Thinking of Changing Brokerages? Robinhood Is Offering a 1% Bonus for a Limited Time

It isn't uncommon for brokers to offer incentives to bring new customers into their ecosystems, and to persuade customers who may have funds stashed elsewhere to consolidate them onto the same platform. Usually this is a flat dollar amount for certain account balance tiers.

Robinhood recently announced a unique bonus structure that is percentage-based. Here are the details of the bonus, what it could mean to you, and a few other things you need to consider before making a switch.

Robinhood's new bonus offer

If you open (or already have) a Robinhood brokerage account and transfer assets from an external brokerage account into your Robinhood account, you will receive a bonus equal to 1% of the transferred assets' value.

There are no limits to the amount you can receive. For example, if you transfer $1 million in assets to your Robinhood account, you'll receive a $10,000 match.

The offer started on Oct. 23 and ends on Dec. 8, at midnight.

Like most bonus offers, there's some fine print to be aware of. Just to name some of the highlights:

• This offer is valid on taxable brokerage accounts only. However, Robinhood has a similar 1% offer on transferred IRAs and 401(k)s, although with slightly different terms and conditions.
• If you withdraw money from your Robinhood account within two years and it brings the account value to less than the amount the bonus was based on, Robinhood will charge back a proportional amount of the bonus given. (Note: With the IRA and 401(k) bonus mentioned above, the earn-out period is five years.)
• Depending on your circumstances, the bonus could be considered taxable income. If required to do so, Robinhood will report the bonus as interest income on a Form 1099-INT to the IRS.

Should you move your brokerage account(s) to Robinhood?

There are a few things to consider before moving your account to take advantage of this bonus offer. For one thing, be sure that the value of the bonus is more than the fees you'll pay. Most of our top brokers charge a fee to transfer an entire account to another broker ($75 is common), so be sure it's still worthwhile. For example, you would have to transfer a minimum of $7,500 to Robinhood to just break even on that $75 fee with the 1% bonus.

More importantly, since you're essentially committing to keep your money in a Robinhood account for two years to be able to keep the bonus, be sure that Robinhood's investment platform is a good fit for you. It has a top-rated investment app and an extremely user-friendly platform, and is one of the few brokers that has no commissions on options trading.

However, there are some drawbacks to consider. For example, Robinhood doesn't allow investors to buy mutual funds or fixed-income investments like bonds, and it doesn't have as many educational or trading features as some of its competitors. It would be a smart move to read our full Robinhood review to see if it's a good fit for your investment goals before taking this bonus.

The bottom line

Robinhood's new bonus offer is rather competitive -- especially for people with relatively large account balances at other brokers. But the decision of what broker to use is about more than the best incentives, so it's important to take a closer look at Robinhood's trading platform and features before making a move.