earning interest on cash

[JJReddick]

Hiya all,

been eyeing IBKR, who is paying over 4% on USD hel on the account and almost 2% on EUR held there.
Think money markets mutual funds are paying 5% on dollar deposits right now, but not sure about commissions and custody fees. Also not sure if they allow non US customers in.

Seems like a good deal for parking some cash. Any feedback or something I am missing?

cheers

 

[Martin Everson]

Any feedback or something I am missing?

Well Euro ECB deposit rate is 2.5%, USD Fed rate is 4.65% and Bank of England GBP base rate is 4% etc etc.

You can get the same rates or better on fixed deposit at HSBC Jersey etc. However your locked in unlike IBKR. But in general a lot of banks are NOT passing on the interest rates or even close to those rates to customers and are just keeping the profits for themselves . But kudos to IBKR for passing on to customers most of the interest they are getting paid on their balances.

 

[bigdaddyleon]

Currently, Monefit Smartsaver offers about 7% yield on cash deposits.

It should be noted that the platform does not seem to be regulated and there is no deposit protection.

 

[Martin Everson]

Currently, Monefit Smartsaver offers about 7% yield on cash deposits.

Good Lord that is high on euros . This must be subprime credit lending or something....lol.

 

[bigdaddyleon]

Good Lord that is high on euros . This must be subprime credit lending or something....lol.

How will my money be put to use by SmartSaver?

Creditstar Group, the parent company of Monefit, will use the funding from SmartSaver to accelerate its credit services growth in the EU. Access to alternative assets was previously only available to institutions, but not anymore. To date, Creditstar has paid to investors €83 million in interest returns. Source: Boost your savings for your goals | Monefit SmartSaver

Is actually very much for EUR deposits, personally I do not use it, but had already read good reviews.

 

[Mr Magoo]

think putting idle cash on a IBKR account is a good option,they pass on most of the FED rate / ECB rate to you and you can move it to stocks / other accounts at any point in time. That 7% sounds to good to be true somehow. There must be a catch there. Bunq gives me 1.65% on EUR cash and Trade Republic 2%.

 

[Martin Everson]

Wise gives the below and pays monthly also:

• 1.12% for any EUR
• 2.65% for any GBP
• 3.53% for any USD

https://wise.com/help/articles/b8sVSdAzytqVamfajSirb/how-does-balance-cashback-work
It's not brilliant but better than most EMI's that are passing on nothing .

 

[void]

Wise gives the below and pays monthly also:

• 1.12% for any EUR
• 2.65% for any GBP
• 3.53% for any USD

https://wise.com/help/articles/b8sVSdAzytqVamfajSirb/how-does-balance-cashback-work
It's not brilliant but better than most EMI's that are passing on nothing .

technically speaking it's pretty good... practically not so much since holding serious 6 figures with wise or ibkr for a longer period to get some yield on one's idle cash is not a good idea and no way worth the risk, sadly

 

[Mr Magoo]

what is the risk holding 6 figures with ibkr / wise?

 

[JJReddick]

technically speaking it's pretty good... practically not so much since holding serious 6 figures with wise or ibkr for a longer period to get some yield on one's idle cash is not a good idea and no way worth the risk, sadly

I can understand why Wise given their history of shutting down accounts on a whim, but IBKR risk profile is extremely low and they offer 250k insurance on accounts that can be extend to 2m750k. What are your sources?

Insured Bank Deposit Sweep Program, eligible IBKR clients can obtain up to $2,500,000 of FDIC insurance in addition to the existing $250,000 SIPC coverage for total coverage of $2,750,000

Currently, Monefit Smartsaver offers about 7% yield on cash deposits.

It should be noted that the platform does not seem to be regulated and there is no deposit protection.

Wouldn't touch it with a 6feet stick. Think the whole purpose of holding cash is to reduce risk profile, not increase it

 

[Martin Everson]

technically speaking it's pretty good... practically not so much since holding serious 6 figures with wise or ibkr for a longer period to get some yield on one's idle cash is not a good idea and no way worth the risk, sadly

Forgot to mention Wise has 30% withholding tax on those interest payments .

But you are right .

 

[void]

what is the risk holding 6 figures with ibkr / wise?

same as with any other financial institution - fiat is not your money unless you hold physical cash and there is always non-zero risk that your money will get seized or simply locked for some time for whatever reason - some institutions clearly pursue this "strategy" to earn free yield on you deposits - surely it's a function of many variables but it's a simple math to decide whether it's a good idea to hold 500k eur in wise account for a year to earn 6k

I can understand why Wise given their history of shutting down accounts on a whim, but IBKR risk profile is extremely low and they offer 250k insurance on accounts that can be extend to 2m750k. What are your sources?

fair enough... maybe ibkr has this insurance and depending on one's trust in this kind of guarantees it might make sense...

 

[Marie Manila]

You can get the same rates or better on fixed deposit at HSBC Jersey etc. However your locked in unlike IBKR.

With HSBC Jersey, you can cancel the fixed-term deposit account before maturity.

See page 6 of their Tariff of Charges: https://www.expat.hsbc.com/content/.../hsbc-expat-tariff-of-charges-01-feb-2023.pdf

 

[Martin Everson]

With HSBC Jersey, you can cancel the fixed-term deposit account before maturity.

See page 6 of their Tariff of Charges: https://www.expat.hsbc.com/content/.../hsbc-expat-tariff-of-charges-01-feb-2023.pdf

Yup you can always break any fixed deposit if your willing to pay the cost .

----

Fixed on or after 14 October 2022

Term < 12 months - 90 days interest
Term > 12 months - 180 days interest

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[wellington]

Convert to USDC/EUDC and put into a interest bearing pool.

 

[JJReddick]

Convert to USDC/EUDC and put into a interest bearing pool.

smart contract risk is real

 

[void]

Convert to USDC/EUDC and put into a interest bearing pool.

did you ever think about where is the interest coming from and estimate the risk level?

 

[daxbr]

Good Lord that is high on euros . This must be subprime credit lending or something....lol.

Not if they receive over 100% from payday loans:

Representative Example: Amount of credit £900 over 12 months. Interest £398.81. Interest rate 73% pa (fixed), 0.2% per day of the amount borrowed. Repay with 12 equal instalments of £108.23. Total amount payable £1298.81. Representative APR: 100.96%.
https://www.creditstar.co.uk/

 

[Martin Everson]

Not if they receive over 100% from payday loans:

Representative Example: Amount of credit £900 over 12 months. Interest £398.81. Interest rate 73% pa (fixed), 0.2% per day of the amount borrowed. Repay with 12 equal instalments of £108.23. Total amount payable £1298.81. Representative APR: 100.96%.
https://www.creditstar.co.uk/

Payday income????? Thats even worse.....

Look at the collapse of pay day lenders such as Peachy, Wonga, QuickQuid, MyJar etc etc etc. And Peachy for example had a representative APR of 855% - no joke....lol.

Anyway I let people find out the hard way as I always say. There is no free lunches out here.