The decision of the Governing Council of the European Central Bank to raise interest rates by 50 basis points, the first rate hike since July 2011, led some banks to offer new deposits at 2% interest, which is already worth it for customers.
In our country, deposits are an old savings option that has been diminished by the low price of money. Over the past eight years, with negative rates, banks have offered zero deposits, which savers could not afford, who nevertheless contracted these products in the face of daily uncertainty due to the pandemic and, these months, because of the war in Ukraine.
According to data from Bank of Spain, family deposits In June, they reached the highest figure in the entire historical series, which began in 1989, at almost one trillion euros, adding 5.19% to the interannual rate, at almost 46 billion euros. On the business side, deposits increased in May to nearly 300,000 million euros.
Term deposits above 2%
The chief economist of ‘La Tarde’, Fernando Trías de Bes, assures in his “Pocket Economy” space that “there are already banks which give interest higher than 2% on term deposits. to 2012 when those rates fell below those two percent. What we are seeing right now is that the ones that have moved, right now, are the foreign banks and the smaller banks, since the big Spanish banks react slowly to all the remuneration of deposits and current accounts”.
What is Trías de Bes’ advice as we consider putting our money to work in these changing times? “There are starting to be offers, so the first factor to look at is the diversification of banks and products. In all these offers, you first have to look at how long you have to leave the money for them to pay these 2% , and there are deposits of three months, others of six or one year. What if I rush and in two months there are deposits that pay 3 or 4% and they will allow you to change but they will penalize you so before you have the money stuck in a checking account that gives you 0% if you want to invest and knowing there is going to be more upside of rates, you have to see what mandatory duration they ask for, the penalty if you take before and two very clear ones, the minimum value to be able to invest (there are deposits that ask for a minimum of 10,000 euros), and the maximum from which they do not reimburse you (this is the case with current accounts)”.
Notice, whatever you decide, “never buy or invest in anything you don’t understand” The economist clearly advises, if the product is not understood, the bank must explain it to you and must make it clear.
Variables to keep in mind before investing
Trías de Bes advises anyone looking to invest that they need to be very clear about these six key variables:
- what kind of interest do you give me
- how often do you calculate it for me to calculate the APR
- What is the minimum amount I have to deposit?
- how much is the maximum you will pay me
- what is the penalty
- what is the term
“These key variables should be clear and if there are other conditions, always in writing and if you have a lot of savings, it is worth spending some money on a consultant.”