Fixed-term deposits have been established for many years as the quintessential savings product, especially aimed at a very well-defined customer profile : a defensive user with significant purchasing power who prioritizes security over the risk associated with other banking products focused on equities (stocks, investment funds, derivatives, etc.).
However, this safe haven for savers is gradually losing its role as the preferred banking product for storing capital over time. The European Central Bank's decision to lower interest rates has led to deposit returns falling to historic lows.
They offer interest rates that rarely exceed 0,75% , in contrast to what was common a few years ago, when it was quite possible to reach 5%, and even higher with the most aggressive offers from banks. Furthermore, they offered a wide range of products covering all types.
As a result of this new economic climate, deposits have lost their appeal for customers, and it's no surprise that they are directing their savings towards other, more attractive and productive investment options that currently offer higher returns. This is not without risk, however, since to increase these margins they find themselves needing to link their savings to other financial assets. And not necessarily equities, but rather to other emerging markets: raw materials, precious metals, and so on.
This is confirmed in the 2014 annual report prepared by the Association of Collective Investment Institutions (Inverco), which highlights the change in habits among Spanish savers. Not surprisingly, in this period the weight of deposits in the asset portfolio of Spanish families fell from 42,3% to 39.8%.
While these monetary outflows were directed towards investment funds, collective investment instruments, and pension funds , this is a strategy to improve your personal accounts through the most reliable financial products.
Strategies to increase your returns
Despite everything, it won't be entirely impossible to find a deposit account with better terms. It will undoubtedly be more difficult, but the dynamic market is generating new models, some of them truly innovative, that meet your expectations as a saver. It will certainly depend on your customer profile , but in any case, it will be an option to ensure your money doesn't settle for the meager returns offered by more traditional deposits.
Their structure will change somewhat, as you'll currently have to take more risks with your positions, but in the end, you'll reach your most desired goal . Not through spectacular percentages, but at least enough to ensure your bank account is reasonably healthier by the end of the year. This will allow you to treat yourself to something small, buy the latest television model, or even plan a trip with your whole family.
To make things easier for you, banks are developing different marketing strategies to encourage you to keep your savings in other options. In some cases, this involves offering more products with your current bank, and in others, extending the minimum term of your account . Any change can result in a slight improvement of a few tenths of a percentage point over conventional deposits. And in the most aggressive offers, the difference can increase by up to one or two percentage points on average.
First key: direct debiting the payroll
This is the most effective way to quickly reach your goals. The only requirement banks will impose is that you link your regular income to the institution. In return, you can open fixed-term deposits with a return of up to 5% , as is the offer Bankinter is currently developing for new customers.
However, not everything will be favorable to your interests, of course not. To begin with, these offers are only valid for very short commitment periods, rarely exceeding 6 months . Furthermore, the amounts that can benefit from these products don't cover all your savings; on the contrary, they cover a maximum of 5.000 or 10.000 euros. And in all cases, they are intended for new customers and are even limited by the duration of the promotion.
Second key: link them to other financial assets
Linking your deposit to other products is often the most effective way to increase its return. This could be to assets from the stock market, but also from other financial markets. These products guarantee a minimum return (around 0,50%), but if the expected appreciation of these assets is met, it can reach 3, 4, or even 5% . However, in any case, this is not guaranteed; it depends on the conditions of the financial markets.
This is a sales strategy that major banks are using to retain their key customers. These loans require a longer commitment period, potentially reaching two or three years . Cancellations, whether partial or full, will be more difficult. They will also demand a greater financial outlay from you, as they are structured with higher minimum deposit amounts, exceeding €10.000 in many bank offers.
Third key: extend your terms of stay
This will be the most conservative tactic you have at your disposal to improve the performance of your savings, albeit slightly. You'll have to extend the investment period to at least two or three years . As a reward, you'll receive an additional interest rate of a few tenths of a percent above the original projections. But the question you should ask yourself is whether this small increase is worth having your money tied up for such a long period.
One of the main drawbacks of applying this strategy is that the period in which you have deposited your assets, any type of expenses may arise, even those not foreseen in your budget. And you may have no choice but to resort to this long-term imposition to meet these needs, and therefore, waiving the interest offered by the signed proposal.
Fourth key: offers for new customers
As a last resort, you'll have no choice but to take advantage of one of the many offers banks are providing to attract new customers. These are very advantageous for your interests, as they offer returns of up to 2%. You have many options to choose from, ranging from welcome deposits to the traditional offers that have always existed, both of which reflect the philosophy of this sales strategy.
As in the previous fixed income proposals, in this specific case they are very limited, both in their term of permanence and in the maximum amounts allowed for each contract. Only if you are thinking of changing banks will you be able to opt for one of these savings products.
And it will even offer you other initiatives to make signing up more appealing. One of its advantages, however, lies in the fact that these are very flexible models that are constantly being updated and adapted to the latest developments in the banking sector.
Five tips that will improve your deposits
You're probably not in a position to change your investment strategy and turn to the equity markets to improve your position. You'll prefer a minimum, guaranteed, albeit meager, return to the risks involved in stock market trading. As a result of this decision, you'll have no choice but to change your mindset and become much more actively managing your savings . This will be your last chance to achieve your goals.
The objective of your actions will be none other, that by the end of the year your account is more healthy as a result of your positioning in this kind of traditional banking products. It is true that market conditions will not help you to achieve this, but also that the dynamism of the market will allow you a small shortcut to achieve your goals.
In any case, forget about the returns from previous years; you probably won't see them again, at least in the short and medium term. However, any decision by the European Central Bank (ECB) to raise interest rates—as will soon happen in the United States— will help improve profit margins on deposits in the coming months . In the meantime, you'll have no choice but to implement some of the following recommendations.
- Try to analyze the different offers that banks are proposing to youPerhaps some of them fit your profile as a saver, and with higher performance.
- You can choose to link your taxation to a financial asset, and although it will not guarantee you better interest, You will have the opportunity to achieve it if the market conditions reflect it.
- Not only Spanish banks offer you these products, but other international and legally established in our territory, which have a more generous offer in terms of their remuneration.
- You may have been thinking about changing banks for a while, and the appearance of promotional offers for new customers is the perfect excuse to activate this movement in your personal accounts.
- And finally, you may not know that you can open a deposit in other currencies (pound, dollar, Swiss franc, Japanese yen, etc.), although at the cost of assuming many more risks in the operation. Although if the change is more beneficial to you, you will be able to emerge strengthened by the change in the management model.