5 Solutions Against Negative Interest on the Account

5 Solutions Against Negative Interest on the Account

Each saver face the hackles on such headlines:

ECB cuts interest rates to zero.

ECB levies penalty for bank deposits.

It’s really hard to look positively forward when big central banks start experimenting with the financial system.

Most of all, we fear all negative interest rates on our credit, that is, you would have to pay interest to the bank in order to park your money with her. You have to let that melt on your tongue. Since you wear his hard savings on the bench to make it work a bit and then you will not only not rewarded but even disadvantaged.

Although the banks are certainly not the winners in the current low interest rate environment, I am well aware of that.

Negative interest rates already exist, so the Skatbank and Commerzbank levy a kind of undefined fee for (very) large deposits. But basically, it’s nothing more than punitive interest.

How likely it is that even private, normally large daily money and current accounts will be affected by it once is in the stars. However, I do not think it is very realistic, because as a saver, we do not have to stand idly by and see how the bank is bugging us away from the savings.

Here are 5 approaches to fight back against it.


  • 5 options for negative interest rates
  • Are penalty rates realistic?
  • Who benefits from negative interest?
  • Real you pay a penalty often now
  • Conclusion: Calm blood
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5 options for negative interest rates

1. Switch to foreign / non-European banks

Pro: You can continue to participate in the money transfer (transfers etc.)

Contra: possibly no deposit guarantee if outside the euro area then currency risk

The most convenient solution would be to simply use a bank that does not require negative interest rates. Maybe you have to look a bit outside the box, with the danger in the back, that the local deposit insurance is not the best. Currency risks (eg Norwegian Krone to Euro) are also an issue for foreign currency accounts. A big advantage of this method is that you can still conveniently participate in the monetary system.


2. Bunk your cash

Pros: you stay liquid

Cons: Theft risk, could be banned

What you have got that one. The mattress full of money (or at least the pillow) can not take the state so easily. That may be but he could simply ban cash. And if not the state takes it away, then maybe a thief. The advantage of this method is that you remain liquid, you do not have to invest in investments that are subject to price risk or are illiquid.


3. Use gold as a store of value

Pro: never becomes completely worthless

Cons: quite illiquid, impractical as a means of payment, possession could be banned, fluctuations in value

Gold will fluctuate in value over time, but I would guess that gold will at least never be completely worthless. One could therefore use gold as a store of value and tie up excess liquidity in it. However, it has the disadvantage that it can not be made so quickly to money and the bid-ask spread (the range between selling and buying price) are not to be underestimated, at least for physical gold. There have also been times when the private gold ownership was banned and who knows what else there is waiting for us.


4. Buy government bonds

Pro: you stay relatively liquid (if you need money you sell bonds), property is never forbidden

Cons: Price risk (government bonds also fluctuate in value), even states are not without risk

Another alternative would be the purchase of government bonds. This could be done so that you clear your account to a large extent and put your bonds in the deposit with your broker. Every time you need extra liquidity, you sell bonds and transfer the money back to your checking account. Government bonds are almost always liquid and can be sold quickly. However, they also fluctuate in value, so you may have to sell in an awkward moment.


5. Invest in a property

Pro: inflation-protected, by borrowing, inflation can work for you

Cons: requires large funds, very illiquid

This option is only suitable if you have a lot of excess liquidity. Then maybe make the investment in a property sense. Another advantage is the “paging”. By that I mean, since you take out a loan, you now benefit from low interest rates and inflation works in your favor. But you should weigh very carefully if that makes sense to you. You should also be clear how much free money you will probably need in the future, because a property can not just sell it once and turn it into money.

Are penalty rates realistic?

How likely negative interest rates are, it can be argued well. Some say that the progressive abolition of cash is solely for the purpose of forcing people to expropriate this form of expropriation. I do not think so, there are many reasons why cash is less and less used, but I can not see any conspiracy in it.

I also do not believe that on a broad front, negative returns on assets will prevail, because if the existing money system punishes the participants on a large scale which use it, then yes, the citizens simply switch to another system without such negative interest. At some point it is just too stupid people and then they look for alternatives.

This can be, for example, an exchange economy or a kind of parallel currency.

Who benefits from negative interest?

As a preliminary I have already mentioned that banks certainly are not among the winners of this interest rate environment. Even if they should raise interest rates from savers, they would prefer to pay us interest. That’s how it worked, the good old 3-6-3 world. Borrow money for 3%, lend 6%, live well from the range and return to the golf course by 3.

Nor do the large (life) insurers benefit. Their business is to collect money from savers and investors on the right-hand side and to invest in securities on the left-hand side. Like also sometimes government bonds.

And here we come a good deal closer to the truth. Because negative returns are good for everyone’s debt. And we know, if someone in this world has debts, then states!

Interest rates on government bonds are currently extremely low, sometimes even negative . So states can lend money very cheaply and keep the shop running.

Here you can see the interest expenditure of the federal government in the individual years. We’re not talking about eradication here! These are only interest that the state spends, of which the mountain of debt has not diminished.

That looks pretty good, the interest burden has steadily declined. Good state or not?

Thus the indebtedness of the Federal Republic (on which of course the interest is paid) developed:

Ok, maybe not so good, the debt has increased well in the time. This means that the current low interest burden comes to the state. Although he has significantly more debt than 10 years ago, he has to pay significantly less interest than 10 years ago.

But what happens when interest rates rise again and new debts can no longer be received as cheaply? The average will rise again and only as a food for thought: 3% of 2,000,000,000,000 (2 trillion) would be 60,000,000,000 (60 billion).

Only for interest.

I think we agree if the states in the current environment are probably the winners. Of course, the ECB and politics are independent of each other (of course), but I would imagine that our politicians are quite grateful to the central bankers.

Real you pay a penalty often now

What many savers are not really aware of:

From time to time, you pay in real terms today, after deducting taxes and inflation. Say the credited interest in your account is not enough to pay for the loss of purchasing power and taxes. Only when the interest goes beyond just these, then you actually generate a real return.

But there have often been occasions where the real saver has paid. A paradoxical situation, because something is being paid to your account, so it looks like more, but in fact you can buy less than before. One is almost happy that the savings are now worth less and does not even notice it.

Incidentally, this also applies to “the good old days” when there was still 5% interest on the current account. Put simply, what good is 5% interest if only inflation is 6%?

The subject of punitive interest is therefore not completely new, which was born only in the current environment.

Conclusion: Calm blood

As you can see there are different approaches to avoid negative interest rates. Sometimes they even throw off some returns, but you have to also some price risk, so that the value can sometimes fluctuate, or take illiquidity into account.

In the case of negative interest rates, I would suggest a diversified approach consisting of several of the above solutions. This should be well equipped against penalty interest.

However, it is not without its challenges, because you have to keep an eye on your liquidity even more intensively than you should anyway.

In addition, one must also pay attention to be able to participate with the respective solution to the payment in any way practicable.

Even if one does not generate a return with a reasonably practicable alternative, the majority of savers will nevertheless resort to it in case of negative interest rates.

Because no return is still better than a negative return.