When the repo rate is down to 0.25 percent as a result of more or less non-existent inflation, there is not much room for savings rates. These are at very low levels, sometimes ridiculously low such as 0%. Many of the major banks have savings rates that do not yield any return at all. But are you completely run over if you want to save money on a savings account or what to do?
It is precisely the big banks that have the least to offer right now, it seems
Banks have non-existent savings rates, usually 0% or maybe 0.05 – 0.10% on larger amounts over USD 50,000. You do not get rich in this and there is no return worth owning a thought. In an earlier post we wrote about the possibility of moving from the savings account to another type of savings / investment form such as shares or funds.
If you do not want to invest in funds but want to stick to a savings account, what do you do? Should one just wait out the low market interest rate and hope it gets better soon? Unfortunately, this is not a great alternative as there may be continued low interest rates well into 2015 and perhaps longer than that. What you can do is be active and look for alternatives to the major banks. Switching to a bank with a more sensible savings account is not that difficult and it makes a big difference, especially if you have zero interest rates now.
Some banks have reasonable interest rates after all
There are banks that have better savings rates. Obviously, having a better interest rate than zero percent is not very difficult, but there are some that have perfectly ok rates in relation to the repo rate. You can find interest rates around 2% at a number of different banks.
If you are one of those who chase the very highest savings rate and move around between different banks and savings accounts to get the best possible return on your money, it can be a little tricky times. Many banks change their interest rates and it is possible that you move to a new bank and not long afterwards they lower their savings rate and suddenly you no longer have the best possible interest rate.
It is not easy to get right in all situations and it becomes a bit of a cat-and-rat game where you hunt for something and then disappears just when you think you have caught it. What you can do is try to find a stable bank that you think will keep a good level of interest rates all the time. You do not necessarily have to have the absolute highest savings rate of all – as long as you have a relatively high interest rate and do not keep on changing all the time it will be good.
The most important thing, however, is that you do not become passive and sit there and content yourself with 0.00% interest on your savings account! There you do not make any money. If you have a reasonably large savings capital, you can normally expect a fairly good return, at least 2-3%, so you have to take the bull by the horns and start looking for a sensible savings account. This even if you have to get out of your comfort zone and look at banks that you might not normally have used.
Check around and find the best savings rates
You need to be a little active and spend some time if you want to find good savings rates. It is always a good tip to look at different alternatives and to compare before making your decision, but it is especially important in the current situation when there is such a big difference between different banks.
If you want to be sure of finding a reasonable interest rate, you need to look at all banks, not just the usual big banks. It is precisely the startups who often have slightly better savings rates to offer so don’t forget them. If you want a good interest rate, try to look at the different banks and see which one you feel feels best. The highest interest rate is of course a good argument, but it is not the only thing that comes into play when choosing. Let the hunt begin!