A brand new app-based bank account is offering Brits 2% interest earned on balances up to £85,000.
‘Socially responsible’ digital bank Kroo is launching its fee-free checking account after securing a full UK banking license earlier this year.
His boss says “really [has its] customers’ backs” and wants to “change the bank for the better”.
New current accounts rarely arrive and Kroo is only the third bank to be licensed since 2016.
But it has plenty of competition in app-based banking stakes, with banks such as Monzo and Starling already serving millions of UK customers.
Kroo is a digital bank founded in 2016. It obtained its full UK banking license earlier this year and is now launching its first checking account
Cash held with the bank is fully protected by the UK Deposit Guarantee Scheme (the FSCS), meaning customer deposits are protected up to £85,000 per person.
In addition to the 2% interest rate, Kroo offers lower APRs on overdrafts than some of the big banks. It will also not charge any fees when spending abroad.
We run the rule on Kroo’s new account and social and environmental claims, and ask if it’s worth opening one.
Who is behind Kroo?
Kroo describes itself as a “socially responsible digital bank” and says it is on a mission to change banking for the better.
Founded in 2016, it is led by co-founder Nazim Valimahomed and managing director, Andrea De Gottardo.
De Gottardo says, “Building a fully licensed bank from scratch is exceptionally difficult and requires enormous amounts of time, resilience and passion – and rightly so.
“We have created a bank that breaks the standard logic of extracting profits from incumbents and truly focuses on supporting our customers.
“Kroo is a bank that truly connects people financially and upholds the values our customers can identify with.”
Ethical banking: Kroo’s managing director, Andrea De Gottardo, says the bank “stands for values with which its customers can identify”
Plant trees to attract millennials
Kroo will probably appeal to the most environmentally conscious banking customers.
The bank says it will plant two trees for every checking account opened, through its charity partner, One Tree Planted.
It’s also focused on marketing itself as the bank of choice for Gen Z and millennials — basically anyone in their 20s or 30s.
Similar to some other digital banks, Kroo allows its customers to spend, track, and hang out with their friends with just the tap of a few buttons on the app.
This means its customers can create groups with friends and let Kroo calculate who owes what.
It provides instant spending notifications and will also break down its customers’ spending into categories. For example, transport, shopping and dining out.
This can potentially help people better understand their spending habits and budget accordingly.
Interest income: is Kroo the best account offered?
In terms of interest income, Kroo is arguably ahead of the pack.
Nationwide offers 5% interest earned, but only on balances up to £1,500, making it less appealing to those who typically have a large balance in their checking account.
The Kroo app, like many other app-based accounts, gives customers a breakdown of their spending habits
Santander’s 123 account is Kroo’s closest competitor, paying 1.75% interest on balances up to £20,000. However, it also comes with a monthly fee of £4 which will reduce any returns.
However, those who wish to maximize the interest they earn through their checking account would be better off looking for a bank that offers checking accounts with a linked savings account.
These are exclusive savings offers that savers will have access to if they register with a particular bank or current account.
For example, Santander has a linked savings account for Santander Edge current account users, offering customers 4% interest on balances up to £4,000.
HSBC’s Online Bonus Saver account is an easy-to-access savings offer paying 3% on balances up to £10,000, exclusive to HSBC banking customers, although any withdrawals reduce the rate to 0.5% during of a given month.
The Barclays Rainy Day Saver Account pays 5.12% interest on balances up to £5,000, exclusive to Barclays Blue Rewards members with a Barclays bank account.
Are other banks more sustainable?
In terms of “social awareness”, planting two trees for every account opened certainly counts for something. However, there may be other banks with a stronger claim in this area.
Triodos Bank considers itself to be the UK’s most socially responsible bank and champions the concept of sustainable banking, which it defines as the use of money taking into account its environmental, cultural and social impacts.
Money from Triodos customers goes to a range of projects including charities, community programs, nursing homes, social housing providers, organic farmers, homelessness programs and renewable energy .
It publishes details of these organizations on its website so its customers can see where their money is going.
Last year, which one? and Ethical Consumer ranked Triodos as the most sustainable savings account provider.
The ranking was based on publicly available information about how they use savers’ deposits, the environmental impact of the industries they finance, and what the bank or building society was doing to reduce it.
Those who create a bank account with Triodos will, however, have to pay £3 per month for this privilege.
The app can provide reminders when customers have an upcoming payment
How does it compare to Monzo and Starling?
One of the main disadvantages of a Kroo account is that its free cash withdrawal limit is £200 every 30 days.
For withdrawals over £200, it will charge 3% of the amount withdrawn.
Most banks have a daily or monthly cash withdrawal limit – however, £200 is well below most.
Similarly, Monzo charges a 3% fee if customers withdraw more than £250 in cash in 30 days – although customers can increase this cash limit if they’re willing to pay a monthly fee.
Starling behaves more like the big banks and allows customers to make up to six withdrawals per day, with a daily limit of £300.
Kroo offers up-to-date expense and payment notifications, as well as the ability to split bills.
Going forward, Kroo says he will use predictive technology to track spending in real time, helping customers make better financial decisions and stay on top of their transactions, as well as upcoming payments.
But for now, its technology offering is similar to app-based rivals Monzo and Starling Bank, both of which offer instant payment notifications, categorize expenses and can split bills.
Kroo’s 24.9% overdraft rate is certainly lower than most other banks, but not all. For example, Triodos’ overdraft rate is set at 18%.
As for the fact that Kroo doesn’t charge customers when they spend abroad, that’s an advantage over some, but not all, bank accounts.
For example, Starling, Chase, Metro, Virgin Money and Monzo all offer free usage abroad to varying degrees.
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