Banks hit a new low– but you CAN give them a run for (your) money

As savers face zero returns and escalating charges, doing nothing could cost you dearly

Banks have just started paying 0% interest on savings – over as much as 10 years. That’s right. If you lock your money away for a whole decade, it earns nothing. A big fat zero.

In fact, it’s less than nothing. After inflation, your money will probably be worth a lot less when you take it out.

RaboDirect is offering 0% on a wide range of savings accounts from one year all the way up to 10 years. However, it does pay interest on its online demand deposit account – a whopping 0.2%.

Rabobank was once the great hope for Irish savers, desperately in need of options. The Dutch bank swooped into Ireland in 2005 – shaking up competition. Two years later it was offering a tasty 5% on deposits.

By 2012, interest rates had dropped but Rabo still had the second highest rates of 2.75% on demand, just behind KBC.

But how the mighty have fallen. Now it is setting the pace – in the opposite direction. Almost certainly, 0% over 10 years is a record low for Irish savers. In over 25 years as a financial journalist, I can’t remember a worse rate.

Rabobank recently closed its low-cost online investment services but denied that its derisory deposit rates indicate plans to shut up shop entirely.

‘There is no plan [to leave],’ said a Rabobank official, adding that the low rates reflect the current market and the bank is ‘not advising’ customers to take them.

However, the bank, along with KBC, could be accused of pulling off the oldest trick in the banking book. To make a killing, banks can easily offer top deposit rates – only to slash them when they’ve scooped up millions.

KBC, for example, offered regular savings rates of 4.5% as recently as June 2015. Savers flocked to salt their money away with the Belgian bank.

Now they are getting just 0.5%.

Banks who pull off this stunt know that customer inertia means fewswitch to another bank when rates plummet. The best deposit rates on demand are 0.3% (KBC).

Neither the Central Bank nor any consumer watchdog can take banks to task for luring depositors in and then leaving them in the lurch – because they have no control over interest rates. Banks can charge what they like when they like.

Rabobank isn’t the only bank to offer its customers zilch returns. Bank of Ireland’s demand deposit account also pays 0% (other banks are not offering much more, with most paying a derisory 0.01%) but at least you get instant access to your savings. However, unlike Rabobank, Bank of Ireland is also creaming off fat profits on other products.

It made €2.3bn profits in 2016 – more than €6m every day. Fattening its bottom line is the highest standard variable rate mortgage around – at 4.5%. And that’s the dearest of the very dear, with Irish mortgage rates recently shown to be nearly double the eurozone average. BoI’s fixed mortgage rates are competitive and it does give up to 3% cashback to borrowers. Its 7.5% personal loan rate is also the lowest for three-year loans – but that just means it’s ‘the best of a bad lot’, with a rate that is many, many times what it pays out for deposits.

Meanwhile BoI’s credit card is the most expensive on the market at an eye-watering 21.36%.

A spokesman for BoI said: ‘Bank of Ireland keeps all rates under review.

‘In the current interest-rate market there is a cost for the bank when depositing cash with the ECB, with overnight market rates of approximately -0.40%.’

That’s all true. We are in uncharted territory with interest rates at historic lows.

But why don’t BoI and other banks forego some of their massive profits and stop charging so much for loans, credit cards and mortgages? Here are SIX ways to beat the banks at their own game: Pay off your mortgage and save up to 4.5% a year instead of earning 0% on deposit. Switch to a credit card offering a low rate on new balances, albeit for a limited period. Every bank has these offers. Pay off your balance before this expires. Then make sure to clear it every month.

Check out your local credit union. Many are no better than banks but some occupational unions have very tasty rates. The Cana credit union for Revenue Commissioners staff pays 2% on deposits and charges just 2.9% for mortgages.

Save with An Post. While 1.5% a year over 10 years won’t set the world on fire, it beats the banks. And it’s tax free. You can also get 0.98% over five years. If you need to take out money early, you can – albeit with much lower interest accruing.

Switch your mortgage to a cheaper lender and save tens of thousands. If enough people did this, the pricey banks would change their wicked ways but they know few people will

Check out your loan-tovalue rate on your homeloan. You may qualify for a lower interest rate as your property rises in value and pays off your loan but you have to ask for it.