Cutting corners on savings account interest rates: What's new for customers in 2025?
Daily interest on daily income: Essential information for both current and future clients regarding current interest rates applied to daily earnings
The rosy days of enticing savings account interest rates for new customers seem to be a thing of the past. With banks receiving less from the European Central Bank, it's only natural that these savings will trickle down to the customers. The ECB's latest move, lowering the deposit rate by 0.25%, is a precursor to the change that's coming for both new and existing customers.
A study by Frankfurt-based data experts FMHX reveals that the impact of deposit rate cuts on promotional offers for new customers is not as direct as one might think. On average, new customer offers decrease by a factor of between 0.13 to 0.23 percentage points following a deposit rate cut. As of now, new customers can expect an average interest rate of 2.21%, with top providers offering rewards up to 3.0%. However, the attractiveness of these offers is tempered by the short term, often only two to six months, of their guarantee.
Where to find the highest savings account interest rates?
With a competitive market, customers have options when it comes to savings accounts. The Bank of Scotland leads the pack with a competitive 3.0% interest rate, although this offer is only guaranteed for two months. For those seeking stability and a longer term option, the Volkswagen Bank offers a more attractive proposition – a guaranteed 2.4% interest rate for six months. Someone depositing 50,000 euros with the Bank of Scotland would earn 513 euros in interest over half a year (guaranteed 3% for two months and subsequent 1.25% existing customer interest rates). With the Volkswagen Bank, a guaranteed interest income of 675 euros would be achieved.
The rapid decline of promotional interest rates on savings accounts
While not all banks immediately adjust their rates following an ECB deposit rate cut, the decline in promotional interest rates for new customers is inevitable. 1822direkt, Openbank, Targobank, BMW Bank, Advanzia, and the abcbank are among the banks that have already lowered their savings account interest rates for new customers by up to 0.7%. This trend is expected to continue, with more drastic cuts likely in the near future.
Interest rates for existing customers: a slower but steady decline
Contrary to new customers, the interest rate decline for existing customers has been slower, with rates dropping by only 0.33 percentage points since the beginning of the year, decreasing from an average of 1.19% to 0.86%. The reason behind this modest decline is the banks' ability to invest their sight deposits (primarily overnight deposits and balances on checking accounts) at the ECB at a rate of 2.0%. With over nine trillion euros worth of sight deposits, the ECB is paying out a significant 281 million euros daily in interest due to an interest rate differential of 1.14%.
Proactive saving for successful financial management
In the face of potentially continuous interest rate cuts, it's essential for customers to stay informed about their account options. The FMH website offers current interest rates for different financial institutions. By making informed choices and considering fixed-term deposits over overnight deposits, customers can effectively manage their savings and invest in their financial future.
Max Herbst is the owner of the independent financial advisory firm FMH, which has been providing independent interest rate information since 1986.
Source: ntv.de
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Community policies and employment policies within the banking and insurance industry may need to be re-evaluated in light of the changing savings account interest rates. The decrease in promotional offers for new customers, as well as the potential further cuts for existing customers, could have implications for personal-finance management and the overall finance industry.
Industry experts recommend proactive saving strategies as an effective way for customers to manage their financial future, despite the continuous interest rate cuts. By staying informed about account options, considering fixed-term deposits, and making informed choices, customers can continue to invest in their financial future.
