Frankfurt In the competition for customers, the online bank ING Germany is increasing interest rates for overnight money. The bank wants to use this to attract new customers. But even those who already have an overnight deposit account with ING will now receive three percent interest on newly deposited funds for six months.
According to the comparison portal Verivox, ING is at the top of the market. Savers receive such high overnight interest rates from no other German bank.
Oliver Maier, Managing Director at Verivox Finanzvergleich, expects: “The new offer is likely to further fuel competition for investors’ savings.” As Germany’s largest direct bank, ING is also an important benchmark for many other market participants, which competitors use to determine based on their own conditions.
Since the interest rate hike by the European Central Bank (ECB) in July 2022, banks no longer have to pay penalty interest if they park money at the central bank, but instead make money from it. The interest on deposits that the ECB pays to commercial banks is currently three percent. Some economists expect the central bank to continue raising interest rates.
It is therefore possible to earn money again with deposits, and more and more financial institutions are raising overnight interest rates. With particularly high interest rates, the banks are trying to attract new customers in particular. ING Germany boss Nick Jue also said that the bank was confirming its growth ambitions with the rate hike.
Call money interest: On average, the banks only pay 0.27 percent
In addition, banks aim to keep deposit growth in line with lending. Even if the construction financing business in Germany has collapsed, financial institutions are likely to arm themselves with more deposits for a renewed increase in credit demand.
However, the difference between the ECB deposit rate and call money rates is often still large. According to Verivox, the average interest rate is currently 0.27 percent. Here, the data flowed in from 674 credit institutions, which show the overnight money offer freely accessible on their website.
>>Read here, why inflation plays such an important role in interest rate setting.
In the most recent Verivox evaluation from the end of March, 39 percent of the banks paid no interest at all on call money. A month earlier, the proportion of credit institutions without overnight interest was 55 percent – including a particularly large number of savings banks and Volksbanks. You benefit from loyal customers who do not react too quickly to high interest rate offers.
A three in front of the decimal point – that hasn’t been the case with call money for a long time. The Spanish Suresse direct bank was recently the first financial institution to call up this brand, as reported by the consumer portal Biallo.
There, the offer only applies to new customers and is limited to four months. From the fifth month there is “still above average” 1.75 percent per year, reported Biallo.
Given the ECB’s negative deposit rates for several years, excess deposits cost banks money at times. Many credit institutions reacted by demanding negative interest rates from customers with higher deposits. These penalty interest rates often apply above a tax-free allowance of 100,000 or 500,000 euros.
ING interest is limited, but also for existing customers
ING Germany, which had previously attracted customers with relatively high savings interest under the name ING Diba, increasingly relied on house bank customers. In the best case, such customers not only park money, but also generate income through mortgage lending, consumer credit or securities savings.
At ING, the three percent interest is now available on new call money accounts for deposits of up to 50,000 euros from the time the money is received for six months. Existing customers get the higher interest rate for every euro of new deposits until April 25 – also up to a maximum of 50,000 euros.
There is also an ambitious goal behind the new conditions of ING: After a drop in profits last year, the direct bank is aiming for significantly stronger customer growth again. “At today’s interest rate, any growth is profitable,” CEO Jue said in early February. “That’s why an old goal is back: ten million private customers, but now for 2025.”
Jue had already issued this target shortly after taking office on June 1, 2017, but later dropped it because of the low and negative interest rate environment. At the end of 2022, ING Germany had just over 9.1 million customers.
More: According to a survey, the ECB should raise interest rates despite the turbulence in the banks
With material from dpa
First publication: 04/05/2023, 08:26 (last updated: 04/05/2023, 16:08).