The interest-bearing current account for businesses: everything you need to know

What is an interest-bearing current account for a company?

Current and savings accounts are traditionally contrasted.

The first is used to pay day-to-day expenses. This is the account where you deposit your income and then make payments and other transactions via the payment methods provided.

On the other hand, the savings account is used to deposit and add value to unused funds thanks to the interest generated .

These are generally two separate accounts.

An interest-bearing current account is a hybrid account that is used both to carry out current transactions and to generate interest.

This is an interest-bearing account.

Historically, this type of account has long been prohibited by French law. It wasn't until 2005 and a referral from Caixa Bank so that things can finally change.

What is the difference between an interest-bearing current account and a partner's current account?

When a company finds itself short of cash, it can call on associates or managers to grant current account advances.

This is known as a partner's current account. It is a loan granted to the company by the partner, who advances funds or waives sums due. The associate thus becomes a creditor of the company.

These advances earn interest. Shareholder current accounts and interest-bearing current accounts thus have certain points in common, but they differ in the following respects:

• The nature of the account . An interest-bearing current account is an account held with a bank or other financial institution. A partner's current account is an internal company account.

• Purpose. The interest-bearing current account enables you to make the most of unused cash. Associate current accounts are used to meet the company's financing needs.

• Compensation . It is the financial institution that sets the interest rate unilaterally for an interest-bearing current account. In the case of an associated current account, interest is agreed by both parties . Moreover, it is not necessarily remunerated, as the associate may opt for simple repayment.

How much does it pay?

Rates vary according to bank and economic conditions. For businesses, they generally hover around from 0.12% to 0.20% gross per annum for traditional banks.

Some neobanks offer higher rates, up to 3% (such as Hero ).

The benefits of an interest-bearing current account for your company

Holding an interest-bearing current account offers a number of advantages:

Optimizing available cash

Unlike a conventional current account, an interest-bearing current account makes money instead of just letting funds languish .

Each amount deposited can earn interest. What's more, unlike other solutions such as term accounts, there is no no time limit or restrictions on the disposal of funds.

Accessibility and flexibility of invested funds

The advantage of combining a current account with a savings account is that you benefit from all the advantages of a traditional current account, while earning interest. So you can freely dispose of funds .

So you don't need to manage several accounts at once.

Security and often competitive remuneration

Money deposited in an interest-bearing current account is guarantors. You therefore run no risk of losing it unless the bank goes bankrupt, which is very rare. Even then, the FGDR deposit guarantee covers you up to 100,000 euros.

Disadvantages of interest-bearing current accounts

Interest-bearing current accounts also have certain disadvantages:

Generally modest remuneration

The average return on interest-bearing current accounts remains well below that of other savings products. Moreover, interest rates are at the discretion of the banks who modify them according to market conditions.

Restrictive eligibility conditions

Not everyone can open an interest-bearing current account. Financial institutions generally require eligibility conditions . They can demand :

• Minimum balance

• The obligation to carry out a minimum number of transactions every month

• Payment of a monthly or annual fee

Limited options at some traditional banks

Offers of interest-bearing current accounts are generally restricted by various conditions at traditional banks:

• Compensation ceilings . Banks generally set a ceiling beyond which the capital deposited no longer earns interest. For example, only the first 10,000 euros earn interest.

• Strict eligibility conditions . Some banks may require a minimum income or a certain average balance to open an interest-bearing current account.

• High costs . Account maintenance fees and other associated charges may limit the profitability of this type of account.

Generally speaking, interest-bearing accounts offered by traditional banks are fairly limited.

How to choose the best interest-bearing current account for your business

Faced with such a wide range of offers, you need to use the right criteria to make an informed choice.

Compare interest rates and fees

Of course, the whole point of opting for an interest-bearing account is to be able to earn interest. You also need to take into account the various fees associated with the account.

So compare the various offers on the basis of a cost/benefit analysis. Is the interest offered sufficiently attractive in relation to the costs incurred? Give preference to offers with competitive interest rates .

Identify your specific liquidity needs

Holding an interest-bearing current account is only worthwhile if you maintain a certain level of balance in the account. The idea is to generate sufficiently comfortable interest to balance out the account management fees.

To do this, you need to evaluate your budget and monthly expenses and determine the amount you are willing to deposit in the account. You must also determine your short-, medium- and long-term financial needs .

If you have no immediate plans for the future, it might be a good idea to opt for a financial product offering a more attractive return.

Explore the offerings of neobanks and fintechs

The development of neobanks and fintechs is a reality that can no longer be ignored.

Their advantage in terms of flexibility and cost is generally presented as their main asset. So take the time to analyze their offers and compare with offers from traditional chains .

Hero: a modern solution for optimizing your company's cash flow

Hero is an innovative and flexible fintech solution dedicated to small businesses . Here are our main competitive advantages:

A competitive rate with no time commitment

Hero propose an interest-bearing pro account that doubles as a current and savings account.

We offer an attractive yield of 3% per an.

While most interest-bearing accounts offer a lower interest rate than savings accounts, Hero stands out with one of the most competitive rates on the market.

Remuneration calculated daily and paid monthly

The frequency with which interest is calculated and paid is also a relevant criterion for choosing an interest-bearing account. At Hero, interest is calculated daily (amount deposited X 3%/365) then paid monthly.

This ensures that your cash surpluses can be valorized more quickly.

Funds always available and easily accessible

Hero guarantees permanent availability of your funds without condition or penalty.

To sum up: when you need it, you can easily withdraw or transfer your funds. On the other hand, when the funds are not used, we pay you interest proportional to the amount.

Optimize your company's cash flow today with Hero

Hero is a multifunctional tool that helps small and medium-sized businesses optimize their cash flow management.

We offer a range of features to help you in your day-to-day work:

• A 0 euro/month pro account for startups and freelancers or a 39 euro/month account for companies

• Invoice financing

• Payment facilities for your invoices fractional payment and deferred payment.

In short, an interest-bearing current account is an effective way of optimizing your company's cash management. But it's important to choose the right interest-bearing account for your needs. Hero offers an interest-bearing current account with one of the most competitive rates on the market.