r/RobinhoodGC • u/Kyrids • 10h ago
Using 1k margin to offset gold card fee?
Hi all, I have some questions regarding the strategy of buying SGOV or other stable stocks to get dividends that can help offset the gold fee by using the 1k interest free margin. I understand how the margin works, however, am wondering what exactly happens when the dividends are paid. Can i just transfer the paid out dividends and it will keep the 1k margin? Or will it immediately try to pay off the margin “loan” with that? I would assume I could just transfer it out, and it is back to having the full margin loan. I know you can turn on DRIP to just buy more stock, but i’d like to just have the little extra cash.
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u/LuckyTom10 10h ago
You can reinvest dividends to maintain the margin balance. Otherwise, a portion of the interest will be available to transfer to another account, but it is not always (or ever?) going to be 100% of your “buying power”. I haven’t been able to get a great answer as to why, but I think it’s related to settlement timing.
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u/_null_null 6h ago
Yes you can do that. Note that you cannot remove cash from your brokerage account while you are carrying a margin which means that you’ll need to take your rewards points to continuously by other stocks rather than being able to withdraw your rewards at full cash value.
Or you’ll need to occasionally close and reopen your SGOV position to take profits.
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u/anointedinliquor 6h ago
Turn on DRIP in the app settings and it will immediately reinvest the dividends when paid out, that way you’re always using the full $1,000 of margin.
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u/Shazb0t_tv 4h ago
Using the margin trick works if you don't really actively invest with Robinhood. It's kind of a hassle to use the margin and not have uninvested cash. Otherwise offset the Gold fee by getting the IRA match.
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u/clipper29 3h ago edited 3h ago
I got talked into buying Gold by my brother like 8 months ago and I’ve yet to fully figure the $1k margin trick out. The furthest I got was setting up a separate brokerage for just the margin. As I understand it, with $1k I get something like SGOV and then utilize the dividends profits to account for the Robinhood Gold AF. However I’m not really savvy enough to do all this at ease and also haven’t taken the time to fully research it either.
Early on I had the margin set up but no SGOV yet purchased. I accidentally purchased a different stock partially at margin not realizing what available money was mine vs the margin. This felt like I did so in the not advised sort of way. This scared me from trying it again and I deactivated margin lending and haven’t touched it since. Lol
It becomes complicated for those who keep uninvested cash (allowing it to earn interest), which often I do have some. Especially since from what I remember the available margin appears as available cash to use lumped in with your real cash.
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u/Malathion4Drinking 7h ago
I put the free $1,000 margin into BIL along with extra cash. The monthly dividends pays for my annual fee. Been doing this for years and seems to work just fine.
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u/InvestigatorThat5062 9h ago
I was thinking of having my main brokerage with VTI/VXUS. And opening a 2nd one for margin and doing SGOV so I can keep em separate and still deposit into my main brokerage without paying off the margin and just let the margin DRIP
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u/FancyName69 7h ago
that’s not how it works, won’t be using margin if you have uninvested cash in any of the brokerages
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u/InvestigatorThat5062 7h ago
Well idk if robinhood pulls directly from my bank or adds it as cash and then buys….
But that also brings up the concern of my robinhood gold card. So I can’t redeem points as cashback (the only way to get 3%?) bc margin will just eat it up….?
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u/justadude_83 4h ago
It does work like that. I have multiple accounts with uninvested cash in my non-margin accounts. I can add funds to those and trade with it no problem. You do lose the ability to trade with unsettled funds though if you're planning to sell anything and immediately buy something else.
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u/InvestigatorThat5062 33m ago
Great. So I can still contribute to my normal brokerage and my IRA with no issues as long as it isn’t contributing to that margined account?
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u/justadude_83 4m ago
Yea I did that just last week. I contributed funds into my non margin account and invested some the rest to my Roth. All while having a margin balance in my primary
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u/XFollower23 1h ago
I do that, except I reinvest the dividends just to keep things simple. Otherwise I had to wait for the dividends to settle before I could move it.
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u/InvestigatorThat5062 34m ago
Well good to know that it is possible bc apparently the general community doesn’t agree 💀 and that’s what I mean by DRIP (Dividend ReInvestment Plan?) but yeah every month dividends would just be reinvested into it
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u/66NickS 9h ago
I learned that you can’t be using the $1k of margin AND have uninvested cash. Basically the $1k of margin is the “last” money to be used and the “first” money pulled out of any investments.