Alexis Kestler
I‘m sure you‘ve seen that confusing "unsettled funds" message on Robinhood before. It can be pretty worrying and confusing if you don‘t understand what it means. But don‘t stress my friend – unsettled funds are totally normal on Robinhood.
In this comprehensive guide, I‘ll explain everything you need to know about Robinhood unsettled funds in simple terms:
- What unsettled funds mean
- Why they happen on Robinhood
- How long they take to settle
- How to use or withdraw unsettled funds
I‘ll also answer the most common questions about unsettled funds so you can use Robinhood with confidence. Let‘s dive in!
So What Exactly Are Unsettled Funds?
Here‘s a simple definition:
Unsettled funds refer to money that is in the process of transferring between your bank and Robinhood account.
Specifically, unsettled funds happen in two cases:
-
After you deposit money – Takes 2-5 days for Robinhood to verify the bank transfer
-
After you sell stocks – Takes 2 trading days for the sale proceeds to process into your account
During this settlement period, the cash is "in limbo" and can‘t be used for trading or withdrawing.
The reason for this delay is that SEC rules require brokerages to verify transfers between bank accounts and investment accounts. This is for safety and fraud prevention.
So in a nutshell, unsettled funds are just cash transfers that are pending – it‘s totally normal!
Why Does Robinhood Have Unsettled Funds Anyway?
I know, it can be annoying to have to wait for funds to settle right? But Robinhood is just following the same SEC rules as any big brokerage like Fidelity or Charles Schwab.
The SEC mandates that transfers "settle" within a certain timeframe:
Bank Deposits:
- Up to 5 business days to verify and settle bank transfers
Stock Trades:
- 2 trading days for sale proceeds to settle (called T+2)
This explains the two cases where you‘ll see unsettled funds on Robinhood:
1. After Depositing Funds
When you transfer money from your bank, Robinhood credits it to your account immediately. So you can go ahead and start trading!
But behind the scenes, it takes 2-5 business days for them to complete the bank transfer through the ACH system. During this time the funds show as "unsettled" while they verify the money.
2. After Selling Stocks
When you sell a stock, you might think the cash proceeds are available instantly. But really, it takes 2 trading days for Robinhood to verify and settle the sale through the clearinghouse. So the funds will remain unsettled for 2 days.
It can be annoying, but that‘s just standard settlement for all brokerages to verify transactions and prevent fraud in the financial system.
How Long Do Unsettled Funds Take to Settle?
Now that you know what causes unsettled funds, let‘s talk about how long you can expect them to take to settle so you can use the cash again:
For Bank Deposits
- Deposits under $1000 can settle as fast as 2 days with Robinhood Instant
- Larger deposits over $1000 may take 3-5 days to fully settle
- Weekends and bank holidays extend the settlement time
For Stock Sales
- Proceeds from a sale take 2 trading days (T+2) to settle after the sale
- For example, if you sell shares on Monday, the funds will be settled by Wednesday morning
- Settlement is only on trading days, so sales on Friday settle by Tuesday
The maximum settlement times are outlined in the table below:
| Deposit/Sale Type | Max Settlement Time |
|---|---|
| Bank deposits under $1000 | 2 business days |
| Bank deposits over $1000 | 5 business days |
| Stock sale proceeds | 2 trading days |
So if you time things right, your unsettled funds shouldn‘t be stuck in limbo for too long!
Can You Trade With Unsettled Funds on Robinhood?
Unfortunately, Robinhood‘s standard cash account doesn‘t allow you to trade with unsettled funds. You‘ll need to wait until the funds fully settle after a deposit or sale.
I know, I know…the waiting really sucks.
But there are two special account types that give you more flexibility:
Robinhood Instant
This account allows you to trade up to $1000 of unsettled funds immediately after a deposit. Very nice for getting a head start!
Instant is available if you meet Robinhood‘s eligibility requirements.
Robinhood Gold
Gold accounts let you trade based on "buying power" – so you can trade more than just your settled cash balance. Basically trading on margin without paying interest.
The downside is that Gold costs $5/month. But if you value trading flexibility with unsettled funds, it can be worth it!
So in summary:
-
The regular Robinhood cash account makes you wait for funds to settle before trading
-
Instant and Gold accounts offer more freedom to trade with unsettled funds
Withdrawing Unsettled Funds – Can You Do It?
I hate to say it, but withdrawing unsettled funds is a no-go on Robinhood. You can only withdraw cash that has fully settled.
Here are some key things to keep in mind:
-
Robinhood will cancel any withdrawal of unsettled funds – gotta wait for that cash to settle first!
-
Once initiated, bank withdrawals take 3-5 business days to complete via ACH transfer.
-
You can withdraw up to $50,000 per day from Robinhood – not too shabby.
-
Withdrawals only process on regular business days (no weekends or holidays).
So I‘d recommend only trying to withdraw settled cash to avoid headaches. Check your balances to see what cash has finished settling before you attempt to transfer it out.
5 Pro Tips to Avoid Unsettled Fund Headaches
While unsettled funds are totally normal, I get that they can be a pain to deal with. Here are 5 tips from an experienced Robinhood user (yours truly!) on avoiding issues:
1. Check settlement times before trading
Take a minute to see when that big deposit will finish settling before trying to invest it. You‘ll avoid some nasty surprises!
2. Let stock sale proceeds settle before withdrawing
Give yourself a buffer of a day or two after selling stocks before attempting to withdraw the cash.
3. Keep cash on hand to trade before settlements
Having some settled cash ready avoids having to wait for pending deposits or sales.
4. Consider upgrading to Robinhood Instant
Saves you from settlement waits for smaller deposits up to $1000. Super handy!
5. Withdraw early in the week
Avoid withdrawing late in the week when transfers might get held up over weekends.
I hope these Robinhood tips help you avoid unsettled fund frustrations my friend! Just stay on top of settlement timeframes and you‘ll be all good.
Answers to Common Questions About Unsettled Funds
I know you might still have some specific questions about unsettled funds on Robinhood. So let me try to answer some of the most frequent ones:
Why are my funds taking so long to settle in Robinhood?
If your funds are taking longer than the typical timeframe, there may be a pending review by Robinhood holding things up. Reach out to their support team for help figuring out what‘s causing an extended settlement.
Can I trade options with unsettled funds?
Unfortunately no – you can‘t purchase options in a cash account with unsettled funds. You‘ll need to wait for funds to fully settle first. But with an Instant or Gold account, you may be able to trade options with unsettled funds.
How do I check my unsettled funds balance?
It‘s easy – just log into your Robinhood account and your unsettled funds balance is shown on the home screen, right below your account value. It will show as a negative figure until the funds settle in.
Can I withdraw my stock sale proceeds before settlement?
Nope, you‘ll need to wait the standard T+2 period after selling stocks for the cash to officially settle into your account before withdrawing it out.
Why is Robinhood different than other brokers?
Robinhood operates just like any major brokerage when it comes to trade settlement rules. The only difference is making funds tradeable quicker before fully settling.
What happens if I spend unsettled funds?
If you use unsettled funds to trade or withdraw, Robinhood will restrict your account for 90 days once they detect insufficient settled cash. You‘ll then need to sell those stocks purchased with unsettled funds. So avoid spending unsettled cash!
Let‘s Wrap Up…
Phew, we covered a lot of ground here on Robinhood unsettled funds!
The big takeaway is that unsettled funds are totally standard with brokerage transfers and trades. While they can be inconvenient at times, don‘t let settlement times stop you from using Robinhood!
Now that you understand exactly how unsettled funds work, you can avoid problems and manage settlements like a pro. Let me know if any other Robinhood questions come up!
