A cash account holds only money you deposit—you cannot borrow to trade

A cash account on Robinhood is an investment account where you can only trade with money you have already deposited. You cannot borrow money from Robinhood to buy stocks, options, or other securities. Every dollar you spend on a trade must come from your account balance.

This is different from a margin account, where Robinhood lends you money to trade with. In a cash account, your buying power equals the cash sitting in your account — nothing more. You cannot use leverage, and you cannot be forced to close a position due to a margin call.

Robinhood defaults all new accounts to cash. You do not need to request it or take any special steps. Your account is a cash account unless you later upgrade to margin.

Key Takeaways

  • A cash account lets you trade only with money you have deposited; you cannot borrow from Robinhood to buy securities.
  • You must wait for trades to settle (usually two business days) before you can use that money again for another purchase.
  • Cash accounts have no minimum balance requirement and no monthly fees.
  • If you sell a security and buy another with the same money before settlement, you may trigger a good-faith violation that can restrict your account after three violations in 12 months.
  • Weekends and market holidays do not count toward the two-day settlement window.

How settlement works in a cash account

When you buy a stock or ETF on Robinhood, the trade executes when ready, but the money does not leave your account right away. The transaction settles two business days later. Until settlement happens, that cash is still yours to use, but Robinhood marks it as pending.

When you sell a security, the same two-day settlement applies. You cannot withdraw the proceeds or use them to buy something else until the sale settles. If you try to use unsettled funds for a new purchase before settlement completes, you may trigger a good-faith violation.

Weekends and market holidays do not count toward the two-day window. A trade that executes on Friday settles on Tuesday. A trade that executes on Thursday before a holiday weekend settles on the following Tuesday.

Good-faith violations and how they work

A good-faith violation occurs when you sell a security and use the proceeds to buy another security before the sale settles. Robinhood allows three good-faith violations in a 12-month rolling period. After the third violation, Robinhood will restrict your account from trading for 90 days.

The restriction applies only to cash accounts. During the 90-day period, you can still hold existing positions and deposit new money, but you cannot buy or sell securities. The restriction lifts automatically after 90 days. The 12-month rolling period means violations drop off as they age — a violation from 13 months ago no longer counts toward your total.

You can avoid violations by waiting for sales to settle before reinvesting the money. If you have already triggered violations and want to trade sooner, you can deposit additional cash instead of using unsettled funds. This way, you have fresh buying power without touching the pending settlement.

No margin, no minimum balance, no fees

Cash accounts carry no account minimum. You can open one with any amount and start trading when ready. Robinhood does not charge monthly maintenance fees or inactivity fees on cash accounts.

Because you cannot borrow, you also cannot be forced to close a position due to margin calls. Your losses are limited to the money you have deposited. This makes cash accounts simpler to manage for people who want to avoid the risk and complexity of borrowed money.

When a cash account makes sense for your trading

A cash account works well if you trade infrequently, hold positions for longer than a few days, or want to avoid the complexity of settlement rules. It also suits people who want to trade without borrowing or who do not meet the $25,000 minimum required for a margin account.

If you plan to buy and sell the same security multiple times in a week, or if you want to use borrowed money to amplify gains, a cash account will frustrate you. The two-day settlement window and good-faith violation rules make rapid trading difficult. Day traders typically use margin accounts instead, though those accounts require a $25,000 minimum balance.

Switching from margin to cash or vice versa

When you create a Robinhood account, the platform defaults to a cash account. You do not need to request it or take any special steps.

If you already have a margin account and want to switch to cash, you can change your account type in the settings menu. Robinhood will ask you to confirm the change. Any open margin positions must be closed or paid off before the switch takes effect. Once you switch to cash, you lose access to margin borrowing until you upgrade again.

Frequently Asked Questions

Can I day trade in a cash account?

You can buy and sell the same security in a cash account, but you cannot use the proceeds from the sale to buy something else until the sale settles two business days later. This makes frequent trading difficult. Day traders typically use margin accounts instead, though those require a $25,000 minimum balance.

What happens if I violate the good-faith rule three times?

After your third violation in a 12-month rolling period, Robinhood restricts your account from buying or selling for 90 days. You can still hold existing positions and deposit new money. The restriction lifts automatically after 90 days.

Do I need $25,000 to open a cash account?

No. The $25,000 minimum applies only to margin accounts. Cash accounts have no minimum balance. You can open one with any amount and start trading when ready.

Can I withdraw money while a trade is settling?

You can withdraw unsettled funds, but doing so may trigger a good-faith violation if you have also sold a security and used the proceeds to buy another. Check your settlement dates before withdrawing to avoid unintended violations.

How do I know when my trade settles?

Robinhood shows settlement dates in your transaction history. Most trades settle two business days after execution. You can also contact Robinhood support to confirm a specific settlement date if you are unsure.