You can now get 3% interest on your cash balances with a Freetrade Plus account
The UK’s 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 £4000.00.
How is interest paid on 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 £3000 cash in your stocks and shares ISA and £2000 on your trading account you will receive the interest on the full cash balance in your ISA and the balance on £1000 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: “
We’ve always believed that retail brokers should be doing more to help their customers put their money to work. That’s why we’re really excited to announce the launch of this new feature for Plus members, that means that our customers’ cash will be able to generate returns while they are diligently managing the cost basis for their positions.”
Is Freetrade Plus worth it for the interest rate?
However, let’s not forget that the Freetrade Plus account has a monthly membership fee of £9.99 or £119.88 per annum and that 3.0% of £4000 is £120.00. 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.
Is getting interest on a Freetrade Plus account a good thing?
Freetrade may have chosen an auspicious time to launch the offer as Bank of England data released yesterday showed that £500 million was withdrawn from National Savings & Investments accounts during October, because of deep cuts to interest rates paid by NS&I products. Which have recently been reduced to as low as 0.01%, more money is expected to follow that half a billion pounds out of the door.
Overall the Freetrade offer is no more than a clever marketing scheme but it’s a topical one, that will get people talking and it could benefit active investors with surplus cash looking for a home.