it. The longer answer is… the rest of this article.
Did you know that you can transfer your account or close it? Luckily, the steps involved aren’t that complicated and won’t take much time.
We will show you how to delete your Robinhood account and give you different brokerages.
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Table of Contents
How to Delete Robinhood Account Overview
Do you know how to delete your Robinhood account? You need to close your account if you want to move to a different broker or cash out and stop trading altogether. As a result, how can you do that? Read more to find out.
Founded in 2013, Robinhood is a discount US broker-dealer app that has taken the world by storm. It has grown from 1 million users just four years ago to 10 million at the start of this year! The main reason is that $0 stock, ETF, options, and cryptocurrency trades to clients in the US and Australia.
Robinhood is geared mainly towards millennial investors who want a smartphone-based trading platform without bells and whistles.
It has been a smartphone-first brokerage, with Android and iPhone apps as the primary methods to log into your account and place trades.
How Does Robinhood Make Money?
Robinhood charges zero commission for US stock, options, and cryptocurrency trading, so how do they make money? Robinhood makes money through a complex practice called “payment for order flow.”
In its basic form, whenever a Robinhood customer places a trade, Wall Street firms buy or sell the shares first. It is these firms who then determine what price the customer gets.
I must add that these firms pay Robinhood for the right to do this. Mainly, they’re engaging in arbitrage by trying to buy or sell the stock for a profit over what the Robinhood customer gets.
Surprisingly, this practice isn’t new; common retail brokers like E-Trade and Schwab also do it.
They get paid more if you trade more.
HOOD Stock Rover Report
Why People Want to Delete Their Robinhood Account
- It’s less than a stellar trading platform for stocks. Robinhood has no advanced trading platform or tools (think hotkeys); this makes it virtually impossible to day trade stocks.
- You can only trade stocks, ETFs, and options.
- The risks of trading through their app are compounded due to numerous software glitches.
- In 2018, Robinhood released software that mistakenly reversed the direction of options trades, giving customers the opposite outcome from what they expected.
- In 2019, they mistakenly allowed people to borrow an infinite amount of money to multiply their bets. This was a dark day for those who didn’t have proper risk management strategies in place.
- A complete blackout of their site for two days in March 2020 frustrated many. Then again several times later.
A Black Mark for Robinhood
In March 2020, Robinhood went completely down. You couldn’t see your statement, account, or anything. Even the main website is down.
The site crashed for almost two days in March due to the COVID-19 volatility. During this time, Robinhood’s customers could not make trades to offset the damage to their accounts. Recently, they started restricting people from trading certain stocks because they were too volatile…They know what’s best for you, right?
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What Happens When You Deactivate Your Robinhood Account?
You can still access the important documents you need when deactivating your Robinhood account—for example, tax documents and accounts statements. But you won’t be able to trade once you’ve deleted your account.
Is There a Cancellation Fee When I Delete My Robinhood Account?
Luckily, Robinhood does not charge account closure fees for either their joint or individual brokerage accounts. Are there fees if I close my Robinhood IRA? Nope.
How to Transfer My Robinhood Account to Another Broker?
If you’re a person who likes to keep their options open, why don’t you consider transferring your stocks or other securities to another broker? If you decide to return to Robinhood, you save yourself the hassle of re-opening an account.
Let’s clarify: Transferring your Robinhood account to another broker will cost you money. While transferring your trading account to Robinhood costs nothing, you must pay $75 to go in the other direction.
No shocker there. Worse yet, this $75 fee is above average by industry standards. For starters, Ally Invest only charges you $50 to transfer out your account, while TD Ameritrade charges nothing.
Props again to TD Ameritrade, owners of one of our favorite charting platforms, Thinkorswim.
Automated Customer Account Transfer
You don’t need to do anything at Robinhood to start the transfer process. The process begins at your newly chosen brokerage firm.
Plus, you can do it from the comfort of your home! Most brokerages have an online form you fill out; an automated system moves your account electronically.
Keep your Robinhood account number handy throughout this process, as your new brokerage firm will request it.
Even better, free money! Most brokerage firms offer incentives for you to transfer your brokerage to them. How great is that? Like any sign-up incentive, you start by clicking on their promotion link and following the steps. One vital point to remember is that you specify that your new account will be funded by an account transfer (ACAT) from another brokerage. In this case, the brokerage is Robinhood.
Before all this, decide if you’re transferring your entire account or just particular securities. An important point often overlooked is that your Robinhood account can’t be moved to a different account type. A classic example would be a joint account; you can’t transfer it into a trust because that’s a different account type.
This process takes about one or two weeks, depending on your new brokerage firm!
For whatever reason you need assistance during the account transfer process, you can call Robinhood. During regular working hours, they have a customer service line you can call at 1-650-940-2700.
Steps to Transfer Your Account
- Pick a new brokerage firm
- Decide if you’re transferring your entire or just a portion of your account
- Fill out the ACAT form
- Pay the $75 fee to Robinhood
- Wait approximately one to two weeks for your new brokerage account to be approved.
- Join Bullish Bears so you can learn how to trade.
Best Trading Companies
How to Delete Your Robinhood Account Entirely
If you’re still reading, chances are you want to delete your account entirely, and that’s too. Robinhood has made it quite easy for you to close your account. But, there are a few requirements to be aware of.
First off, your account balance must be $0. To do so, transfer your account to a new firm, sell everything, and put the funds in your bank account.
As I mentioned, Robinhood doesn’t charge commissions if you decide to sell, which is a bonus. However, like most brokerages, Robinhood does pass on the SEC and FINRA sales charges.
Finally, fire up your email and submit a written request to Robinhood (support@robinhood.com) to close your account. The written request step is a MUST! Once this is complete, a representative will reach out within five business days. Your account will be restricted from investing or trading. But it will still exist in their system, according to reports from former Robinhood users who have attempted to delete their accounts.
Steps to Take Before Closing (Deactivating) Your Account
- Sell all your positions
- Withdraw the balance back to your bank account
or
- Submit a request to another brokerage to transfer your assets out of Robinhood. Once completed, Robinhood will close your account for you.
Robinhood Alternatives
Before deleting your Robinhood account, you must open another brokerage account to continue trading. Which begs the question: Who are the best alternatives to Robinhood? Luckily, Changing brokers isn’t that difficult; here are several low-cost brokerages to choose from!
In my opinion, your best bests include Firstrade, M1 Finance, WeBull, AllyInvest, and TD Ameritrade. All these brokerage companies provide low-cost trading plus many benefits that Robinhood doesn’t offer. Indirectly, Robinhood is competing with Robo-advisors like Betterment and Wealthfront.
A Wording of Warning
His family woke to a sticky note on 20-year-old Alex Kearns’ door, “If you’re reading this, then I am dead.” His body was found a few days later; the cause of death was suicide.
The brand new trader, assigned 1 million dollars worth of leverage from Robinhood, “thought” he lost $730,165. He claimed the puts he bought and the shares sold “should have canceled out,” but in hindsight, he said he had “no clue” what he was doing.
But sadly, he may have misunderstood the financial statement from Robinhood. Alex was trading in options, and little did he know that negative buying power and negative cash are not the same as typical debt.
Moreover, the $730,000 likely reflected the other side of the options trade – the side not settled yet and the underlying value of the stocks tied to those options.
Final Thoughts: How to Delete Robinhood Account
Alex’s’ death underscores the risk that comes with complicated financial instruments like options if you don’t know what you’re doing. For this reason alone, you must take the time to educate yourself before you ever put money on the table.
Be cautious with the course provider you pick, as some encourage people to go from training wheels to driving motorcycles in one week. Stock trading is not a race; you must always follow the one percent rule to protect your account.
Remember, patience equals profits.
If you or someone you know is in crisis, call the National Suicide Prevention Lifeline at 800-273-8255.
