Robinhood is a reputable, efficient brokerage with a quickly-growing user base. Investors can buy and sell stocks, options, and ETFs commission-free on their platform. The company has been praised for its user-friendly design, low fees, and innovative features.
Robinhood has recently come under scrutiny for its mishandling of unsettled funds despite its many benefits. The issue primarily affects users who attempt to sell stocks and ETFs. In some cases, the funds from these sales have failed to appear in the seller’s account as expected.
The problem appears to be caused by a flaw in Robinhood’s system that incorrectly allocates proceeds from sales transactions. When this occurs, the money from the sale doesn’t show up in the seller’s account as it should. In some cases, the funds are not credited at all, which can cause serious financial problems for investors.
You can think of ‘unsettled funds’ as similar to your bank account’s pending transactions or as funds that have been made available to you but haven’t yet been cleared by the other party.
Remember that access to your Robinhood unsettled funds can be restricted, depending on your account settings. It means that you cannot withdraw them or use them for any other transaction until they are settled.
Should you be worried when you see Robinhood unsettled funds in your account?
The simple answer is no; you shouldn’t be worried about unsettled funds at Robinhood – rest assured that all is well and there are no problems with your account or investments.
For a longer, more in-depth answer, this article will explore what are unsettled funds on Robinhood and how they occur within the platform.
We’ll also clarify why it happens and what it means for your account’s balance.
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What are Unsettled Funds in Robinhood?
Before the internet made money easy to transfer between accounts, owning a stock required an actual stock certificate, and trading a security could take several days. That’s why the Securities and Exchange Commission (SEC) established settlement periods. A stock settlement period provides buyers and sellers enough time to exchange their half of the trade physically.
On Robinhood, two types of transactions might result in funds not being resolved, including direct deposits from a bank and stock sales.
Let’s take a closer look at these two transactions to understand what can happen to your funds during the settlement period.
When you make a mobile deposit to your Robinhood account from your bank, the money is transferred immediately. However, it may not show up in your account right away because banks can take several days to settle the transactions.
Once the money has been deposited into our account, Robinhood waits until the settlement date to transfer that money over to its clearing partner. The fund settlement date usually happens within two business days after the direct deposit hits.
Once the funds have successfully settled, they’ll be ready for withdrawal or trading on Robinhood. Until then, the funds will appear as unsettled in your account.
When you sell stocks on Robinhood, it immediately deducts the shares from your account and sends them to the buyer. Of course, the sale proceeds are also sent right away – but they won’t necessarily reflect in your account balance immediately.
It’s because stock sales typically involve three parties: the buyer, seller, and their respective brokers (in this case, Robinhood). For all three parties to receive what is owed to them- including Robinhood- the sale takes the required time to settle.
Even though Robinhood has already deducted the shares from your account and sent them to the buyer, it’s still necessary to wait for the funds to be delivered to Robinhood.
Robinhood is a stockbroker and is bound by SEC Regulation T. The rule states that a trade can’t be settled until the buyer has received the security from the seller. So until then, the funds will also show up as unsettled in your account.
How Long Do Unsettled Funds Take on Robinhood?
Fund settlement on Robinhood takes “T+2 days,” meaning that the trade will be settled two days after the transaction date. The funds don’t take long at all.
A settlement period is the time it takes for a buyer to receive the security from the seller. The SEC establishes a settlement period to provide buyers and sellers enough time to exchange their half of the trade. Settlement is when the buyer of a security pays for it, and the seller delivers the security to the buyer.
In most cases, cash in your account from a trade will be received by Robinhood and reflected in your balance within two business days of the trade date. Once the money shows in your balance, you can freely access the funds to transfer or use for another stock, bond, or crypto transaction.
Do Robinhood Funds Settle Over The Weekend?
No, Robinhood funds don’t settle over the weekend. So, for example, if you sold a security purchased on a non-business day or during a holiday, the sale or deposit wouldn’t settle until the next business day. So, in this case, the settlement date would be pushed out by one or two days.
For example, if you sell a security on a Friday that was purchased on a Thursday, the sale would not settle until Tuesday (the next business day).
How Long Does It Take To Transfer Money To Robinhood?
Robinhood offers instant deposits of up to $1,000 to basic users, although you may increase the limit by upgrading to Robinhood Gold. You can place trades immediately but won’t be able to withdraw your funds for six trading days.
Although the cash may be accessible, the transfer from your bank to your Robinhood account might take up to five days. Therefore, to avoid a transfer reversal, make sure you have the required cash in your bank account for at least five business days after initiating the ACH transfer.
Can I Trade Unsettled Funds in Robinhood?
It depends on your account. If you have a Robinhood Cash Account, you can’t trade unsettled funds. You also can’t withdraw or use the cash for any other purpose. It’s because Robinhood Cash Accounts cannot make Instant Deposits or settlements.
However, if you have Robinhood Instant, you can trade unsettled funds up to $1000.
Suppose you’ve upgraded and have a Robinhood Gold account. In this case, you may be able to trade unsettled funds depending on your account type and position limit settings with a maximum of $5,000 in unsettled funds.
In addition, unlike the free cash and fast accounts offered by Robinhood, Gold accounts have a monthly fee. A Gold account provides different benefits, such as access to essential research reports to help you make better investment decisions.
Can I See Unsettled Funds in Robinhood?
While you cannot trade or transfer funds from your app that are not in your account, you can still see them on your balances page. However, there isn’t a way in Robinhood to see your unsettled funds for your account.
Instead, you can check the status of each of your trade transactions. You can do this by going into your account and clicking ‘transfers.’
Once you are on the ‘transfers’ page, you will see all your transactions listed on the right-hand side of the screen. Click on any one of them to provide a detailed description of a transaction and its status.
How to Withdraw Unsettled Funds in Robinhood?
You can’t withdraw or use your Robinhood unsettled funds for any purpose. The only way to access unsettled funds is by waiting until they are cleared and reflected in your account balance.
The length of time it takes for unsettled funds to clear and show in your account balance varies. It depends on the type of transaction that occurred and the clearing partner.
Unsettled funds are similar to how check clearing works. The funds will be available in your account when they have successfully settled with the clearing partner.
You can also request a Robinhood debit card to withdraw unused funds from your account and use like a credit card. It works at most places that take Mastercard, and you can also withdraw $5 or $10 from an ATM, or more, depending on your available cash.
If you know your PIN number, cardholders can use the debit card to get cash back at retail stores.
Why Can’t I Withdraw From My Robinhood Account?
There are a few reasons why you might not be able to withdraw money from your Robinhood account, including:
Robinhood unsettled funds are financial transactions transferred to your account but haven’t been cleared by the other party. Until the funds are cleared, you cannot withdraw or use them for any other purpose.
Reached The Withdrawal Limit
If you attempt to withdraw more money than what’s currently in your account, you’ll get an insufficient funds error message. It happens because Robinhood doesn’t allow users to overdraw their accounts. Users are only allowed to withdraw $50,000 per business day and cannot reach six figures.
Your account might also be restricted from withdrawing funds if it’s been flagged for security reasons. In this case, you will need to contact Robinhood customer service to resolve the issue.
What’s the Robinhood Crypto Settlement Time?
Cryptocurrencies are a little different from stocks and ETFs. You do not have to wait for crypto funds to clear. The Robinhood funds from the sale are available in your account immediately because the SEC rules do not apply to cryptos.
Cryptocurrencies don’t count as collateral and are non-marginable. As a result, you’ll need enough cash in your account to buy another security.
You can see the status of your cryptocurrency transactions by going to “My Wallets” in Robinhood and then selecting the coin you want more information on. Transactions will show a green checkmark if they have been successfully completed or a red ‘x’ if they have failed.
What Does Not Enough Buying Power in Robinhood Mean?
Your buying power is the total funds available in your account to spend on stocks, options, and ETFs. It is calculated by subtracting your Robinhood unsettled funds from your account balance. As your account balance changes and new transactions are settled, the amount will vary.
Your buying power does not include the proceeds of a sale or the funds used to purchase a security. For example, if you sell a security for $1,000 and have an account balance of $2,000, your buying power would be $1,000.
Before you can make a purchase, the broker will require a marginable security in your account. It’s a security that the broker can borrow against to provide you with funds for your purchase. Simply put, it protects the broker if you cannot repay the loan.
“Not enough buying power” in Robinhood typically refers to not having enough funds available for immediate trading. It can result from making too many trades in a short period, having insufficient cash in your account, or the funds being unsettled and unusable to cover the trade cost.
If you see the message, “Not enough buying power,” it means there wasn’t enough money available to cover your purchase when you placed the order. Therefore, you’ll need to add more funds to your account before placing new securities orders.
What you can do is upgrade your account to Robinhood Instant or Gold so that you can trade with a margin or add funds to your account. You can also wait until the unsettled funds are cleared and available in your account balance.
Robinhood Unsettled Funds Summary
Unsettled funds in Robinhood can be confusing for first-timers. However, with a little bit of explanation and understanding of how they work, you can rest assured that there is nothing to worry about.
The unsettled funds are simply part of the buying and selling process and usually clear within two business days or sooner. In the meantime, you can still see the funds on your account balance page but cannot use them for any other purpose if you have a standard account.
If you need immediate access to the funds, you can upgrade your account to Robinhood Instant or Gold and trade with margin funds available. Otherwise, just wait until they are settled and available in your account balance.
We hope that this article has been helpful and provided you with a better understanding of unsettled funds in Robinhood.
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