Why is the taxman encouraging you to empty your checking account by the end of March ?

© Pixabay – Byrev

It was a first in three years: the Livret A rate (3% net) exceeded that of inflation (2.9%) in February last. In other words, the real yield on Livret A finally became positive that month, at 0.1%. Even if it was negative in recent years, the return on this savings investment remains higher than that of the current account… which is 0%.

Indeed, in France, banks do not remunerate the money that is deposited in the current account. However, the latter will not hesitate to invest your money (in low-risk products) to generate income on your back. In order to maximize your money, it is strongly recommended to avoid keeping too much in the current account.

Yield deficit on current accounts

France is among the countries where banks have the right not to remunerate funds deposited in their customers' current accounts. This policy stems from a historic agreement. between the banks and the government which aimed to maintain free checkbooks in exchange for no remuneration. Today, checkbooks are no longer in vogue, which makes this idea totally outdated.

This French exception is all the more frustrating as many European countries see banks offering a return on the current account. Of course, it is not always as high as that of a real savings account, but it remains a good opportunity to generate additional income. In this period of high rates, it is relatively easy to generate a few hundred euros per year with your current account.

In France, leaving your money dormant in a current account is not only unprofitable but also expensive. Account maintenance fees, intervention commissions and fees in the event of an overdraft accumulate. Additionally, inflation reduces the real value of tied up money.

Of course, it is necessary to keep part of the funds in the current account to cover current expenses. A common rule is that you must leave at least one month's expenses. This therefore represents a maximum of a few thousand euros. Thus, the rest can be transferred to more profitable and liquid savings accounts – like Livret A. The latter offers a rate of 3% (fixed until 2025), no risk and instant availability.

Why empty it before the end of March?

Every day that passes is a day where you will lose interest on your checking account. It is therefore better to take charge as quickly as possible to migrate as much of your dormant money as possible from the current account to a more profitable savings account. You can easily transfer it to Livret A, LDDS, LEP (if you are eligible) or even your establishment's bank account. It won't cost you anything and the transaction is instant.

Also, you must also know the “rule of fortnights”. In the month, there are two: from 1 to 15 and from 16 to 30/31. For a bank to pay you on your Livret A (or any other livret), you must complete at least fifteen during the month. For example, if you start moving your money on the 17th of the month, you will only start generating interest from the 1st of the following month. Any fortnight that is not complete will not allow you to receive interest.

This is why it is absolutely necessary to transfer your money from your current account to a savings account before the end of March. If you wait until the following month, this will delay your return on your savings by another 15 days (at least). This is all the more frustrating in times when rates are high: with a return of 3% net per year, the Livret A is almost unbeatable. And above all, it is risk-free since guaranteed by the French State.

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