A brand new app-based bank account offers Britons a 2 per cent credit interest rate on deposits of up to £85,000.
The ‘socially conscious’ digital bank Kroo is launching its free checking account after being awarded a full UK banking license earlier this year.
The boss says it ‘sincerely’ [has its] backs of customers’ and wants to ‘change banking for the better’.
New checking accounts are rare and Kroo is only the third bank to receive a license since 2016.
But it has a lot of competition in the 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 acquired its full UK banking license earlier this year and is now launching its first current account
Cash held at the bank is fully protected by the UK Deposit Guarantee Scheme (FSCS), meaning client deposits are protected up to £85,000 per person.
On top of the 2 percent interest rate, Kroo offers lower APRs on overdrafts than some major banks. It also does not charge for spending abroad.
We check the new account and Kroo’s social and environmental claims, and ask if it’s worth opening one.
Who is behind Kroo?
Kroo describes itself as a “socially conscious digital bank” and says it is on a mission to change the banking industry for the better.
It was founded in 2016 and is led by co-founder Nazim Valimahomed and CEO, Andrea De Gottardo.
De Gottardo says: “Building a fully licensed bank from scratch is extremely difficult and requires an enormous amount of time, resilience and passion – and rightly so.
“We have created a bank that breaks with the standard profit extraction logic of the established players and focuses on truly supporting our clients.
‘Kroo is a bank that really connects people financially and stands for values with which our customers can identify.’
Ethical bank: Kroo’s CEO, Andrea De Gottardo, says the bank “is champions of values that its customers can relate to”
Planting trees to attract millennials
Kroo will probably appeal to the more environmentally conscious banking customer.
The bank says it will plant two trees for every current account opened, through its charity partner One Tree Planted.
It’s also aiming to brand itself as the bank of choice for Gen Z and millennials – essentially anyone in their teens, twenties or thirties.
Similar to some other digital banks, Kroo allows its customers to spend, track and checkout with their friends with just a few buttons on the app.
This means its customers can create groups of friends and let Kroo calculate who owes what.
It offers instant spending alerts and will also break down into categories where its customers spend their money. For example transport, shopping and eating out.
This can potentially help people better understand their spending habits and budget accordingly.
In-credit interest: is Kroo the best account on offer?
In terms of credit rates, Kroo is arguably leading the way.
Nationwide offers 5 per cent credit interest, but only on balances up to £1,500, making it less attractive for those who usually have large current account balances.
The Kroo app, like many other app-based accounts, gives customers an overview of their spending habits
Santander’s 123 account is Kroo’s closest competitor, paying 1.75 per cent interest on balances up to £20,000. However, it also comes with a £4 monthly fee that will eat into all the proceeds.
However, those who want to maximize the interest they earn through their current account should look for a bank that offers current accounts with a linked savings account.
These are exclusive savings deals that savers can access when they log into a particular bank or checking account.
For example, Santander has a linked savings account for users of a Santander Edge checking account, which offers customers 4 per cent interest on balances of up to £4,000.
HSBC’s Online Bonus Saver account is an easy-to-access savings deal that pays 3 per cent on balances up to £10,000, exclusive to HSBC bank customers, although each withdrawal reduces the rate to 0.5 per cent in any given month.
The Barclays Rainy Day Saver account pays 5.12 per cent interest on balances up to £5,000, exclusively for Barclays Blue Rewards members with a Barclays bank account.
Are other banks more sustainable?
In terms of being “socially conscious,” planting two trees for every bill opened certainly counts for something. However, there may be other banks with a stronger claim in this area.
Triodos bank sees itself as the most socially responsible bank in the UK and supports the concept of sustainable banking, which it describes as using money with conscious consideration of environmental, cultural and social impacts.
Triodos customers’ money goes to a range of projects, including charities, community programs, care homes, social housing companies, organic farmers, homelessness programs and renewable energy.
It publishes details about these organizations on its website so that its customers can see where their money is going.
Last year, Which? and Ethical Consumer ranked Triodos as the most sustainable provider of savings accounts.
The ranking was based on publicly available information about how they use depositors’ deposits, the environmental impact of the industries they fund, and what the bank or building society did to reduce it.
However, those who open a bank account with Triodos will have to pay £3 per month for the privilege.
The app can provide reminders when customers have an upcoming payment
How does it compare to Monzo and Starling?
One of the major drawbacks of a Kroo account is that the free cash withdrawal limit is £200 per 30 days.
For withdrawals over £200, you will be charged 3 per cent of the amount withdrawn.
Most banks have a daily or monthly cash withdrawal limit – £200 is much lower than most though.
Similarly, Monzo charges a 3 per cent fee if customers withdraw more than £250 in cash within 30 days – although customers can increase that cash limit if they’re willing to pay a monthly fee.
Starling acts more like the big banks, allowing customers to make up to six withdrawals per day, with a daily limit of £300.
Kroo offers up-to-date spending and payment notifications, as well as the ability to split bills.
In the future, Kroo says it will use predictive technology to track expenses in real time, help customers make better financial decisions, and stay on top of their transactions and upcoming payments.
But right now, its tech offerings are similar to those of its app-based competitors, Monzo and Starling Bank, both of which offer instant payment notifications, categorize expenses, and the ability to split bills.
Kroo’s 24.9 percent overdraft rate is certainly lower than most other banks, but not all. Triodos’ overdraft rate, for example, has been set at 18 percent.
In the sense that Kroo does not charge customers when spending abroad, this is an advantage over some bank accounts, but not all.
For example, Starling, Chase, Metro, Virgin Money and Monzo all offer free use abroad to varying degrees.
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