Banks and savings banks are still stingy when it comes to interest on demand deposits.
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frankfurt Some banks are now again offering very high interest rates on demand deposits. This is due to the rise in prime rates, but also due to its advertising effect. Many establishments use phone bills in a targeted way to attract new clients. As a result, financial institutions are very generous when it comes to interest rates. Especially with interest rates already on the rise, there can be real competition among banks, with the number one spot on the call-for-money attack list changing at least weekly.
In addition to attractive interest rates, another advantage of money market accounts is that funds are available on a daily basis. It’s very different from a savings account. They usually only offer very low interest rates, and it can sometimes take weeks for the money to return to the checking account.
What sounds good to customers also has its drawbacks. And even though overnight money is a relatively simple financial product, there are a lot to consider. Business Daily has compiled the most important content here.
What is a wire transfer account?
As the name implies, a money market account is one in which funds are available at all times (i.e., daily). Interest rates usually change from time to time. That means rates can rise if banks want to attract new customers. On the other hand, interest rates could drop again at any time.
Where is the most interest in electricity bills right now?
These banks currently offer the highest demand deposit rates (as of July 5, 2023):
- Openbank up 3.7% in six months
- 1822 direct six-month increase of 3.6%
- Raiffeisenbank Hochtaunus at 3.55% for six months
Also interesting is DKB, which pays everyone (not just new clients) a 3.5% swap until January 31, 2024.
Where can I compare overnight rates?
Overnight currency offers can be compared on comparison portals such as check24.de or verivox.de. Handelsblatt offers you independent call funding comparisons and overviews based on FMH-Finanzberatung data.
>> Read related content: Per diem: Which deals are worth it right now
In the linked article you will find a detailed overnight funding comparison and find out which interest rate offers are particularly attractive. Experts also explain which strategies pay off with overnight funding and whether term deposits are currently recommended.
Overnight rates: what should you look out for when comparing?
There are almost no overnight funding offers without ifs and buts. Most top rates only apply to new customers or new funds from existing customers. Also important is the answer to the question of the maximum amount the offer is valid for. The valid amount for most new client campaigns is up to EUR 50,000. The duration of the interest guarantee is also important. A six-month fixed rate offer combines the benefits of a six-month term deposit with the flexibility of an overnight deposit.
Anyone actively jumping from one overnight money provider to another should not forget to close their account again. Horst Biallo of the eponymous interest portal says it’s one of the most common mistakes savers make. Because these “account corpses” ensure that depositors get nothing when they return to the bank after a period of time for new customer offers. The reason is that she still maintains an active association with the institute. Most banks consider a new customer to be someone who has not opened an account with the bank within the past six months.
How do you identify the bait rate?
Telephone remittances are a classic door opener for banks to win new customers. Therefore, high-interest money market accounts for new clients are considered loss leaders. Anyone thinking of using this type of account should check out the rate guarantees and maximum investment amounts. If the guarantee period is short and the amount to earn high interest is low, customers who do not want to have a long-term relationship with the bank should cancel as soon as the interest is due.
Some banks also base interest rates on whether customers also have checking accounts. Offers like this are worth it for anyone already looking for a new bank. However, anyone who just wants high rates won’t be well served here.
How will overnight rates develop in 2023?
According to FMH Finanzberatung, the average interest rate on demand deposits will double to 1.31 percent by June in 2023. Experts such as Ania Scholz believe interest rates will continue to rise for some time.
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After all, the ECB is planning to raise key interest rates at least once more. “We will still see overnight funding quotes of 4 percent in summer,” said the authorized official of the FMH-Finanzberatung. However, no market watcher can predict how high rates will rise.
Why are wire transfer accounts useful?
Wire transfers provide quick and available funds for unplanned expenses. These are usually new washing machines or expensive car or house repairs, says Niels Nauhauser of the Consumer Advisory Center in Baden-Württemberg. Therefore, two to three months’ salary should be deposited into a checking account.
>> Read also: Time deposits and demand deposits: Deposits have increased since the interest rate adjustment
However, demand deposits are not very suitable as savings products. This is partly because interest rates are usually lower compared to term deposits and partly because banks only guarantee interest rates for a few months, if any.
How to open an overnight deposit account?
Fortunately, the days of having to go to the post office to open a money market account are over. Many banks are now advertising that customers can open money market accounts in minutes.
Thanks to the video recognition process, this can actually be done from the couch at home. As with all banking transactions, account holders must be of legal age. Overnight savings accounts for children must be opened by their parents or other legal guardians.
Once a money market account is established, funds can be transferred directly from the reference account. If the bank no longer offers attractive overnight rates, simply liquidate the account and terminate the bank details in writing.
What is the maximum amount you should have in your money market account?
Most overnight deposits have a maximum investment amount. Above this amount, interest rates typically drop rapidly. “In any case, anyone who is particularly concerned about security should allocate larger assets in the form of 100,000 euros to different accounts,” advises Ania Scholz. Not only does this spread risk, but you always have full fiat deposit protection.
How do I identify a bank with safe overnight funds?
Across Europe, each customer and bank is insured up to EUR 100,000 by their respective national deposit insurance. If the bank fails, the money must be repaid within a few days, including interest accrued up to that point.
Many German banks also participate in the Bankers Association’s voluntary deposit protection fund. Amounts over EUR 100,000 can also be secured through it.
>> Read related content: Deposit Insurance: Your Funds Are So Safe Now
Savings banks and PBOC protect the deposits of all their customers. Troubled savings banks and PBOC are supported by the rest of the association through so-called institutional safeguards until their economies are healthy again.
How is compound interest calculated?
Banks are free to choose the interval at which interest is credited, whether monthly, quarterly or annually. How each bank supervises is in the account conditions.
In order to take advantage of the compounding effect as much as possible, shorter intervals make sense. For example, at Openbank, interest is credited on a monthly basis, eventually raising the rate from 3.7% to 3.711%.
Some interest portals also calculate returns. Stakeholders can feel whether they can benefit from the compounding effect during the period of guaranteed interest. You can also compare returns to a fixed deposit with a term of one year.
Assuming a bank offers 3% interest on its money market account for 6 months and then offers only 2%, that’s a return of just 2.5% for a year. This example shows very clearly why it is worth turning to one of the highest interest offers currently available when calling.
more: Fight Inflation With Overnight Funding
First published: July 7, 2022, 4:00 AM (last updated: July 5, 2023, 3:00 PM).