Trade Republic is a German banking entity that operates in different countries of the European Union, including Spain. Those who create a savings account from its application receive a 3.75% remuneration with an investment limit of 50,000 euros. This interest rate is much higher than that offered by other brokers and that has encouraged several users to use it. But what exactly is Trade Republic? What are its advantages and disadvantages? Is there any fine print in that 3.75% remuneration?
The fintech platform Trade Republic was founded in 2015 in Germany and arrived on the Spanish market in October 2021. Its main activity is to act as a broker for those who want to invest in stocks, ETFs (Exchange Traded Funds), cryptocurrencies or bonds. However, in recent months, it has also become known for its function as a savings account, as it rewards its users with 3.75% per year on the money deposited.
This interest rate is the highest available in the Spanish market at the moment. In addition, they do not require any type of link. That is, the holders can withdraw the money whenever they want without any penalty. But, as with everything, Trade Republic has its pros and cons and it is worth considering them before venturing to put the money into the account. Below, we will tell you the details that you should know to become an expert and, if you dare to take the step, do so with a firm footing and without any doubt.
Advantages and disadvantages of Trade Republic
The big advantage of Trade Republic is the ease with which you can create an account that pays 3.75% (previously 4%). Even if you don’t invest, the app offers you a reward for putting your money in it instead of other banking alternatives. Its percentage is much higher than its rivals.
Creating an account with Trade Republic is as simple as installing the platform on your mobile phone and following the steps indicated. You will need to identify yourself with your ID, passport or other legal identification document that has not expired, and with a photo.
Afterwards, you can transfer the money from your usual account to the German bank’s account in two ways: by credit card or by bank transfer. The first time you do it with a card, you won’t be charged a fee, but the second time you will, and that can be considered a disadvantage. However, you can always opt for a transfer, which, although it may take a few days, won’t incur any fees.
Regarding Visa debit cards, which allow you to pay in establishments with a dataphone, only the virtual one is free. Therefore, you must have a mobile phone with NFC. Otherwise, you will have to spend some money on a physical one:
- Classic Card: 5 euros one-off issue fee
- Mirror Card: 50 Euros one-off payment. Made from 20 grams of metal.
No card, whether virtual or physical, has subscription fees. In addition, regardless of which one you choose, you will be given 1% Saveback with each payment to invest within the broker.
Another disadvantage to consider is that there are fees when withdrawing cash. Trade Republic explains that any ATM that accepts Visa cards can be used to withdraw money in any currency. But the withdrawal must be more than 100 euros if you don’t want to be charged for it. The same goes for transactions to another account.
How do they calculate the 3.75% interest at Trade Republic?
All customers who open a savings account with Trade Republic will earn 3.75% interest on the cash they have deposited. Up to a maximum of 50,000 euros. So, if you deposit more money, you will not get more if you have exceeded the limit set by the German company.
As stated on their website, interest is accrued daily. To calculate it, their partner banks use the European Central Bank’s convention of daily calculation (interest/360 days).
At the end of each day, Trade Republic calculates the effective balance in the user’s savings account and multiplies that amount by the annual interest rate for each day. They then add up the value of that daily interest and transfer it to the cash account on the first day of each month.
The fine print of Trade Republic’s 3.75% stake
When you create a savings account at Trade Republic, in order to start rewarding you with the 3.75%, you must activate the interest. This is as simple as going to the ‘Cash’ section of the app, scrolling down until you find ‘Interest’ and, once inside, activating it.
If you want to deactivate Trade Republic interest, you can do so. The brand informs that you will only have to contact its customer service team. But you must be very clear about this, since, once you have disabled the payment of interest, it will no longer be possible to activate it again.
Also, if you decide to make the jump to Trade Republic, you will have to remember to include your profits in your tax return each year. The fintech platform does not withhold taxes on the interest paid to its international clients, but these capital gains are subject to tax. Therefore, it is the responsibility of Spanish clients to include the interest received in their returns according to Spanish rules.
Is your money safe at Trade Republic?
On their official website, they report that they are supervised by BaFin (Federal Financial Supervisory Authority), Bundesbank (the German Central Bank) and the Central Bank of Ireland. In this way, they guarantee security and trust identical to that offered by a normal German bank.
The money you deposit with Trade Republic is held in a collective account with their partner banks. Currently, these are Deutsche Bank AG and JP Morgan SE (from Germany), HSBC Continental Europe SA and Citibank Europe plc (from Ireland). They are all authorised to take deposits and, thanks to this, they can make a profit and give us a percentage of 3.75%.
All the cash you deposit with Trade Republic, up to €100,000 per client, is legally protected. So, if something happens to the fintech platform, you could save your money in your savings account. However, if you invest your money in any of the options offered by the broker, the situation is more complex, as is always the case in the world of investments.
