Within a year, the deposits of private households with banks and savings banks rose by more than € 180 billion to a total of € 1,730,000,000, or € 1.73 trillion. Never before has the savings rate of around 17% been as high as in the long period of the Corona crisis. The citizens of our country hoard large parts of their incomes: some find little opportunity to make major purchases and expensive purchases, others put money aside in the event that their job or their livelihoods could be endangered. Banks and savings banks suffer from excess liquidity. Because they cannot put that much money in as loans and mortgages at a profit. If they deposit part of this excess liquidity with the central bank, they will incur penalty interest.
Overly liquid banks and savings banks
An old wisdom of clever merchants reads: The profit lies in purchasing. But the monetary policy of the European Central Bank (ECB) floods the markets with cheap money to such an extent that the deposits of savers, i.e. the purchase of the money, cause the banks more burden than pleasure. The interest rates on loans and mortgages are at an extremely low level, but business in this loan area is by no means at full speed. The interest margin is now extremely low, so that the banking industry is consistently complaining about the loss of earnings. Because ever higher amounts have to be paid for the penalty interest dictated by the ECB.
Penalty interest losses
More and more banks are charging their customers for these fines. In total, around 300 banks and savings banks are now demanding what is known as a custody fee, i.e. a penalty interest rate from the depositors. Until recently, holders of credit costs with amounts over € 100,000 were asked to pay, but today more and more banks and savings banks are charging negative interest on deposits with a total balance of € 50,000 or less. At € 100,000, € 500 is debited from the customer’s account, at € 50,000 € 250 is due per year. Anyone who has such high or even higher balances on their accounts in the medium or long term should think about how the penalty interest due can be reduced or avoided. On the one hand, it would be possible to park the credit balances in accounts at various credit institutions; on the other hand, the amounts could be invested in stocks, investment funds or other forms of investment.
No interest rate turnaround in sight
A return to normal interest rates is not in sight for the time being. The ECB and other central banks around the world have announced that they will continue to pursue the cheap money policy. In any case, there will only be a turnaround in interest rates when inflation rates are above 2%. Until then, the central banks will give full throttle to accompany the economies out of the deep corona pandemic valley and, in particular, to facilitate the financing of national budgets by indirectly buying public bonds. Regular savers are going through difficult times. Smart investors can rely on alternatives with potential returns.
Image source: Image by Gerd Altmann, Pixabay License
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