Not only the traditional banks are raising interest rates for their new customers as a result of the interest rate turnaround. Various fintechs are currently campaigning for your deposits with aggressive interest rate increases.
The C24-Bank, which belongs to the Check24 Group, will pay its customers 2.0 percent interest on their current accounts from April. Top of the German market. But there’s a catch.
Neobroker Scalable has increased the overnight interest rate to 2.3 percent – but not for all customers. Trade Republic has been attracting interest of 2.0 percent on your portfolio assets for some time.
Ever since the European Central Bank (ECB) heralded the turnaround in interest rates, the classic banks have been trying to secure the deposits of savers with ever higher interest rates on fixed-term and overnight deposits. The last time they paid such high interest was several years ago. But a lot has happened in the financial world since then. New competitors have emerged on the market – and they are also currently competing for your money.
The so-called fintechs, such as neo-brokers or neo-banks, are also willing to pursue significantly more risky and aggressive strategies. Savers also benefit from increased competition. Because the interest rates are impressive.
read too
C24 Bank pays 2.0 percent interest on the checking account
The C24 Bank, which belongs to the company Check24, is raising the interest rate for the current account to 2.0 percent on April 1. This applies to new and existing customers on deposits of up to EUR 50,000. “From April, C24 Bank will be the only bank in Germany to offer interest of 2.0 percent on all current account models,” says Lasse Schmid, General Manager at C24 Bank. “Account balances and cash receipts automatically earn interest. Our customers benefit from attractive interest rates from day one and from the first euro. That makes our current account models unique.” Yes, the interest rate is initially only guaranteed until the end of the year. How to proceed is unclear. However, it is likely that interest rates could then fall again. Switching accounts therefore needs to be carefully considered.
A few weeks ago, the neo-broker Scalable announced that it would pay 2.3 percent interest on uninvested assets. That is significantly more than you would currently get from most other financial institutions on the overnight money. Up to 100,000 euros earn interest and are paid out quarterly. But: there is a catch. The offer is only valid for “PRIME+” customers who pay 4.99 euros per month. For Erik Podzuweit, founder and co-CEO of Scalable Capita, only a small problem. “We make PRIME+ membership so attractive that not becoming a member is almost irresponsible,” he says.
A few weeks ago, the competing neo-broker Trade Republic announced that customers will now receive 2.0 percent interest on money in the clearing account. In other words, money that you pay into your Trade Republic account but do not invest.
“No time limited offer”
The offer applies not only to existing customers, but also to new customers and is “not a time-limited offer”. In addition, the interest will be credited to you monthly, although the two percent relate to one year. You also benefit from the compound interest effect.
This makes the Trade Republic account a serious overnight money alternative. Here, too, you can deposit or withdraw money just as quickly. The Deutsche Skatbank currently offers the highest interest rate for call money in Germany at 1.09 percent and is thus still below the interest rate of Trade Republic. The only catch: The Neobroker’s offer is “only” valid up to 50,000 euros. Beyond that, you will not receive any interest.
“PR effect for the app”
But how is it that a company whose core business is equities and ETFs is now paying interest itself? Hendrik Buhrs from the consumer portal “financial tip‘ is convinced that the main aim is to expand the business. “With this strategy, Trade Republic will appear on the radar of savers who have not previously dealt with stocks and the stock market. So the attractive interest rates have a PR effect for the app,” the financial expert tells Business Insider. As soon as prices on the stock exchange go up again, the newly won customers could “itch their fingers to achieve an even higher return on securities instead of two percent, for example by starting an ETF savings plan”. However, you should be aware of the risk that, in contrast to fixed interest rates, returns on the stock market are significantly more volatile.
read too
Peter Barkow, Managing Director of Barkow Consulting, already pointed out in June 2022 that the sharp drop in the volume of savings would lead to greater competition for bank deposits. “This has become particularly clear in the last few weeks, when numerous banks have significantly increased interest rates. The trend will probably continue in the medium term,” he explains when asked by Business Insider.
Klarna advertises with attractive fixed deposit interest rates
When it comes to time deposits, it is also evident that fintechs are willing to pay high interest rates in order to be able to manage savers’ deposits. The Swedish company Klarna is now also marketing its own fixed-term deposit offering much more intensively.
There are two different products, fixed-term deposit and fixed-term deposit+. The difference: the interest and the deposit guarantee. The normal fixed deposit offer is processed through the Swedish Klarna Bank, Festgeld+, however, through the German branch of the company.
read too
You currently receive 3.01 percent interest on a two-year fixed deposit with the fixed deposit+. The deposit guarantee amounts to 100,000 euros. Interest and deposit insurance are currently somewhat lower with the standard model. You can collect 2.93 percent interest for a two-year fixed deposit.
Keep an eye on deposit protection for fixed-term deposits and plan for buffers
Since you are insured with the Swedish deposit insurance in this case, you would only be reimbursed around 95,000 euros if the bank failed. The reason is the weakening Swedish krona. A few months ago you would have received well over 100,000 euros back.
Sebastian Schick, editor-in-chief at the consumer portal Biallo.de, therefore advises paying attention to the exchange rate risk. “Anyone who invests fixed-term deposits with Klarna and wants to be on the safe side should therefore install an appropriate buffer in case the krona should fall further against the euro,” he tells Business Insider.
This text was updated on February 1, 2023 and first appeared on January 4, 2023.