Why Does Robinhood Say Unsettled Funds?


Why Does Robinhood Say Unsettled Funds?

Last updated on August 2nd, 2022 at 06:17 am

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When new Robinhood users first start selling stocks with the platform, a common question they have is “Why does Robinhood say unsettled funds?

Introduction To Mutual Funds
Introduction To Mutual Funds

Unsettled funds in your Robinhood account means the stock or option hasn’t settled yet. Stocks take 2 business days to settle while options take 1 day. 

Settling Is essentially the finishing process of selling your stock/option so you don’t have access to those funds until the stock/option is officially sold. 

Options settle in one business day so the funds are available the next day after you sell the option. Stocks take 2 business days to settle so the money is available 2 days after you sell the stock. 

You can almost think of it as selling an item on eBay where you don’t get access to your money until the item is delivered to the buyer. You don’t get access to your money until the stock or option has “reached the buyer” one or two days later. 

In this article I’m going to help you gain a clear understanding of unsettled funds, including what they can be used for. I’ll also talk about unsettled funds from cryptocurrency sales. 

As a Robinhood user, I know how confusing some of the prompts and error messages that you come across can be. 

I’ll try to help you understand unsettled funds to give you peace of mind when using the platform.

Unsettled Funds Explained

Robinhood has become a popular investing app with three to four million new subscribers annually. Thirteen million users were reported on the app as of 2020. 

With that many users and with many of them being new to the stock market and investing, some of the more common questions are regarding unsettled funds. 

What are they and what can you buy with them?

Why Does Robinhood Say Unsettled Funds?

What are unsettled funds and why does Robinhood say I have them? This is a common question among new users. 

Unsettled funds usually means that the money that has either been made from selling stock/options or transferred from a bank account is not available for you to use quite yet. 

The funds show as unsettled because the transaction is still processing. 

When the status moves to settled, you know your money has transferred completely or the sale has gone through and now the money  is available to purchase securities or to withdraw from your account. 

If you are frequently trading or depositing funds, you may have some portion of your brokerage account showing as unsettled. Is there anything you can do with unsettled funds?

Can I Use Unsettled Funds to Make Trades On Robinhood?

What you can do on the Robinhood app largely depends on your account type. 

A standard account like Robinhood Instant will allow you to use up to $1000 of unsettled funds to buy stocks/options. Robinhood Gold (which is $5 per month) allows you to use up to $5000 of unsettled funds.

This means that you can trade stocks or options much more often than you would be able to without having access to Robinhood Instant. With Robinhood Instant you can sell some stock and then immediately buy another one as long as it is under the $1,000 limit. 

Where Can I Check Unsettled Funds on The Robinhood App?

You can’t see the total amount of unsettled funds, but you can view the status of each individual transaction on the app or website. 

To do this, click on the account icon (bottom right corner) in the Robinhood app and then click on the hamburger menu (top right corner). Finally, click transfers. 

Now you can see each individual transfer by clicking on it, which will show you the status. 

This only applies to transfer into the app though. To see how much money you can trade with currently just go the homepage on Robinhood and look at your buying power. That is how much money you have access to that you can currently buy stocks or options with. 

Do Funds From Cryptocurrency Sales Need To Settle First? 

If you normally trade crypto on Robinhood instead of stocks or options you might be wondering how the settling process works for crypto. 

Unlike normal transactions on Robinhood, you do not need to wait a period of time for cryptocurrency sale funds to settle in your account. Crypto sales are immediate so you can also use the funds immediately to buy more crypto or stocks/options. 

The funds from crypto sales are available immediately and can be used to buy stocks, additional cryptocurrencies, or you can simply make a withdrawal and deposit the money into your bank account.

Crypto transaction are always immediate on Robinhood so there is no wait time to trade or use that money like there is with stocks and options. 

Why Is Robinhood Saying I Don’t Have Enough Buying Power? 

If you’re getting an error message that says you don’t have sufficient “buying power” when trying to place an order, this means one of two things:

  • You don’t have enough funds currently in your account to purchase the stock 
  • The funds are currently unsettled or unusable

If you think you have enough funds because your account balance matches the stock price, think again! 

In order to have enough buying power you need to have a little bit more than the quoted price of the stock in case the market moves and the price increases as a result. 

You can get around this by setting a limit order on the stock/option purchase. You can also just make sure you have at least 5% more than the total for the order available if you are placing a market order. 

If you’re getting an insufficient buying power error due to the funds not settling, you can upgrade to Robinhood Gold. By doing so you won’t have to wait for funds to settle on up to $5,000 instead of the $1,000 with a normal Robinhood Instant account. 

Of course your other option is to simply wait for the funds to settle (which will increase your buying power) before buying that stock, option, or crypto. 

Should I Use Robinhood?

If you’re just starting out investing, Robinhood could  be the ideal online stock broker for you. However with so many choices of brokerages it can be difficult to know which is best for you and your situation. 

If you typically trade stocks in a normal brokerage account and you prefer to place trades on your phone then Robinhood is a great brokerage to use. However if you want to use an IRA, custodial account, etc. you will have to use another brokerage since Robinhood doesn’t offer those. 

Robinhood is a good choice for many people as not only do they have an intuitive, easy-to-use desktop and mobile app, but they also offers commission-free trades and no fee to sign up.

You’ll also be able to buy and sell cryptocurrencies such as Bitcoin, Etherium, Dogecoin, and more via their app or website. 

However not everything is amazing with Robinhood. Some of the downsides of using them include the customer service (which is pretty hard tk get a hold of!) and the fact that it isn’t set up for long-term investing as you can’t invest in retirement savings accounts such as Roth IRAs or 401ks.

What is Robinhood Gold?

Robinhood offers a premium membership for $5 per month called Robinhood Gold. The main features included with the subscription are: 

  • Reports compiled by Morningstar
  • Level 2 quotes
  • Higher instant deposit limit
  • Pre-market trading
  • After-market trading
  • Additional margin of $1000

The Gold membership was initially priced based on how much margin was to be used, but that changed in April 2019. 

Now all users pay $5 per month. Robinhood also increased the benefits of the Gold membership to include extended trading hours and research.

Final Thoughts

So…why does Robinhood say unsettled funds? Well, for one it’s completely normal to see this when trading on Robinhood or virtually any other brokerage. 

However, this will dictate how much buying power you have when attempting to purchase stocks, options, or cryptos. 

Keep in mind, what you can and can’t do with unsettled funds boils down to what type of account you have on Robinhood and what you’re trying to do with the unsettled funds.

At the end of the day, you won’t be able to withdraw unsettled funds and deposit them into your bank account until they settle first. 

This can take up to 2 business days for a sale of a stock or 5 days if the unsettled funds are from a transfer into Robinhood. 

Ultimately unsettled funds are just funds that are waiting to be verified before you can trade or withdraw them. 

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