Crypto

3 mins read

January 03, 2023

How does Juno give a 5% annual bonus on cash?

Know the difference between interest rate allocation at banks and at Juno

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TL;DR

The US Fed rate influences the interest rates on cash deposits in consumer banks. These banks have a choice to set their own interest rates based on the fed rate. Banks also earn profits on existing cash deposits by providing loans, which they can pass on to their customers. They choose not to.

In Juno’s case, we pass on the returns earned on checking deposits directly to you. We also add an additional bonus on top of it from our end.

So, at the current ~4.25 - 4.5% Fed rate interest and additional bonus from Juno, you get a 5% annual bonus on your Juno checking account.

The average US Checking Account

2022 has been a particularly tough year with rising inflation leading to high loan and mortgage rates in the US. Even though the interest rate on loans is increasing, the idle cash in your traditional bank account is earning a meager 0.03% APY (the national average of US checking accounts).

Your idle cash deposits earn 5% up to balances of $25,000 and 4% beyond $25,000 up to $250,000 with a Juno checking account. But before we dive more into how Juno provides this, let’s understand how banks earn from a customer’s cash deposits, why do they offer such low rates, and how Juno is different.

How much do banks earn on your cash deposits?

If you have a bank account in any of these consumer bank accounts like Chase, Bank of America, Wells Fargo, your money is put to use. Consumer banks use your deposits to give out loans, and make profits by charging interest. Typically, the cash deposits are loaned out to other financial institutions.

These banks set their individual rates based on the Fed rate (federal funds rate). The federal funds rate is decided by the Federal Open Market Committee (FOMC), which determines the rate at which banks can loan out money to one another.

Federal reserve banks loan money to consumer banks, and thus the fed rate influences the rate of interest of consumer banks. To tackle rising inflation, the Fed increases the federal funds rate, and the 12 federal reserve banks charge higher interest rates for loans.

So, effectively, consumer banks who loan out from these banks also raise the interest rates on their loans. This way, these banks earn more when they offer loans with your deposits. While consumer banks make more returns on your deposits, they rarely pass the returns to depositors like you.

In the US, the national average checking account interest rate is 0.03%. This means you are effectively losing your cash’s purchasing power sitting in your bank account, especially in 2022, when the inflation rate was above 7% throughout the year.

The increase in fed rate for the year 2022
Source - tradingeconomics.com

Checking account features: Juno versus others

We compared our rates with that of other banks and here’s what we found:

Average checking account APY vs Juno checking account APY
Source - valuepenguin.com

If you compare the federal funds rate with the average checking account APY, it shows how much money consumer banks are making when they loan out your cash deposits.

In the case of Juno, cash deposits in Juno's checking account are loaned out by our banking partner, Evolve Bank & Trust, to potential customers. Now, with the increase in the federal funds rate since last year, all cash deposits of Juno users are directly earning the Fed funds rate in the form of a bonus.

Juno, as a company, doesn't take any commission, and we are entirely passing the Fed funds rate received from the fed rate as a bonus to all our users who deposit cash. The 5% bonus comes from higher Fed funds rate (current range of 4.25 - 4.5%) on loans offered by our partner bank. We are also giving an additional bonus on cash deposits from our end, effectively totalling the bonus to 5%.

With Juno's checking account, you earn more bonuses on your cash deposits, which help you save more. With more cash, you save money for essentials, and you can budget better. This helps you with managing a downpayment for the mortgage, setting up an emergency fund, and more.

To summarize, Juno's checking account offers

  • 5% bonus on checking vs the 0.03% national average
  • FDIC insurance for your cash deposits up to $250k
  • Fastest on and off ramp to crypto
  • Zero account fees

Sign up today for the inflation-proof checking account and earn a 5% annual bonus when you save with Juno.

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Juno (CapitalJ Inc.) is a financial technology company, not a bank. Banking services provided by Evolve Bank and Trust, Members FDIC. The Juno card is issued by Evolve Bank and Trust, Member FDIC, pursuant to license by Mastercard International.

Cryptocurrency services are powered by Zero Hash LLC and Zero Hash Liquidity Services LLC and may not be available in all states. Terms and conditions apply. When you buy or sell cryptocurrency, a difference between the current market price and the price you buy or sell that asset for is called a spread. However, unlike most other exchanges, Juno does not charge an additional trading fee. All forms of investments carry risks, including the possible loss of principal.

Cryptocurrency is not subject to FDIC insurance. The cryptocurrency assets in your Zero Hash account are not held at Juno or Evolve Bank and Trust. Juno and Evolve Bank and Trust are not responsible for the cryptocurrency assets held in any Zero Hash account. Neither Juno, nor Evolve Bank and Trust, is involved in the purchase, sale, or exchange of fiat funds for cryptocurrency or custody of the cryptocurrencies. Crypto on Juno is not currently available in HI and NY. Cryptocurrencies are highly speculative in nature, involve a high degree of risk and can rapidly and significantly decrease in value. It is reasonably possible for the value of cryptocurrencies to decrease to zero or near zero. This does not constitute investment advice.

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