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Chapter · Master Robinhood

If it is free, how does it earn?

Robinhood does not charge a commission, yet it is a real business that earns real money. Its main income sources are payment for order flow (getting paid to route your trades to trading firms), net interest (earning interest on cash and on money it lends), and Robinhood Gold (a paid monthly subscription). Understanding this helps you see that you are not the customer being charged, you are part of how the machine runs. Knowing the model makes you a sharper user.

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What you get asked

  1. If Robinhood charges no commission, how does it make money?

    The three big buckets are payment for order flow, net interest, and Robinhood Gold. No commission does not mean no revenue, it just means the revenue comes from other places.

  2. Robinhood earns money partly from payment for order ___, plus interest and a subscription.

    Payment for order flow, often shortened to PFOF, is money paid to Robinhood for sending your trades to certain firms. We unpack it fully in the next lesson.

  3. Match each revenue source to a plain description

    The commission free label is what you see, but income flows in from routing trades, interest, and subscriptions behind the scenes.

  4. Why is it useful to know how a free app earns money?

    Follow the money and you understand the incentives. A free app still has business goals, and those goals influence design choices like how easy it is to trade often.

  5. How many main revenue sources did this lesson describe?

    Three: payment for order flow, net interest, and Robinhood Gold. Keeping the big picture simple helps the details stick.

The rest of this chapter

Learn how Robinhood works, how it makes money, and how to trade with discipline instead of hype.