How can you make your checking account money grow?
Imagine a checking account that earns a gross return of 4%! At some banks, your checking account can actually make you money!
According to the most recent data from the Banque de France, of the 1,867 billion euros deposited by French citizens in their banks, a colossal 591 billion euros lies dormant in checking accounts that, so to speak, yield little or no interest.
In France, checking accounts do not earn interest due to a tacit agreement among French banks dating back to the 1960s, which stipulates that deposits do not generate interest in exchange for free services such as check issuance.
However, with the emergence of neobanks, this tradition is beginning to take a new turn. These fintech companies aim to revolutionize this norm in the French market, capitalizing on the dramatic rise in interest rates mandated by the European Central Bank to offer attractive returns.
One of the most innovative companies in this field is the German fintech firm Trade Republic. Although it is not a traditional bank, Trade Republic is an investment firm regulated by German authorities that works in partnership with banking institutions such as JP Morgan City and Deutsche Bank, which hold the platform’s clients’ uninvested funds. These partner banks deposit these funds with the ECB, which now pays 4% interest on them. They then transfer all of this interest to Trade Republic’s customers, as reported by “Les Echos.” As a result, uninvested funds held in Trade Republic accounts will yield a gross return of 4%. After applying the 30% flat tax, this equates to a net return of 2.8%, which is roughly the same rate as that of the Livret A savings account, with a minimal difference of just 0.2 percentage points. More specifically, this interest rate on the cash account—previously set at 2% gross—applies to the first 50,000 euros.
This announcement is likely to pique the interest of the Belgian neobank Wise, which lists an interest rate of 3.19% on its website. In fact, Wise clearly states that its rates automatically follow those of the ECB, whether they rise or fall. Just like at Trade Republic, interest is calculated daily and paid monthly.
Founded in 2011 in response to high bank fees on international transfers, Wise now has more than 10 million customers. During the fiscal year ending in March, the total volume of money transfers increased by 37%, reaching nearly 105 billion pounds (121.9 billion euros), while the company’s revenue climbed 51% to 846.1 million pounds. Along with rising interest rates, its pre-tax profit tripled, rising from 44 million to 147 million pounds.
Another dynamic player in the market is Bunq, a company originally from the Netherlands. Founded in 2012 by a Canadian entrepreneur named Ali Niknam, Bunq is known for paying an interest rate of 1.56% on deposits of up to 100,000 euros, with interest paid weekly. In 2022, Bunq strengthened its market presence by acquiring Tricount, which gave it access to a base of more than 5 million users who might open an account.
