You can now earn interest on some current accounts in France
Rates of 4% are being offered for three months with one French neobank. Note that tax is due on any gains unlike with certain state regulated savings accounts
Neobanks N26 and Sumeria say they are breaking the ‘taboo’ of providing interest on current accounts
Postmodern Studio/Shutterstock
Neobanks are among the first groups to “break the taboo” of interest payments on current accounts in France, which for many years have not paid interest. However, customers must pay tax on any gains from these new accounts.
Savers in France have long been directed to a number of regulated savings accounts with predictable interest rates and guaranteed by the government.
The most well-known of these is the Livret A, currently on a 3% rate fixed until January 2025, and the Livret d’Epargne Populaire (LEP) for people with modest declared incomes, which has a 4% interest rate.
A maximum of €22,950 can be saved by one person in a Livret A, and you can have only one account, although it can be held alongside a Livret de Développement Durable et Solidaire (LDDS), which has a €12,000 maximum.
An LEP account can be held only by people with a declared income of €22,419 or less, or €34,393 for a couple with a joint declaration. They come with a €10,000 limit.
Read more: Can you open a bank account in France without a local address?
The rise of neobanks
The no-interest current account is facing increasing competition from digital and neobanks.
Most of these are based outside France, but one, called Sumeria, is the banking app of fintech company Lydia.
This famously became one of the first French start-ups to become a ‘unicorn’, meaning it has a valuation exceeding €1billion.
It is offering interest payments on current accounts of 4% for three months, which then drop to 2%. Interest is paid monthly.
Unlike regulated accounts, interest on savings in the Sumeria current account is not tax-free and will have to be declared. It is subject to the 30% Prélèvement Forfaitaire Unique, consisting of a 12.8% income tax and 17.2% social charges.
The Sumeria offer was quickly matched by German online bank N26. It is offering interest rates of up to 4%, depending on the type of subscription customers have with the bank.
N26 claims to have around three million French customers among the eight million Europeans who use the bank.
A rising star of the digital banking world, N26 hit a snag earlier this year when German regulators temporarily stopped it expanding due to concerns that its anti-money laundering and terrorist safeguards were not robust enough.
Read more: CA Britline: is it a good bank for Britons with homes in France?
High interest rates at the European Central Bank
Banks are now able to offer interest to customers because of high rates being given to those banks on funds deposited with the European Central Bank.
For a long time, these rates were very low, or even negative.
The co-founder of Lydia, Cyril Chiche, hailed it “the end of a taboo” when unveiling the Sumeria offer. He said: “Banks have deprived clients of earning interest on their deposits for cost reasons – something which was true in a low-rate universe, but is no longer the case today.”
Other accounts can also be found by shopping around.
Aimed at savers who have reached the limits of their LEPs and other regulated livrets, they are usually for fixed periods.
One example is from Distingo Bank, run by car-maker Stellantis, which is offering 3.2% interest for a three-year fixed-term savings account.
Renault Bank, Monabanque (linked to Crédit Mutuel) and Fortuneo (linked to Crédit Mutuel Arkéa) are all offering so-called super livrets with interest rates of 5% for the first three months.
