Why do banks pay interest in the first place?
A lot of the differences in terms and interest rates for different products can be explained if you know why banks pay interest in the first place. Banks pay interest because the money you put in savings account can be put to good use by a bank. Banks mainly make money off giving out loans. They however need to back all the loan they give off by a certain percentage of real money they have in reserve. This reserve money is usually money which is in fact ‘loaned’ to a bank by people who put money in their savings account. Because for every euro a bank receives on a savings account a bank can loan out about 20 to 50 euros to customer, they more than welcome new deposits. Banks pay interest in order to attract savings. So in short, banks pay you interest in return for you allowing them to ‘use’ your money.
Different products
There are many ways of saving up money using Dutch bank accounts. Usually you’ll already get a bit of interest on the account associated with you debit card. The reason you get so little interest on this account is that the bank never can be sure you’ll leave you money on it for very long. You could pay for it at the grocery store any moment for example. It’s thus hard for the bank to use that money for backing loans. If you however put that money on e regular Dutch savings account, the bank knows it’s unlikely you’ll just redraw all your money at a random moment. These accounts are usually referred to as ‘spaarrekeningen‘ in Dutch. Because of this extra security, the bank is better able to back its loans using that money and thus pays higher interest. So what if you promise a bank you’ll leave you money at the bank for a whole year? This provides a huge increase in security for the bank and thus you’ll receive much higher interest rates. These type of accounts are known as deposit accounts, or ‘deposito rekeningen‘ in Dutch. Dutch banks usually offer you a whole range of the same deposit account with varying deposit times.
Terms
Depending on the type of bank account you choose, different terms apply. As just explained, for deposit account’s you are required to deposit your money for a fixed amount of time. You may have to pay a fine if you do want to withdraw your money before the deposit term expired. Dutch banks also offer a special variety of savings accounts, which require you to deposit a fixed amount of money every month or week. Banks typically pay more interest over such accounts because they are assured they receive extra money for backing new loans every month of week. It’s important however that signing up for such a savings account will increase the monthly fixed charges for you household.
Next to all these interest increasing opportunities it’s also important to pay attention to the nationality of the bank itself. The Dutch central bank backs savings account for up to € 100.000 if the account is provided by a Dutch bank. For non Dutch banks this amount is lowered to € 50.000. These figures become important when banks fall over, like the Ice-Save bank for example. If you are a Dutch citizen and you lose all your savings deposited at a Dutch bank which goes bankrupt, the Dutch central bank will refund up to € 100.000. If you are looking for a place to save more than € 100.000, it thus may be important to spread your savings among different banks.
Next to all these technical variations, Dutch banks usually also offer savings account to specific demographic groups. The so called youth savings accounts, or ‘jeudgspaarrekeningen‘ in Dutch, are special savings account for parents who want to save money for their children. Banks typically offer higher interest rates on these accounts.
Comparing interest rates and terms
Now that we have treated all the details of different savings account, it’s important to be able to easily compare all these financial products. Luckily you don’t have to visit all the websites of different banks any more these days. There are great Dutch sites which can help you out picking the right Dutch savings account.
Several great sites for comparing interest rates at Dutch banks are Nederlandse spaarrente vergelijken and Rente Gids. Take for example a look at hoogste spaarrente. Note that these sites are in Dutch. You’ll thus have to polish that little knowledge of the Dutch language you may or may not posses or resort to tools like Google Translate.
