Why do banks not give interest on savings anymore?

armabelle

When I was young my parents taught me to save and put my money away in a bank so that I could earn interest on it. Nowadays, hardly any interest is given on my savings. Does anybody knows why this is the case?

Nody

Because ECB gives negative interest (this is where the money is put while waiting for being used in simplified terms).

EagererBeaver

armabelle wrote: »

When I was young my parents taught me to save and put my money away in a bank so that I could earn interest on it. Nowadays, hardly any interest is given on my savings. Does anybody knows why this is the case?

Are you sure you're ready to buy a house?!

Lux23

Get a post office account, the interest is better.

Geuze

armabelle wrote: »

When I was young my parents taught me to save and put my money away in a bank so that I could earn interest on it. Nowadays, hardly any interest is given on my savings. Does anybody knows why this is the case?

Interest rates have fallen sharply since 2008 in most major economies.

Indeed, they have fallen to 0% in EMU, Japan, DK, CHF and close to zero in UK and USA.


Why?

Central Banks cut the short-term int rate to revive weak economies.

Geuze

Lux23 wrote: »

Get a post office account, the interest is better.

State Savings rates have fallen as well.

Savings Bonds now offer 0.33% pa.

Captain Chaos

Because the ECB want people to spend money and not horde it to kick start growth and inflation. Everyone is afraid to spend money after the crash, dropping interest rates is to try and put people off hording cash.

Bubbaclaus

Because the ECB rate has dipped into negative territories.

I may have imagined it but I believe I read recently that some bank accounts in Germany (and possibly elsewhere) currently have negative interest rates.

JTMan

armabelle wrote: »

When I was young my parents taught me to save and put my money away in a bank so that I could earn interest on it. Nowadays, hardly any interest is given on my savings. Does anybody knows why this is the case?

--> Many banks have surplus cash.
--> If they don't, the ECB is giving unlimited money at 0% to the banks. If they need more cash, the ECB is on-hand, they don't have to rely on depositors like in the past.
--> The ECB charges -.40% on excess cash deposited with the ECB. Hence, surplus cash is costing a bank rather than earning it cash.
--> Low sovereign yields.

There are still few deposit products that pay a good return.

JTMan

Bubbaclaus wrote: »

Because the ECB rate has dipped into negative territories.

I may have imagined it but I believe I read recently that some bank accounts in Germany (and possibly elsewhere) currently have negative interest rates.

Banks have negative rates for inter-bank deposits, corporate deposits, some pension deposits and some SME deposits. Banks, bar a tiny number of exceptions across Europe, do not apply negative rates to retail deposits. 0.00% remains the floor for retail deposits.

armabelle

EagererBeaver wrote: »

Are you sure you're ready to buy a house?!

not yet

armabelle

JTMan wrote: »

--> Many banks have surplus cash.
--> If they don't, the ECB is giving unlimited money at 0% to the banks. If they need more cash, the ECB is on-hand, they don't have to rely on depositors like in the past.
--> The ECB charges -.40% on excess cash deposited with the ECB. Hence, surplus cash is costing a bank rather than earning it cash.
--> Low sovereign yields.

There are still few deposit products that pay a good return.

why does the ECB give unlimited money at 0% interest?

snubbleste

armabelle wrote: »

why does the ECB give unlimited money at 0% interest?

Because the retail banks ask for it.

armabelle

snubbleste wrote: »

Because the retail banks ask for it.

do they get whatever they want?

JTMan

armabelle wrote: »

why does the ECB give unlimited money at 0% interest?

To stimulate lending. Banks get money at zero so they can in turn reduce interest on loans. That's the theory anyway.

regi3457

Captain Chaos wrote: »

Because the ECB want people to spend money and not horde it to kick start growth and inflation. Everyone is afraid to spend money after the crash, dropping interest rates is to try and put people off hording cash.

This is the most "correct" answer on this thread.

It is very simple why you do not get interest on your savings anymore. Banks used to need to keep a certain % of what they were able to loan out to customers under the fractional reserve banking system. If I remember correctly the amount was 10%. Your savings deposited in your account allowed them to make a profit from that money. Now, because banks no longer have to have those deposits to loan money and can create it out of thin air, why should they give you interest on it? The only way the eurozone can see increase in growth is through debt. Debt = growth. So savings are bad for banks and bad for business in general. The whole economy is structured in a way that debt is promoted and saving should be discouraged at every opportunity.

armabelle

regi3457 wrote: »

This is the most "correct" answer on this thread.

It is very simple why you do not get interest on your savings anymore. Banks used to need to keep a certain % of what they were able to loan out to customers under the fractional reserve banking system. If I remember correctly the amount was 10%. Your savings deposited in your account allowed them to make a profit from that money. Now, because banks no longer have to have those deposits to loan money and can create it out of thin air, why should they give you interest on it? The only way the eurozone can see increase in growth is through debt. Debt = growth. So savings are bad for banks and bad for business in general. The whole economy is structured in a way that debt is promoted and saving should be discouraged at every opportunity.

But does this dissuade people from saving as your savings will probably get reduced because of inflation that way?

I wonder if people save more now or before because it seems EVERYONE lives in debt. Like if you don't have debt nowadays you are WEIRD

The J Stands for Jay

armabelle wrote: »

But does this dissuade people from saving as your savings will probably get reduced because of inflation that way?

I wonder if people save more now or before because it seems EVERYONE lives in debt. Like if you don't have debt nowadays you are WEIRD

You're better off investing. You'll got a non-ridiculous return, and your investment may help stimulate economic growth (that's the theory anyway).

newacc2015

armabelle wrote: »

But does this dissuade people from saving as your savings will probably get reduced because of inflation that way?

I wonder if people save more now or before because it seems EVERYONE lives in debt. Like if you don't have debt nowadays you are WEIRD

Except there is no inflation! Hence the ECB are aggressively trying to stop people saving and get them spending/borrowing. A lot of the Eurozone has zero inflation or deflation. Giving people no interest is not resulting in the weakening of the value of their money. The ECB doesnt care if it results the value of people money. In fact it benefits them, as if the value of money is falling. People spend and the eurozone economy will recover

The ECB wants people to borrow to stimulate the economy. There is nothing wrong or "WEIRD" with debt as long as it is not excessive.

I dont think you seem to have a grasp of the role of the ECB and its objectives at all. IMO a few mins of wikipedia or any basic economics site would answer your questions.

armabelle

newacc2015 wrote: »

Except there is no inflation! Hence the ECB are aggressively trying to stop people saving and get them spending/borrowing. A lot of the Eurozone has zero inflation or deflation. Giving people no interest is not resulting in the weakening of the value of their money. The ECB doesnt care if it results the value of people money. In fact it benefits them, as if the value of money is falling. People spend and the eurozone economy will recover

The ECB wants people to borrow to stimulate the economy. There is nothing wrong or "WEIRD" with debt as long as it is not excessive.

I dont think you seem to have a grasp of the role of the ECB and its objectives at all. IMO a few mins of wikipedia or any basic economics site would answer your questions.

You didn't read my post properly. I said that nowadays it is weird NOT TO HAVE debt because debt is so common and everyone is in debt. I did not say that having debt was weird. Whether or not I think debt is wrong or weird is another topic completely

_Brian

JTMan wrote: »

--> Many banks have surplus cash.
--> If they don't, the ECB is giving unlimited money at 0% to the banks. If they need more cash, the ECB is on-hand, they don't have to rely on depositors like in the past.
--> The ECB charges -.40% on excess cash deposited with the ECB. Hence, surplus cash is costing a bank rather than earning it cash.
--> Low sovereign yields.

There are still few deposit products that pay a good return.

Which products would you recommend for maybe €10k/20k over 5/10 years ??

twinytwo

regi3457 wrote: »

This is the most "correct" answer on this thread.

It is very simple why you do not get interest on your savings anymore. Banks used to need to keep a certain % of what they were able to loan out to customers under the fractional reserve banking system. If I remember correctly the amount was 10%. Your savings deposited in your account allowed them to make a profit from that money. Now, because banks no longer have to have those deposits to loan money and can create it out of thin air, why should they give you interest on it? The only way the eurozone can see increase in growth is through debt. Debt = growth. So savings are bad for banks and bad for business in general. The whole economy is structured in a way that debt is promoted and saving should be discouraged at every opportunity.

During the boom a lot of banks kept 3% and most banks didnt even have that (as we know the regulators didnt do their job)... why keep cash when they could throw it at all the cowboy developers.

JTMan

_Brian wrote: »

Which products would you recommend for maybe €10k/20k over 5/10 years ??

There are some short term products that pay good rates but no long term products that pay good rates.

State Savings has the highest 5 year and 10 year rates but the rates are low and you have your money out of reach for a long period of time.

billyhead

JTMan wrote: »

There are some short term products that pay good rates but no long term products that pay good rates.

State Savings has the highest 5 year and 10 year rates but the rates are low and you have your money out of reach for a long period of time.

estment

An Post have reduced their interest rates on all savings products so are no longer a profitable investment

JTMan

billyhead wrote: »

estment

An Post have reduced their interest rates on all savings products so are no longer a profitable investment

Profitable is not the right word here. Lower rates alright.