Admittedly, the times when a bank rewarded savers with generous interest rates when they deposited as much money as possible into a checking account or overnight are over. But since the European Central Bank (ECB) lowered the deposit rate for banks to 0.5 percent in September 2019 – so credit institutions pay extra when they stop funds with the ECB – there has been a whole new trend: negative or negative interest on customer accounts. Own.
Contents of this article:
When is the penal interest payable on savings?
The good news: In most cases, negative interest is only payable above a certain amount – 100,000 euros is the magic limit for many banks, some of which are higher. However, experts fear that more and more service providers will cut this limit if the low interest rate policy continues. Call-up funds accounts are currently mainly affected by the interest in fines, but are also increasingly affected by checking and clearing accounts.
The exact amount of the penalty interest ranges from 0.4 to 0.5 percent. With a rounding amount of € 100,000 in your call money account, you will pay € 400 or € 500 in interest penalty on savings – every year.
Good to know: The Call Funds account is an open ended interest bearing account. The central purpose is long-term investment while simultaneously providing flexible credit. Corresponding to this is a fixed term deposit account, where funds are invested for a specified period of time and can only be repaid according to certain notice periods.
Incidentally, some banks don’t show any specific negative interest rates, but then simply get their money out of it through another route: in the form of monthly account management fees. In these cases, it is also easy to calculate how much you would pay on top if you saved money in your checking account or overnight.
Here you can find the account that best suits your needs
Risks and possibilities for new clients
It is not just the amount of savings that determines whether or not you should pay fines interest: if you already have an account with a bank that does not have negative interest, then the bank may subsequently charge you penal interest only with your consent. Unfortunately, there have been instances in the past where old clients’ banks canceled their accounts when they did not agree to an interest penalty. In the last paragraph we explain how you can avoid this situation and the penalties in general.
Get more of your money despite negative interest rates
You can benefit from an offer of positive interest not only if you start from scratch and open a new account or a new checking account, that is, if you are a new customer. As an existing customer, you must also change service providers if the penalty interest is announced. Online tools make it easy for you to compare different service providers and make it easy for you to change your bank.
There are also the following ways to bypass negative interest and get more out of your savings:
- Keep your savings below the € 100,000 limit. This not only provides you with negative benefit – overnight money accounts are only suitable to a limited extent for real returns and long-term investments of this size. Even with positive interest rates, inflation ensures that any form of increase in value diminishes over time. As a rule of thumb: Put about three net monthly salaries into your call money or checking account in order to get a quick “nest egg”.
- The following applies to all other savings: Look for alternative forms of investment, for example ETFs, funds, cryptocurrencies, or real assets like gold and silver.
- If you still want to invest more than € 100,000 in a call cash account, split the deposits into several accounts in different banks. Another advantage here is that some service providers only offer deposit protection of € 100,000 in the event of bankruptcy. If you split your assets, you will benefit twice.
- Choose a direct bank rather than a branch bank. By cutting out personal support, expenses and thus fees are reduced.
- Close the fixed term deposit account for the longest period possible and without penalty interest. Once agreed, the terms apply for the entire term. The lower case letters are important: if the contract simply expires and the money is automatically paid out at the end, there is no risk. However, if the contract is automatically extended at the end of the day for the same time only under new conditions, you should definitely terminate it in time. Otherwise, negative interest rates become highly weighted.
Is there also a negative interest rate on loans?
