Where the money brings more: watch out for interest hunters! Where there is the most interest for overnight and fixed deposits message
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by Simone Grneweg, Euro on Sunday
The Germans don’t make much of their money. Whether on current accounts, savings cups or as cash: Trillions of euros are hardly interest-bearing. The pile of money is growing rapidly. Even in the Corona crisis, around 77 percent of people in Germany regularly put money aside, according to a survey commissioned by Postbank at the end of April. In the previous year it was only 74 percent.
The problem of savers: they don’t know where to put their wealth. “In any case, putting the money under the pillow is not a solution,” says Kerstin Becker-Eiselen from the Hamburg Consumer Center. If you always want to have your money, you are in good hands with overnight money. At least the money is safe there. The form of investment provides flexibility, because you can always save money and, for example, wait for the best time to get back on the stock market.
If you can do without your assets for a long time, you should better switch to a time deposit account. Experts emphasize that this is a good way of investing low-risk money on the financial markets in troubled times. Given the current inflation rate of 0.6 percent, it may even make profits.
Interest hunters have a hard time, however. At the many banks, customers receive a symbolic one on a conventional overnight deposit account Low interest rates just over zero percent. It sometimes looks a little better with time deposits. Some institutes raised their interest rates at the beginning of the corona crisis. “As a precaution, they probably bought liquidity from private investors,” explains Hans-Peter Burghof, professor of banking and financial services at the University of Hohenheim. The trend is unlikely to continue. “The central banks pump a lot of liquidity into the markets,” says Burghof. Forecasts are difficult, but it doesn’t look like interest rates will go up, he says.
“Interest on overnight deposits or fixed deposits will remain at a very low level this year,” estimates Thomas Dwornitzak, head of the Saving & Investing division at ING direct bank. The rating of Chris-Oliver Schickentanz is similar. The chief investment strategist at Commerzbank emphasizes that interest rates in this country would be based on the deposit rate of the European Central Bank. “It is clearly negative at minus 0.5 percent and should not change for the better in the next two to three years,” he says.
Bonus for new customers
Conservative savers should not discourage the search for a suitable investment, but try to jump on the best deals. The FMH financial advice evaluates numerous offers of overnight money, fixed deposits and long-term investments for uro on Sunday every week. The evaluation shows that a comparison of interest rates is definitely worthwhile.
If you have money, you don’t have to have it steamed up on your checking account or hoard it at home as cash. There are a number of alternatives. Again and again, individual providers lure with a slightly higher interest rate than the competition. The French Renault Bank, for example, has a positive impact on overnight money. New customers receive 0.55 percent there, up to an investment of 500,000 euros. One should bear in mind that the car bank is only subject to statutory deposit insurance. That means: 100,000 euros per person are covered.
The French have raised the interest rate guarantee to six months. After this time, customers have to start with the variable customer interest rate of currently 0.25 percent per year. Advanzia Bank offers 0.5 percent for their call money account. Customers need 5,000 euros for this, because that is the minimum investment amount. The institute is headquartered in Luxembourg, which means that a maximum of EUR 100,000 per person is also protected in the event of bankruptcy.
If a saver does not want to access the savings in the coming months, it is definitely worth looking at the offers for fixed-term deposit accounts. Becker-Eiselen recommends a maximum term of one to two years. “In view of the uncertain overall situation, you shouldn’t choose longer terms,” she says. The foreign providers dominate the attractive offers in the same way as overnight money.
If a customer prefers to stay with a German bank and the German statutory deposit insurance scheme, they should take a look at the BMW Bank offer. “Go up a gear with your interest rates,” asks her on her website – although she only offers 0.03 percent of online overnight money. On the other hand, it looks better with fixed deposits: there the money house offers an interest rate of 0.75 percent. The institute is part of the deposit guarantee fund of the Federal Association of German Banks, which secures more than 100,000 euros per customer. Car banks always stand out with good conditions, because they also use the deposits to refinance their leasing and financing offers.
Outside of the car banks, for example, pbb is directly attractive. It belongs to the Deutsche Pfandbriefbank based in Munich. At pbb direkt, savers are currently getting 0.6 percent for a year in fixed deposits.
Some providers abroad pay more than German houses. In this country, the Estonian big bank offers a one-year fixed-term deposit at an interest rate of 0.95 percent. If someone puts their savings there for two years, there is 1.05 percent. With a term of three years, the bank pays 1.20 percent. The deposits are secured through the Estonian statutory protection fund.
Pay attention to lure offers
Money houses often attract new customers with interest campaigns. If you want to benefit from such offers, you usually have to act quickly – the conditions sometimes change quite quickly. This applies to the Swedish bank Klarna, for example, which regularly offers attractive offers, but has recently worsened conditions. At present, the Swedes still pay 0.86 percent interest on a one-year deposit. The deposits fall under the Swedish bank security. The Italian FCA Bank, a joint venture between the Italian-American automaker Fiat Chrysler and the French bank Crdit Agricole, has also been offering fixed-term deposit products in Germany for several years. She is currently paying an interest rate of one percent for one year.
Platforms such as Zinspilot, Savedo and Weltsparen act differently: They act as intermediaries when someone wants to invest their wealth abroad. The advantage: consumers can use products from foreign banks with little effort, without having to open an account there. In addition, the offers can be changed unbrocratically. However, some of these offers come from economically troubled countries. Investors’ interest in this type of investment only flattened briefly in the corona crisis, according to the providers. The customer demand is otherwise stable.
Consumer advocates are critical of offers from countries that tend to be unstable. In any case, the consumer advocate Becker-Eiselen urges caution. Their advice is to look at each country. “The credit rating is very important,” she says. The poorer a country’s credit rating, the greater the likelihood that security systems will not work.
Estonia, where the Bigbank is headquartered, is one of the European countries with high credit ratings, so an investment is considered safe. For Italy, however, the American rating agency Fitch only lowered its credit rating in April. This was justified by the economic burdens caused by the Corona crisis. The country is only just above junk level.
When looking for the right investment product, investors should take the advice of the consumer advocate and not put everything on one card. If you want to invest a larger amount, you can, for example, distribute it to different countries and banks. Interest rate expert Max Herbst from FMH Financial Advisory basically recommends: “Savers should focus more on the countries with good credit ratings – such as Germany, Sweden, the Netherlands or Austria and France.” The specialist believes that in an emergency you can be trusted to actually pay savers back their money.
Secured by law
If a bank goes bankrupt, account holders have a legal right to get back up to € 100,000 (for married couples € 200,000). The rule applies to balances in current, daily and time deposit accounts. The affected consumers automatically get their savings back.
Those who have just sold an apartment or are retiring may have significantly more assets in their accounts. If such special circumstances exist, a security limit of up to EUR 500,000 applies to customers in the event that the bank is unable to pay, for six months from the event to be hedged. However, those affected must submit an application.
The private deposit insurance of the banking association helps if the customer of a private bank has lost more than 100,000 euros due to a bank failure. The maximum amount secured per customer depends on the bank’s liable equity (www.bdb.de). At the beginning of the year, the protection fund reduced the scope of protection from 20 percent of a bank’s liable capital to 15 percent per customer.
The savings banks and cooperative banks in Germany have institutional protection: if an institution in the association is financially bad, it is supported by the rest. More on this on the Internet at www.dsgv.de (Sparkassen) and at www.bvr.de (cooperative banks).
The European Union has established rules, but deposit insurance is in the hands of the individual states. The countries are obliged to set up national deposit insurance funds and to provide them with minimum assets by 2024. Banks from non-EU countries can be organized entirely differently. Investors should take a close look at the regulations of the relevant states. great
Tax income from interest
The state is reaching for interest gains. However, there is an allowance for income from capital assets. In the case of unmarried people, it is 801 euros per year, for married people it doubles to 1,602 euros. The bank automatically pays 25 percent withholding tax plus solidarity surcharge and, if applicable, church tax if profits exceed these limits.
Those who invest their money in EU member states should know that some countries levy a tax on capital gains such as interest or dividends (withholding tax). The bank retains this amount and transfers it to the financial authorities abroad. Important: In most cases, full reimbursement is possible, so that investors generally only pay the German flat-rate withholding tax of 25 percent for interest gains abroad.
Reduce tax rate
If there is a double taxation agreement (currently with Ireland, Croatia, Latvia, Lithuania, Poland, Spain, Slovakia and the Czech Republic, for example), savers must prove their tax liability in Germany to the bank. This is usually done through a so-called residence certificate. The tax rate charged by the foreign bank is reduced to the percentage stated in the respective double taxation agreement. Very often this reduced rate is already zero percent. Sometimes a residual interest rate is withheld that goes to the foreign financial authority. Then customers can have the deducted withholding tax, which has been deducted abroad, credited to Germany. There are usually forms for this at the placement portals.
States without tax retention
If there is no withholding tax deduction in the States, the whole thing is easier. This applies, for example, to Estonia, France, Denmark, Luxembourg, Italy, Malta and Sweden. Savers state income from abroad in their tax return (Annex KAP). Information on this is available on the website of the Federal Central Tax Office at www.bzst.de.
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