eToro offers a competitive interest program for uninvested cash balances, allowing users to earn returns on idle funds. This program is designed to help you make the most of the cash sitting in your account without investing it in other assets.
With eToro, you can earn up to 4.8% annually in USD on your uninvested cash.
In this article, we will explore how eToro’s cash interest rate works, how to activate it, potential limitations, protection and security, and more. Let’s dive in!
Key points
- Interest rates offer: Earn up to 4.8% annual interest on your USD uninvested cash;
- Monthly payments: Interest is added to your eToro balance automatically each month;
- No commitment: Your funds can be withdrawn at any time;
- Eligibility: Requires a minimum account balance of $10,000;
- Simple activation: Activate interest through the eToro Club dashboard;
- Protection scheme: Assets and cash are protected up to £85,000 for UK residents (FSCS) and up to €20,000 for EU residents (ICF);
- Invested in QMMFs: Funds are placed in Qualifying Money Market Funds, invested in low-risk assets like government bonds.
What Interest rates does eToro offer on cash balance?
eToro provides interest on cash balances at different rates depending on the total balance in your account. Here are the rates offered:
- $10,000 – $24,999: 1.5% annual interest
- $25,000 – $49,999: 3.5% annual interest
- $50,000 – $249,999: 4.5% annual interest
- $250,000 and above: 4.8% annual interest
It is important to note that the interest is paid only in USD. This means that any deposits made in other currencies will be converted to USD, potentially incurring conversion fees. For example, if you deposit funds in GBP, they will be converted to USD to earn interest.
Additionally, these interest rates apply only to the available cash balance in your account, not to the total account balance, which includes invested funds.
For detailed information about the terms and conditions of eToro’s interest on balance, please click here.
Does eToro offer interest on EUR or GBP?
No, eToro only offers one account currency, which is the USD. As such, any deposits made using other currencies will be automatically converted into USD.
So, eToro does not offer any interest in other currencies such as the EUR and the GBP.
How can I activate eToro interest on my cash balance?
To be eligible for eToro’s interest payments on your account balance, your total funds need to reach a specific amount. Here’s how you can activate the interest:
- Access your eToro account: If you’re not yet an eToro user, you can create an account here;
- Verify your funds: Ensure the total amount in your account satisfies the minimum requirement for the interest rate you’re aiming for.
- Activate interest: Navigate to the eToro Club section of your account dashboard, locate the “Interest on Balance” option, and toggle it from “Disabled” to “Active.”
Once activated, interest is calculated daily and paid monthly.
How is eToro interest on balance calculated?
While eToro’s interest rate is quoted annually, the calculation is done daily based on the amount of cash you have available in your account.
Let’s illustrate with a scenario where you have a $50,000 balance and are earning a 5% annual interest rate:
- Daily interest rate: 0.013699% (5% divided by 365 days);
- Daily interest earned: $6.85 (0.013699% multiplied by $50,000).
Assuming this balance remains constant, your estimated interest earnings would be:
- Monthly interest (30 days): $205.47 (approximately $6.85 per day multiplied by 30 days);
- Annual interest (365 days): $2,500 (approximately $6.85 per day multiplied by 365 days).
Important notes:
- Non-compounded Interest: Interest is not compounded, meaning the interest you earn does not itself earn additional interest in subsequent periods;
- Consistent balance: The calculations above assume a constant balance of $50,000 throughout the year. Your actual earnings may vary if your account balance fluctuates;
- Daily balance determination: eToro determines the interest-earning balance daily, excluding any interest or fees already owed.
How is eToro interest on cash balance paid out?
Interest earned is credited to your account every month. Payments are made automatically by the 5th business day of the following month. The minimum amount of interest that will be paid is $0.01.
Are there any drawbacks?
No, there aren’t significant drawbacks, but there are a few important considerations to keep in mind:
- Interest is only in USD: eToro only offers interest on your uninvested cash in USD. This means any deposits in other currencies will need to be converted to USD, potentially incurring conversion fees;
- Minimum Balance requirements: To qualify for the interest rates, you must maintain a specific minimum balance in your account ($10,000);
- Tax implications: The interest earned may be subject to taxation depending on the regulations in your country of residence.
For a comprehensive understanding of how your funds are managed and protected within QMMFs, we encourage you to visit eToro’s website here.
How is my money protected?
Your funds are protected through multiple layers of security at eToro:
- Account segregation: Client funds are kept separate from eToro’s operational funds, ensuring their safety even in the unlikely event of eToro’s insolvency;
- Regulatory compliance: eToro adheres to strict regulations set by reputable authorities like the FCA, CySEC, and ASIC, providing an added layer of protection;
- Investment in QMMFs: Uninvested cash is placed in secure, low-risk Qualified Money Market Funds (QMMFs), primarily consisting of low-risk investments like government bonds. These funds are managed by leading financial institutions like BlackRock and JP Morgan. This strategy prioritizes safety and liquidity, aligning with practices used by major financial institutions.
For a comprehensive understanding of how your funds are managed and protected within QMMFs, we encourage you to visit eToro’s website here.
eToro alternatives for interest on uninvested cash
Bottom line
In summary, eToro’s interest in uninvested cash balances provides an attractive opportunity for users to earn returns on idle funds, especially with rates up to 4.8% annually for USD balances. This feature integrates smoothly into the eToro ecosystem, offering users a straightforward way to maximize their uninvested cash.
If you’re an eToro user and prioritize earning interest on your cash holdings, this program could be a great fit for you.
However, it’s important to be aware of the limitations, such as the interest being offered only in USD, potential currency conversion fees for non-USD deposits, and specific balance requirements to qualify for the highest rates.
For more information about eToro and its offerings, check out our detailed review of the eToro platform.
Feel free to get in touch if you want to share feedback or have any questions!
