If you’ve been following the news in recent years, the negative savings interest rate should come as no surprise to you. What consequences does it have in practice? How is it possible that the interest on savings is so low today, because in the past the interest was much more favorable? And what alternatives to saving are there? We list it all for you.
What is negative savings interest?
In short: if there is negative interest on savings, you will no longer receive interest from the bank, but you will have to pay interest on your savings. Although interest rates have already fallen to all-time lows in recent years, we have traditionally still been accustomed to the idea that savings pay off, rather than cost. Most people have started to move, because leaving your savings in your savings account is out of date, especially if you want your accumulated capital to increase in value. A good investor therefore has little cash in the bank.
In practice, almost all banks currently have a negative fee of half a percent. That means with a capital of 100,000 euros in your savings account that you have to pay 500 euros each year instead of, for example, that there is a nice return of 5000 euros per year. There are often more possibilities than you think to realize these annual returns with safe investments. The amount of 500 euros in negative savings interest is then of course independent of the costs for having the savings account or any payment package you need, because a payment account must be linked to the savings account.
Why are you paying negative interest?
Before we explain how the negative interest rate situation came about, it is good to know that the European Central Bank (ECB) is responsible for the EU’s monetary policy. As a result, this organization determines and also the amount of the interest. We can’t really speak of height. The interest on savings has been extremely low for years. The ECB deliberately keeps interest rates low for a reason: to boost the economy considerably, so that spending shoots up. In other words: moving people to spend money mainly. In short, consume instead of saving.
Everyone is affected by low interest rates. Institutional investors, such as banks, insurers and pension funds themselves are also suffering from the extremely low interest rates. Not only do savers find it annoying that little interest is paid out, but for the banks this also means that they make a loss on the storage of your savings. And they want to prevent and compensate those losses with this negative savings rate. In fact, the banks deposit the bill, in part, with the customer.
High costs for assessing new customers and compliance
Due to European rules, more and more banks are employing a huge number of police officers and many people are engaged in what we call compliance in our sector. Naturally, the personnel costs are passed on in costs to the customers. It is expected that everyone will soon have a negative interest rate. In the financial sector, the term ‘compliance’ means compliance with laws and regulations. In recent years, many banks have been imposed more and more regulations by the government and financial regulators. The aim of these rules is to promote the stability and customer orientation of the financial system. There are now many discussions about whether these measures are proportional. With fancy names and abbreviations, such as CDD specialist, KYC and Customer onboarding specialist, there is a proliferation of employees involved in private crime fighting. Detecting possible fraud and money laundering has become an important task for banks because they have been assigned a gatekeeper function.
When and at which banks do you pay negative interest?
To determine whether a negative interest rate is possible and you therefore have to pay a fee to the bank, depends in principle on two points:
- The amount in the savings account
- The bank where you have parked your savings.
| Bank | Amount | Negative interest |
|---|---|---|
| ABN Amro | €100.000 (total) | -0,5% |
| ASN Bank | €100.000 (per account) | -0,5% |
| Bunq | From €100,000 Bunq charges €0.04 per €1000 | Not applicable |
| Centraal Beheer | €100.000 | -0,5% |
| ING | €100.000 (per account) | -0,5% |
| Knab | €100.000 | -0,5% |
| Nationale-Nederlanden | €100.000 | -0,5% |
| Rabobank | €100.000 (per account) | -0,5% |
| Regiobank | €100.000 (per account) | -0,5% |
| SNS | €100.000 (per account) | -0,5% |
| Triodos Bank | €100,000 + €2 per month over the age of 18 | -0,5% |
| Van Lanschot | €100.000 | -0,5% |
The banks are free to choose and decide for themselves whether to introduce a negative interest on savings and from what amount this will be passed on to customers. Until 1 July, most banks generally have a negative savings interest rate of -0.5% for amounts from €100,000, €250,000 or €500,000.
From 1 July 2021, many banks will lower the limits for negative savings rates to €100,000 or €150,000, making negative interest rates a reality for even more customers.
There are still some fine print applicable at some banks. In general, the rule applies that it is checked per account whether you are eligible for the limit amount.
Suppose the limit is € 100,000. Your savings account has €80,000 and your checking account is €30,000. Many banks – for the time being – do not add up. Then you don’t have to pay negative interest either!
At ABN-AMRO it works a little differently. The limit may be higher there (€ 150,000), but here they do add up all your accounts. Do you have a joint account with your partner? Then half of this is included per customer.
Alternatives to avoid negative interest rates
It is understandable that you do not want to pay interest on savings. After all, who’s up for that? There are several ways to (still) stay ahead of the negative savings interest rate.
Alternative 1: spread.
As we described above, most banks (except ABN-AMRO) do not add up the capital in your accounts if you spread it over multiple checking and savings accounts. Do you own more than €100,000 (but less than €600,000)? Then you can easily spread this over several accounts at your own bank. For example, a maximum of €100,000 in your own checking account, €100,000 in your own savings account, €200,000 in the joint checking account (because half of it is counted as your property) and €200,000 in the joint savings account.
Alternative 2: multiple accounts at multiple banks:
Do you have more than a ton in savings? Then it is not a bad idea to spread your money over several banks. In this way you can ‘park’ more money, without having to pay interest on savings. Is a bank also collapsing? Then you are guaranteed to get €100,000 back. Your money on accounts with Dutch banks is legally protected by the Dutch Deposit Guarantee. So apart from the negative interest, it is in any case a lot safer to set aside a maximum of € 100,000 per bank. Not that the chance that a bank will fall over is very high, but still.
Alternative 3: investing:
Do you believe that standing still is a step backwards or do you want to put your assets to work? You are right: thanks to the inflation figures, this is not only a cliché, but also the harsh reality. Then we recommend that you get to work with your capital and invest part of your capital invest. In short: get started with investing and go invest money. Of course you do take a risk (indeed, the well-known disclaimer), but returns on your savings account are excluded in any case. What can you invest in? The choice is huge and the possibilities are enormous. Shares, bonds, cryptos, but also investment properties, for example. investing in real estate and investing in shares has recently become popular at a rapid pace. Everyone is looking for returns now that billions of euros of money in savings accounts are evaporating.
Spare a bit and do the wealth check
Curious about the influence of the negative savings interest on your savings and how this would turn out if you invested your saved capital with Bliss? Schedule a call appointment without obligation and free of charge to see how this works out!
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