One of the most popular savings products is the fixed-term bank deposit. However, its current drawback is its low profitability, offering interest rates that rarely exceed 0,5% . This is a consequence of the monetary policy decision by EU authorities to lower interest rates, which has certainly negatively impacted bank customers' savings.
In any case, this is a financial product that is free of fees and other management and maintenance costs. This is its main incentive for small and medium-sized savers in our country to subscribe to it. There are various investment strategies available to increase the profitability of this savings plan for individuals. Another advantage is that it can be opened with very modest amounts by individuals.
On the other hand, fixed-term bank deposits are structured in various formats, which we will explain to the reader. This way, you can maintain a higher balance in your savings account each year. This is especially important at a time when it is very difficult to obtain returns that are often very low and consistently fall short of users' expectations. Fixed-income products are not currently performing well; on the contrary, they face a very challenging environment for those seeking to earn a return on their money.
Deposits above 1%
To achieve this goal, it's necessary to look at the fixed-term deposits offered by banks as part of promotional campaigns . In this regard, they regularly run offers of this kind that raise the profitability of this banking product to levels of up to 3%. However, these deposits have shorter terms, typically ranging from 3 to 12 months. Unlike other fixed-term deposits, they cannot be withdrawn early. And, of course, they are free of fees and other management or maintenance costs.
On the other hand, it should be noted that this savings model is designed for larger sums of money than other formats. Generally, these are above €2.000 or €3.000 and cannot be renewed upon maturity. These are some of its most significant features and distinguish it from other fixed-income products. Similarly, family members are not allowed to hold two or more of these types of fixed-term deposits.
Contract other banking products
Increasing your loyalty to your long-time bank always pays off in the form of higher-yield investments. This means that by investing in funds, pension plans, or high-yield savings accounts, you can subscribe to deposits with a higher interest rate than before. In some cases, you can even earn up to 5%. This is further enhanced through promotional offers designed to reward our most valued customers.
While on the other hand, the acceptance of this strategy in family savings leads to the possibility of choosing between different models based on their subscribed amounts, terms of permanence or their format. With a wide variety of models that are adapted to the real needs of customers or users. So that in this way, they are in a better position to increase the weak intermediation margins that these banking products have at this time. Although in this case they cannot be canceled in advance either.
Link it to equities
The most aggressive formats currently offer the best returns and can reach a fixed annual interest rate of 5% . However, in this case, the only solution is to link these bank deposits to equity assets, such as shares of publicly traded companies. This involves a somewhat specific mechanism that you should understand before signing up to avoid any surprises during the investment period.
These types of fixed-term bank deposits are characterized by the fact that the potential return generated from their positions is only achieved if the portion linked to the stock market meets certain minimum performance targets. This scenario is not always the case. On the contrary, sometimes it is very difficult to achieve these investment goals. In any case, even if this requirement is not met, there is always a fixed and guaranteed return that ranges between 0,25% and 0,75% and is paid at maturity, regardless of what happens in the equity markets.
It is extended to other financial assets
This strategy for bank deposits isn't limited to buying and selling stocks on the stock exchange. On the contrary, it extends to other financial assets, even those using alternative models. This includes commodities, precious metals, and even, as a more innovative element, the benchmark index for mortgage loans, known as the Euribor . However, in these cases, the supply isn't as extensive as on the stock exchange. These special deposits, which individual customers can now subscribe to, are based more on intentions than actual results.
It's also important to note that these products require longer investment periods to allow investors to develop their strategies for achieving higher returns. These periods range from two to four years, during which the money will be tied up and therefore pose greater risks to household finances given the expenses that will need to be covered in the coming months. Furthermore, these products cannot be renewed upon maturity, as is often the case with more traditional fixed-term deposits offered by financial institutions. In any case, this is a new option that investors with a more defensive or conservative profile can consider in the coming months.
Negotiate it with the bank
However, there's always the option of negotiating the return on the deposit with the financial institution itself. This strategy, though, is reserved for the bank's best clients : those with a strong savings account balance and no outstanding debts. This allows them to improve the intermediation margins on these financial products by a few tenths of a percentage point. To the point where they can be tailored to individual needs without having to resort to any promotional offers from the issuers of these savings products.
Within this general context, it should be noted that through this modality in bank deposits you can choose the amount of the subscription, the term or duration thereof and even the conditions in the contract. That is, it will be much more adjusted to what our needs are at all times. While on the other hand, they have the real possibility that they can be renewed upon completion, even with other conditions in the subscription different from the current ones. As it is a product with its own personality and that therefore differs from the more conventional formats.
With interest rates at 0%
As you may have noticed, you have other options to increase your savings account balance year after year without any effort on your part. However, be aware that exceeding 3% profitability on these deposits will be a very difficult task for your personal goals. In many cases, it will depend on the investment strategy you currently adopt and the well-defined characteristics of the current offerings from financial institutions.
Not with a great variety in the formats, but at least enough to improve the intermediation margins of fixed-term bank deposits. And that is at the end of the day one of your most immediate objectives in a few moments when the price of money is in a negative situation and very unfavorable for contracting this kind of banking products. In what can be considered as one of the actions that you should import from these precise moments in your relationships with the world of money.