Better interest rates on savings accounts is often just a gimmick. The system full of hooks is mainly intended to attract

Czechs are very popular with savings accounts. They are happy to hear when the bank informs them that it is raising interest rates. This has been happening often in recent months. Banks explain this by saying that they want to share the profit with their clients, because they also make better use of the money deposited with the central bank. According to experts, however, it is in fact a marketing move and an effort to attract new clients, to whom they will then offer another product that is more advantageous for the bank.

At the time of the covid-19 pandemic, people spent little, saving three trillion crowns, according to banks, but more than half of them are held in current or savings accounts. But money loses value in these accounts due to high inflation. Although now perhaps some of the banks announce every month that they are raising interest rates on savings accounts, rates are not even close to rising inflation, which is significantly cutting savings.

Interest rates on savings accounts range between two and four percent, with inflation reaching 14.2 percent in March. Experts point out the significant difference and try to offer clients a better return on savings – investment. These are more advantageous for both clients and banks. However, according to a number of surveys, Czechs are not very good at investing yet. Therefore, they prefer to stay with the well-known “savers”. They monitor banks’ bids and sometimes switch from one to the other to catch the highest rate.

Banks thus use “savers” for their advertising, later trying to offer newcomers to clients a different product that is more advantageous for the bank. Maybe just an investment.

“Czech banks have had a long period of time when there was no shortage of money in the financial system. On the contrary, it was a much bigger problem for finding funds. They are not so interested in having their clients entrust their funds to them just for deposit. Savings they use the accounts to keep existing clients, ie not to compete, or to gain new clients, rather than attracting as many of their money as possible, “says economist Vít Hradil of Cyrrus.

Tricks with complicated conditions

The marketing departments of banks then reshape the need to acquire new clients in various, often difficult to understand conditions for the use of specific savings accounts. Thus, for example, it is common to limit the amount of savings or the inability to draw money for a certain period of time, similarly to term deposits.

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“Usually, people want to deal with their financial affairs within a single bank, and they turn to it when looking for other services that are already more interesting for the bank. These include, for example, mortgage loans, mutual fund investments, consumer loans,” he says. Hradil.

Investor Vladimír Brůna agrees. “Most Czech banks have excess liquidity and therefore do not pay them high interest on savings accounts. They attract more advantageous products. In my opinion, mutual funds are the most advantageous. they offer discounted rates for savings accounts only up to a certain amount or condition them on investment in mutual funds, “Brůna points out.

Komerční banka or ČSOB, for example, offer a more advantageous interest rate on a savings account with the condition of investing in funds. Česká spořitelna is also very active in offering investment products.

“For long-term appreciation of savings and their protection against inflation, we clearly recommend investment products such as mutual funds, which provide an interesting appreciation in the five- and multi-year horizon, which can not only protect savings against inflation, but can also significantly enhance them,” he told Aktuálně. cz spokesman of the savings bank Filip Hrubý.

Funny picture from abroad

However, there are a number of conditions for getting a better interest on a savings account, not just the need to invest. Some banks make better interest rates by opening a current account, paying by card or actively using internet banking.

According to economist Pavel Peterka from Roklen, the efforts of banks to retain clients can be often difficult.

“It is also a way to offer tailor-made products to individual segments of savers based on their preferences and needs. For example, for savers who do not plan to raise money for a quarter of a year, the bank will offer higher interest but will not give them access to the money for this time. it can offer easy access to money in a savings account, but it compensates for it with lower interest rates within its product line, ”says Peterka.

According to him, however, it is the fault of all comparators that they put these different products side by side and mark one as more advantageous than the other on the basis of the rate. He sees the problem mainly in the fact that people are not very familiar with the banks’ offer and are unable to calculate the profitability of the savings product.

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“People are unhappy because they often don’t invest and don’t know how. This is a general Czech problem where we spend long hours studying cephalopods in high school, but graduates generally do not understand the APR principle and other vital topics in financial literacy and economics such as science, “says Peterka.

According to Michal Skalický from the financial advisory company Partners, it is usually the case that smaller banks offer higher rates on savings accounts and usually without further conditions or restrictions. They need to attract more clients to grow. Medium-sized financial houses offer decent rates and most often limit their deposits. The largest banks then add additional rules to limit the amount of the deposit, by which they target their active clients.

“People who want to park their honestly money at such a bank at such a bank may find it strange or unfair, but it only means that they are not the target consumer of such a product. This is because active clients who already use the bank as their main and will also use other products, “says Skalický.

According to him, it pays to look at modern banks outside the Czech Republic. “There will be a funny picture without pompous rates carved in large letters on the main pages of the institutions. The reason is the fact that, for example, in the eurozone there are no big rates in general, so there is nothing to attract. The second reason is the maturity of the markets that in the Czech Republic we save on current and savings accounts, while in the west of us we save by much more efficient investments. The rate on the accounts there thus plays a negligible role, “adds Skalický.

When choosing the best savings account, it is recommended to stick to a simple account rather than looking at numbers. “If your bank offers a reasonable rate and you use the savings account correctly to hold only cash reserves, then it is good to think about whether a few crowns in interest is worth forwarding money back and forth and monitoring the fulfillment of all possible conditions,” the expert concludes.

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