The current account is a useful solution for everyday expenses, the latter being directly linked to the bank card. On the other hand, if you intended to make your money work, it is a very bad investment: it is not remunerated.
If the banks don’t hesitate to invest this money to generate interest for their personal profit, the customer will receive nothing (and often, he is unaware that the banks are using it). It is for this reason that it is advisable to leave only the bare minimum in this account.
The Livret A, a paid alternative
Rather than leaving your money unpaid in the current account, you are lucky to have risk-free and generously remunerated investments in France. This is the case for example of the Livret A which allows you since February 1, 2023 to earn a return of 3% net per year.
This state-guaranteed savings account allows you to deposit up to 22,950 euros. If you have excess capital, you can also switch a part to the LDDS which pays the same amount and whose ceiling is 12,000 euros. In the end, this allows you to invest almost 35,000 euros in savings at 3% net per year, without the slightest risk.
In general, we tend to say that you should leave regarding one month’s salary in your current account – which allows you to have enough flexibility in the event of the unexpected. Everything else you should put on a paid placement. The Livret A has the advantage of allowing withdrawals (and deposits) at any time and free of charge. In addition, only 7.5% of the 55 million Livret A accounts reached the ceiling.
The fortnight rule applies
But why should you deport the money from your current account to the Livret A before the end of this month of March? Because the interest on this savings account follows the so-called “fortnightly” rule.
As the Banque Populaire website explains, “interest on your savings account is calculated twice a month. The sums paid bear interest from the first day of the fortnight following the payment or transfer (the 16th of the same month or the 1st of the following month)”. In the same way, the sums which are withdrawn “cease to bear interest from the first day of the fortnight during which the withdrawal occurs (either the 1st or the 16th)”.
More concretely, if you want to have a full month of interest, it will absolutely be necessary to place it before the 1st of the month. In other words, if you invest your money on April 1, your savings will only be remunerated from April 16 (in the second half of the month). You will therefore have lost 14 days of interest. It is for this reason that it is better to deposit your money by the end of March at the latest – rather than waiting until the beginning of the following month.
In one year, the Livret A rate was tripled by the Ministry of Economy and Finance, from 1 to 3% net annually. If this remuneration is still lower than the actual inflation calculated by INSEE, it is at the highest level since 2008.
According to forecasts and the official calculation rule, the Livret A interest rate might even increase to 4% from next August. If you want to grow your money by then, it is in your interest to deposit it as soon as possible in your Livret A, and not in your current account.
