Get 4% Interest On Your Money | Trade Republic Review

There is an interest rate battle going on between banks and trading platforms, and this is good for us. Because a better interest rate for our deposits means a better chance to beat inflation. A leading player who is currently offering such an extraordinary interest rate in the European region is the online broker, Trade Republic. So in this blog, let's look into this platform in detail so that you can also ride this high-interest wave and make the most out of your money. Let's get started.

Hey, if you are new here, my name is Srijith, and on this channel, we talk all about wealth and happiness. Now I am not a financial advisor. I am just a random guy on the Internet sharing my experiences. So please do your research before you act on any of the things I say here.

Who is Trade Republic?

Trade Republic was founded in 2015 in Munich and is now one of the most popular online brokers in Europe. They belong to the neo-broker category, meaning they offer a modern and fresh vibe in comparison to older brokers and are particularly popular with young and cost-conscious investors. Their costs are low compared to conventional banks because of their extremely lean cost structure, with no branch network and relatively few employees.

This means that even beginners can use this platform to start investing in assets at a very low cost. But then not all can open an account with Trade Republic.

How to Open an Account

To open a depot with Trade Republic, you must be a tax resident, in one of the countries in the European Union where Trade Republic services are offered. You should also be at least 18 years old, and have a European mobile phone number and a checking account in the SEPA area. Once all those checkboxes are ticked, opening an account is really quick. You download the Trade Republic app that guides you through the five easy steps.

You start by creating a user account with your mobile number. In the next step, you enter your personal information and link your current checking account. Once this data has been entered and verified, your identity will be confirmed with a short video call with the Trade Republic call center. After successful verification, an SMS with a four-digit code will be sent, as final confirmation.

Finally, you enter the code on the app, complete a short legal survey on your previous experience with trading securities and your account is ready to use. But then what makes opening an account with Trade Republic worthwhile?

Why Trade Republic?

The young broker has several advantages for both beginners and experienced investors, and the most attractive one is the 4% Interest rate.

4% Interest Rate

At the time of this blog, Trade Republic offers a 4% interest rate on your uninvested cash up to a limit of €50,000. This is extraordinary because most established banks currently pay around 1% to 2% p.a. interest on existing customers' balances. I had my emergency fund in a Tagesgeld account with Comdirect and that was giving me an interest rate of 0.75%. So I was always in search of something better.

And considering how easy it was to open and set up an account with Trade Republic, I have moved all my emergency savings there. Another good thing is that the rate is calculated in real time and is paid monthly, so you can earn interest on your interest. But you need to activate this in the app first. To do that, open the app, go to the Cash tab, and enable the switch to activate the 4% interest rate. But then Trade Republic is not a normal bank, so is your money really safe?

Security

Trade Republic does not have its own deposit business, which means that your clearing account is held at four partner banks: Solaris SE, Deutsche Bank AG, J.P. Morgan SE, and Citibank Europe Plc. You can see which of the four banks your clearing account is by tapping on your profile in the top left corner of the mobile app and checking the BIC code. All four banks are members of a statutory deposit protection fund. So your balance in the clearing account is protected up to 100,000 euros in the event of a bank bankruptcy. But other than the interest from your deposits, there are ways to save more with a Trade Republic account.

Trade Republic Card

If you wish, you can apply for a free cashback Visa debit card from Trade Republic. For every purchase, one percent of the total is credited to a savings plan, limited to a maximum of 15 euros per month. To activate the cash back, you need to have a depot with Trade Republic, run a savings plan with at least 50 euros per month, and have money in your clearing account. With the card, you can withdraw money from ATMs worldwide with the Visa logo for free. Only if you withdraw less than €100, Trade Republic charges a fee of one euro.

The card comes in three versions: a card with a mirrored surface for an additional payment of 50 euros, a classic card for an additional payment of five euros, and a free virtual card. There is currently a waiting list to get the card. So if you are interested you can register in advance and get a place on the list. But whatever we discussed above are only additional perks and not the main use case of having a Trade Republic account.

Trading Securities

Trade Republic is primarily an online broker, so you can invest in over 9,500 stocks and ETFs as well as different cryptocurrencies. They also offer a wide selection of savings plans free of charge.

However, if you want to trade individual equities directly without a saving plan, you will be charged a flat rate of one euro per trade. There is no minimum volume, so even people with little experience or low income can start investing money.

The platform and the app are designed in a way to make trading as easy and accessible as possible for everyone. You will receive an annual tax certificate once a year – also free of charge. Although there are a lot of benefits, there are certain aspects where there is still room for improvement.

Cons

An important one is related to the 4% interest rate. These rates are not guaranteed forever but rely directly on rates set by the European Central Bank or the ECB.

If the ECB changes rates, Trade Republic can change the interest rates the next day. Not that it will happen for sure, but it's more likely.

The money in your cash account is primarily intended as a holding account to trade securities. According to their customer agreement, they are allowed to send credit back to your checking account if you do not do any investing for more than 30 days. You can overcome this by either actively investing in securities or setting up a savings plan at a minimum amount.

Since there is a 1 euro fee for each trade, if you are someone who does a lot of trading then it could end up costing you more money in fees compared to a broker such as Scalable Capital which offers a subscription plan and no individual trading fees.

Another drawback is with their customer support. To keep the operating costs low, they do not offer chat, branch, or phone support for customers. There is a 24-hour service, but only by email, fax, post, or via a contact form. So if something goes wrong or if you want some support then you need to wait a while to get some help.

Is Trade Republic the best option for everyone? Maybe not, but they offer a wide range of perks and benefits that are really worth considering. I've now moved my entire emergency fund to Trade Republic and earned 20 euros in interest in the last 2 months. I used that interest to set up a savings plan to buy the S&P500 ETF. It's not much yet, but I love the idea of buying something with money that I didn't work for, which in turn generates money that I can use to continue doing exactly that.

If you found this blog useful, do share it with your network so that the message can reach more people. I would appreciate it if you could use this referral link, if you wish to open an account with Trade Republic. You will get a welcome bonus and this will support me and the work I do here.

Disclaimer: The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. It is important to do your own analysis before making any investment.