Slashed Savings Account Interest Rates: What You Need to Know
Daily Interest Rates on Daily Income: Critical Information for Current and Prospective Clients Immediately
Got some cash sitting around? Well, those lucrative interest rates on savings accounts you've been enjoying might soon be history. Banks are feeling the pinch as the European Central Bank (ECB) slashes deposit rates, and it's only a matter of time before those cuts trickle down to us.
The ECB recently lowered the deposit rate, meaning banks will earn less interest from the ECB. And guess who's gonna pay the price? You got it - new customers who've been reaping the benefits of limited-time promotional offers. That's according to a study by data specialists FMHX. So don't expect to see those eye-popping returns anymore.
Where Can I Find the Best Interest Rates?
New customers are looking at an average of 2.21% interest. If you're clever about it, you can find rates as high as 3% (though they're only guaranteed for two months). On the flip side, some banks won't even budge beyond 0.4%.
If you want that sweet, guaranteed cash, take a look at the Bank of Scotland, who are offering 3% for the first two months. Or dive into Volkswagen Bank's 2.4% for six months. A deposit of 50k with the Bank of Scotland would fetch you 513 euros in half a year. Go with Volkswagen Bank, and you'd bag 675 euros!
The Rapid Fall of Promotional Rates
Sadly, those juicy rates won't last. Banks are already starting to follow the ECB's lead, cutting rates for new customers by up to 0.25%. And it seems this trend will only intensify. Some banks, like 1822direct, Openbank, Targobank, and even BMW Bank, have already made significant cuts. Abcbank even dropped their rate by 0.7%.
Interest Rates for Existing Customers: A Slower, But Not a Stopped Decline
While things are moving more slowly for existing customers, they're not standing still. Despite the ECB's heavy cuts, interest rates for existing customers have only decreased by 0.33 percentage points since the start of the year. That's because banks are still making a pretty penny by investing sight deposits (time deposits and funds on the current account) at the ECB. With more than nine trillion euros in sight deposits as of the end of 2024, the banks are bringing in hefty daily earnings!
Saving Successfully: Ten Tips
For those who want to keep track of their rates, the FMH pages are your best buddies. Banks are expected to lower rates for existing customers as well, so it's wise to keep tabs on your interest earnings. If you prefer fixed-term deposits, remember to weigh the pros (planning certainty) against the cons (lack of flexiblility).
Max Herbst, the owner of the independent financial advisory firm FMH, has been dishing out independent interest information since 1986.
Source: ntv.de
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Additional Insights:
Competitive interest rates aren't hard to find in Europe! The following banks offer attractive rates as of June 2025:
- Trading 212: 2.40% p.a.
- N26 (Instant Savings): 2.25% p.a.
- bunq (Easy Savings): up to 2.51% p.a. (paid weekly)
- Revolut (Instant Savings): 1.84% - 2.69% AER (variable depending on the plan)
These rates are strong, given the ECB's policy decisions (policy rate of 2.25% as of April 2025), and make them worth considering when deciding where to keep your hard-earned cash. Platforms like Trade Republic, Lightyear, and Plum might also be worth checking out, as they've been mentioned in recent financial overviews.
- The ongoing slash in deposit rates by the European Central Bank (ECB) might impact the employments policies of banks, as they reduce costs but potentially affect their ability to offer competitive employment policies to attract and retain talented professionals in the finance and investment sectors.
- For individuals managing their personal-finance, seeking the best interest rates for their savings, it's essential to recognize that banks not only offer varying rates for new customers and existing customers, but also that the practice of frequent rate changes necessitates continual monitoring of one's savings accounts to optimize returns.
