Millions of German savers are annoyed by their banks’ miserliness. Many pay no interest at all, and some collect additional fines. But the first banks are waiving the negative interest rates. Which financial institutions are already reacting and who could soon follow.
The European Central Bank (ECB) is heading for the first rate hike in eleven years. ECB President Christine Lagarde recently announced that negative interest rates in the euro area should end by the end of September 2022.
It will probably be a while before the higher interest rates also reach overnight and fixed-term deposit accounts. But even savers are already feeling the consequences of the new ECB interest rate policy: the first banks are canceling the negative interest rates that they charge their customers.
Financial institutions charge their customers for these negative interest rates – often referred to as “custody fees” – because they have to pay negative interest rates themselves at the ECB for their parked funds. This results in 0.5 percent interest, which hundreds of banks in Germany pass on directly to their customers. Many banks collect the negative interest from the first euro, others only from an exemption amount of, for example, 30,000 euros.
Sample calculation: Customer A. has EUR 50,000 in his time deposit account. His bank demands an annual negative interest rate of 0.5 percent from 20,000 euros. Customer A. has to pay his bank a “custody fee” of 150 euros per year. If his bank cancels this fee, A. keeps the money – even if he doesn’t get any interest on his deposit yet.
The ECB plans to lift negative interest rates for banks in September. German financial institutions then want to pass these savings on to their customers and cancel the custody fee – such as Deutsche Bank. With its subsidiary Postbank, it is one of the major providers on the German market.
But customers don’t have to wait if they want to avoid negative interest rates. The first banks have already canceled the extra fees – for example
From the first of July, other banks will be added, as reported by the “Bild” newspaper: Sparda-Bank Hannover and Volksbank Rhein-Nahe-Hunsrück have announced such steps.
The “Handelsblatt” had already found out in a survey of banks in February that six institutions want to abolish the custody fee as soon as the ECB stops charging them negative interest. That explained
Even if banks do not remove the negative interest rates immediately or at least soon, it is worth making a closer comparison for customers. Because some financial institutions increase the allowances on which they do not charge negative interest. ING Germany took this step back in May by raising the exempt amount from EUR 50,000 to EUR 500,000. This means that savers with large assets can park half a million euros free of negative interest by switching to ING.
According to the comparison platform Verivox, other financial institutions already offer an allowance of 500,000 euros – for example
But even if banks cancel the custody fee, customers must expect losses in their savings. Because the currently historically high inflation of 7.9 percent is costing millions of savers a lot of money. Anyone who has around 10,000 euros in a call money account loses arithmetically 790 euros per year.
Experts therefore advise investing the money more lucratively. This includes investing in stocks. If you want to spread your capital widely, you should use ETFs (“Exchange Traded Funds”). ETFs on the MSCI World global stock market spread deposits across many hundreds of individual companies in different regions. This lowers the risk of losses.
Critics are right when they complain that the stock markets are currently plummeting. However, the plunge in prices can be explained by the fact that the planned interest rate hikes are unsettling many investors. The central banks want to keep inflation down by raising interest rates. If this succeeds, equity investors will also benefit. Anyone interested in this form of investment should take a look at the ETF Xtrackers MSCI World UCITS.
If you want to invest in an ETF (Exchange Trade Fund), you need a cheap securities account. Compare Germany’s online banks and neo-brokers according to offer, price and service and then buy your first ETF.
