You can now get 3% interest on your cash balances with a Freetrade Plus account.
The UKโs answer to Robinhood, Freetrade, has launched another incentive scheme to attract customers to its new Freetrade plus account.
The low-cost stock broker has taken advantage of the ultra low-interest rate climate here in the UK and is offering to pay interest of 3.0% on cash balances in Freetrade Plus accounts, with an upper limit of ยฃ4000.00.
But, there is no interest on basic accounts, and only 1% on standard accounts. This is one of the reasons Freetrade can operated such a low cost share dealing app, as it makes money on the difference between the interest it earns and the interest it pays out.
How is interest paid on uninvested cash in a Freetrade account?
The interest will be paid monthly and the interest-bearing balances will include unsettled and reserved cash.
Freetrade will also pay the interest on ISA balances and indeed will give those priority over other accounts that clients may hold at the broker.
If you have ยฃ3000 cash in your stocks and shares ISA and ยฃ2000 on your trading account you will receive the interest on the full cash balance in your ISA and the balance on ยฃ1000 of the cash in your trading account.
The new feature has gone live already and the first interest payments will be made in January 2021.
Given the paltry rates available to savers at high street banks currently, the Freetrade offer certainly looks attractive.
Adam Dodds, CEO and Founder of Freetrade, said: โ
Weโve always believed that retail brokers should be doing more to help their customers put their money to work. Thatโs why weโre really excited to announce the launch of this new feature for Plus members, that means that our customersโ cash will be able to generate returns while they are diligently managing the cost basis for their positions.โ
Is Freetrade Plus worth it for the interest rate?
However, letโs not forget that the Freetrade Plus account has a monthly membership fee of ยฃ9.99 or ยฃ119.88 per annum and that 3.0% of ยฃ4000 is ยฃ120.00. So at best Freetrade is rebating the annual membership fee through this scheme.
But if you are an active investor trading in the stock market who is looking to keep costs down, whilst maximising the returns, you may well want to consider the offer.
As you can effectively defer your membership fees for the Freetrade Plus account and of course any cash on your account will be protected by the Financial Services Compensation Scheme or FSCS.
However, there are brokers that pay more interest on univested cash which you can see in our comparison tables.
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