Putting a stop to exploitation from your financial institution

January 10, 2024

Putting a stop to exploitation from your financial institution

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Watching central banks raise interest rates is like eagerly waiting for a long-awaited dessert; however, the disappointing reality is that banks have been incredibly slow to reciprocate this positive trend in their deposit rates.

For those of us observing this stagnation, it's quite disheartening!

Understanding the tardiness of banks in raising rates

In investigating why banks are dragging their feet in increasing interest rates, several reasons surfaced:

Banks are enforcing stricter lending requirements, resulting in reduced lending
There's a remarkable decline in demand for property loans
Corporate mergers and acquisitions have almost come to a standstill

Consequently, banks find themselves without a compelling need for our deposits, hence they persist in maintaining low interest rates, guaranteeing handsome profits, even by merely parking funds overnight at the central bank.

Case in point: European banks

For instance, my bank in Germany offers a paltry 0.75% interest per year on my deposit account, while the European Central Bank's interest rate page reveals that banks can earn 3.25% by parking money with them.

This translates to a profitable 2.5% for European banks, with zero risks involved.

Revamping my asset strategy

It dawned on me last week that I had been neglecting my holdings, including those in brokerage accounts, especially the cash segment.

Given the prolonged era of low to non-existent interest rates, I had overlooked this vital section of my portfolio.

But, it's high time to proactively seek out low-risk money market funds with promising interest rates.

I'd strongly recommend you to embark on this search as well, if you haven't already!

Unlocking dormant potential

Imagine this: If you have around €200,000 idling in your accounts and you can earn 3% on it, compared to the meager 0.75% offered by my bank, that's a potential profit of €4,500 for doing virtually nothing except transferring your funds to a more rewarding account.

Your financial ally in pursuit of maximizing returns,

PS To find excellent companies that perfectly align with your investment strategy, click here.

Putting a stop to exploitation from your financial institution

Putting a stop to exploitation from your financial institution