Frankfurt Some banks are now again offering very high interest rates on call money. This is due to the rise in key interest rates, but also to their advertising effect. Many institutes use call money in a targeted manner to attract new customers. As a result, the financial institutions are generous when it comes to interest rates. Especially in times when interest rates are already rising, there can be a real competition between the banks, with the number one on the call money hit lists changing at least weekly.
In addition to attractive interest rates, another advantage of money market accounts is that the money remains available every day. Very different from savings accounts. They usually only offer very low interest rates, and it can sometimes take weeks before the money is back in the checking account.
What sounds great for customers also has its downsides. And even if overnight money is a comparatively simple financial product, there are many points to consider. The Handelsblatt has compiled the most important ones here.
What is a call money account?
As the name suggests, the money market account is an account in which the money is available at any time, i.e. every day. The interest rates are usually variable at any time. This means that if the bank wants to be attractive to new customers, the interest rate can rise. On the other hand, interest rates can fall again at any time.
Where is the most interest for call money at the moment?
These banks currently offer the highest interest rates on call money (as of July 5th, 2023):
- Openbank with 3.7 percent for six months
- 1822directly at 3.6 percent for six months
- Raiffeisenbank Hochtaunus with 3.55 percent for six months
Also interesting is the DKB, which pays everyone, not just new customers, 3.5 percent interest on overnight money until January 31, 2024.
Where can overnight interest rates be compared?
Overnight money offers can be compared on comparison portals such as check24.de or verivox.de. The Handelsblatt offers you an independent call money comparison with an overview based on the data from FMH-Finanzberatung.
>> Read about this: Daily allowance: Which offers are currently worthwhile
In the linked article you will find a detailed overnight money comparison and find out which interest rate offers are particularly attractive. Experts also explain which strategy pays off with overnight money and whether fixed-term deposits are currently recommended.
Overnight interest rates: what should you look out for when comparing?
There is hardly an offer for overnight money without ifs and buts. Most top interest rates are only available for new customers or for new money from regular customers. No less important is the answer to the question up to which maximum amount the offer is valid. Most new customer campaigns are valid for amounts up to 50,000 euros. The duration of the interest rate guarantee is also important. An offer whose interest rate is fixed for six months offers the advantages of a six-month fixed deposit but the flexibility of an overnight deposit.
Anyone who is actively hopping from one overnight money provider to the next should not forget to close their accounts again. Horst Biallo from the interest portal of the same name calls this one of the most common mistakes that savers make. Because these “account corpses” ensure that savers who return to a bank after a while to take out a new customer offer, get nothing. The reason is her still active connection to the institute. Most banks consider new customers to be people who have not had an account with the bank in the past six months.
How do you recognize decoy rates?
Call money is the classic door opener for banks when it comes to winning new customers. Therefore, high-interest money market accounts for new customers are considered a loss leader. Anyone who is flirting with such an account should take a look at the interest rate guarantee and the maximum investment amount. If the guarantee is short and the sum, which earns high interest, is low, customers who do not want a long-term relationship with the bank should cancel immediately when the interest expires.
Some banks also make the interest rate dependent on whether the customer opens a current account at the same time. For anyone who is already looking for a new bank, such offers can be worthwhile. However, anyone who only wants the high interest rate is badly served here.
How will overnight interest rates develop in 2023?
In 2023, according to figures from FMH Finanzberatung, the average interest rate on call money doubled to 1.31 percent by June. Experts like Ania Scholz assume that interest rates will continue to rise for a while.
>>Read also: Call money and inflation: you should pay attention to this
After all, the European Central Bank is planning to raise the key interest rate at least once more. “We will still see the offers at four percent for overnight money in the summer,” says the authorized officer at FMH-Finanzberatung. However, no market observer can say how high interest rates will rise.
Why is a call money account useful?
Call money offers quickly available capital for unplanned expenses. According to Niels Nauhauser from the Baden-Württemberg consumer advice center, these are typically the new washing machine or an expensive repair to the car or home. Therefore, two to three months’ salary should be on the call money account.
>> Read also: Fixed-term deposits & call money: Deposits have increased since the interest rate turnaround
However, call money is less suitable as a savings product. On the one hand because the interest rates are usually lower compared to fixed deposits, on the other hand because banks only guarantee interest rates for a few months, if at all.
How do I open an overnight deposit account?
Luckily, the times when you had to go to the post office to open a money market account are over. Many banks are now advertising that customers can open their money market accounts within a few minutes.
Thanks to the video identification process, this is actually possible from the sofa at home. As with all banking transactions, the person opening the account must be of legal age. Children’s overnight savings accounts must be opened by their parents or other legal guardians.
Once the money market account has been set up, money can be transferred directly from a reference account. If the bank no longer offers attractive overnight interest rates, it is sufficient to clear the account and terminate the bank details in writing.
What is the maximum amount of money you should have in your money market account?
Most overnight deposits have a maximum investment amount. Beyond this amount, the interest rate usually drops rapidly. “Anyone who is particularly concerned about security should distribute larger assets in 100,000 euro packages to different accounts anyway,” advises Ania Scholz. This not only spreads the risk, but you always have the full statutory deposit protection.
How do you recognize a safe bank for overnight money?
Across Europe, 100,000 euros are secured per customer and bank via the respective state deposit insurance. If a bank goes bankrupt, the money must be repaid within a few days, including the interest accrued up to that point.
Many German banks have also joined the Bankers Association’s voluntary deposit protection fund. Amounts over 100,000 euros are also secured via it.
>> Read about this: Deposit insurance: Your money is now so safe
Savings banks and Volksbanks protect all of their customers’ deposits. Savings banks and Volksbanks in crisis are supported by the other members of the association via the so-called institute safeguard until they are economically healthy again.
How is compound interest calculated?
The bank is free to choose the interval at which the interest is credited, whether monthly, quarterly or annually. How the respective bank specifically regulates it is in the account conditions.
In order to use the compound interest effect as well as possible, a short interval makes sense. At Openbank, for example, interest is credited monthly, which ultimately increases the interest rate from 3.7 to 3.711 percent.
Some interest portals also calculate the return. Interested parties get a feeling for whether they can benefit from the compound interest effect during the period in which the interest is guaranteed. You can also compare the return compared to a fixed-term deposit with a term of one year.
Assuming a bank offers three percent interest on its money market account for six months and then only two percent, the return over the year is only 2.5 percent. This example shows very clearly why it is worth switching to one of the currently highest-interest offers when it comes to call money.
More: With overnight money against inflation
First publication: 7/7/2022, 4:00 a.m. (last updated: 7/5/2023, 3:00 p.m.).