DEGIRO pays 0% interest on cash: Why? Other alternatives!

Unlike other brokers, DEGIRO does not pay interest on uninvested cash. Whether you hold EUR, GBP, or any other currency in your account, you won’t earn any interest on your parked funds.

In this article, we will explain DEGIRO’s current business strategy and suggest alternatives that can earn you up to 4.00% in euros.

Why doesn’t DEGIRO pay interest on cash?

DEGIRO hasn’t explicitly addressed this, but an analysis of its financial statements shows that it doesn’t pass any interest to its clients and doesn’t plan to.

Let’s first understand why you might expect to receive interest on your cash, whether in EUR, GBP, or another currency. We’ll use EUR as an example since it’s the currency DEGIRO reports in its financial statements.

The European Central Bank (ECB) aims to maintain price stability within the EU through its monetary policy, which includes setting interest rates. One such rate is the “deposit facility” rate, which banks earn when they deposit money with the ECB. As of September 2024, that rate was 3.50%.

DEGIRO deposits clients’ money in banks that, in turn, deposit it with the ECB, earning 3.50%. By offering a 0% interest rate to clients, DEGIRO keeps all that interest for itself. In DEGIRO’s financial statements, this gain is recorded as “interest income.”

The interim management report for Q1 2024 (found here) shows that “interest income” amounted to 43.8 million euros, making up 35.6% of the total “Revenues” (123 million euros):

As indicated in their report: “Interest income in the first quarter of 2024 amounted to EUR 43.8 million, an increase of 65.0 percent compared to the first quarter of 2023 (EUR 26.6 million). The increase compared to the first quarter of 2023 is the result of higher interest on deposits with the ECB, higher interest rates for margin loans at flatex and DEGIRO, higher utilization of margin loans and a slight increase in cash deposits from customers” (emphasis added).

The “Interest income” comes from the interest on the majority of cash under custody (3.6 billion) – clients’ money parked in their accounts:

Again, the management team is very clear on this:

“flatexDEGIRO continues its conservative treasury strategy, investing customer cash under custody in very short-term investments. These mainly comprise fully collateralized margin loans of around EUR 1.0 billion made available to flatexDEGIRO brokerage customers and approximately EUR 2.6 billion of customer cash under custody, the majority of which are held directly with the German Federal Bank (Deutsche Bundesbank) overnight” (emphasis added).

And:

“The ECB deposit interest rate of currently 4.0 percent (Q1 2023: between 2.0 percent and 3.0 percent) has a direct impact on flatexDEGIRO’s net interest income given the short term of the remaining cash deposits” (emphasis added).

Will DEGIRO start paying interest on cash?

There is no indication that they will. In fact, the opposite seems true. The interim management report for Q1 2024 states in the “Outlook” section:

“Based on current developments, management assumes that revenues and consolidated net income for 2024 as a whole will be at the upper end of the guidance corridor communicated at the start of the year (revenue growth of 5-15 percent and an increase in consolidated net income of 25-50 percent)” (emphasis added).

Since interest income makes up a significant portion of DEGIRO’s revenues, it’s unlikely they could achieve their upper-end guidance without retaining all the interest income for themselves.

Alternatives to earn interest on cash

If you’re looking for alternative brokers that pay interest on your cash, check our articles, where we filter the best brokers and digital banks for getting interest on your cash in EUR. Summary:

Bottom line

All in all, DEGIRO is suitable for investing in stocks, ETFs, bonds and other financial instruments. Unfortunately, there are better options to consider when it comes to getting a risk-free return (or very close to it) on your uninvested money.

FlatexDEGIRO Bank Dutch Branch, trading under the name DEGIRO, is subject to integrity oversight by the De Nederlandsche Bank (DNB) and by the AFM (Dutch Authority for the Financial Market).

Do you have any feedback or doubts about this broker? Consider reading our review, then contact us and share your experiences.