Negative Interest Rates and How You Can Avoid them

Alina August 2020 4 min

Most companies already had to deal with the topic of negative interest rates on deposits at their bank. In the interest rate environment of the recent years, we have almost become accustomed to negative interest rates on large account balances. And for the banks and financial service providers themselves, negative interest rates have become an unwanted necessity. 

On November 1st, 2020 our banking partner Solarisbank AG will change its conditions and introduce negative interest rates on deposits over 100,000 Euro. As your Penta account is managed by Solarisbank, you will be affected by this change if you currently have such a high balance on your main account including all sub-accounts. The interest rate of -0.5 % p.a. will be charged on the amount exceeding 100,000 Euro. If you have several business accounts with Penta, the 100,000 Euro limit will of course apply to each account separately. The settlement of this negative interest will be done quarterly, if it is incurred. You will find an overview on your account statements. 

Why All this? 

With this change, Solarisbank is following many other German banks that are already charging interest on the large account balances. This interest rate is usually not charged to fill the banks’ pockets. On the contrary, the banks themselves pay such a negative interest rate on the credit balances at the Deutsche Bundesbank or the European Central Bank (ECB). The key interest rate or the deposit rate of the ECB is currently exactly -0.5 % (as of September 2020). Accordingly, the Solarisbank is only attempting to cover its own costs. As these key interest rates can be adjusted by the institutions at any time, Solarisbank also reserves the right to adjust the interest rate on deposits. Reductions and increases – both options are possible. We would like to mention that these changes serve to cover costs and that no profits are made from them. 

What Needs to Be Done?

It is likely that such high demand deposits affect only a small number of companies. In case you actually have more than 100,000 Euro on your main and sub-accounts with Penta, you don’t have to do anything else if you agree with the changes. If you don’t notify any rejection to us by the date of the changes, you will be deemed to have accepted the changes. In case you don’t agree with the new terms and conditions, you can notify us by November 1st, 2020. Unfortunately, this would also mean that you can no longer use our services. 

Until October 31, 2020 inclusive, the terms and conditions known to you apply. If you have any questions regarding your deposits with Penta, please contact help@getpenta.com. Our support team will be happy to help you and will find a solution with you. 

How Can Negative Interest Be Avoided?

We would like to provide you with the best possible advice and support in all financial matters. Therefore we would like to show you some possibilities how you can avoid negative interest on deposits over 100,000 Euro. Neither you nor we are helped by this interest rate environment, but there are ways and means to deal with it. 

Make a Split

On the one hand, you have the possibility to divide your credit among different accounts. With Penta or the Solarisbank, the 100,000 Euro limit only applies to one main account with all sub-accounts. If you run several companies and several business accounts, you can make a reasonable division here, if the company structures allow it. 

Implement Investments

Another way to avoid high account balances is to invest. After all, the primary objective of the ECB in pursuing this low interest rate policy is to stimulate the economy so that the economy grows. If you have been planning to invest for some time in, for example, new equipment for your company or more staff, now may be a good time to start these investment plans. 

Find Investment Opportunities

If you do not want to tie up your capital in the long term, you also have the option of finding alternative forms of investment. With the help of overnight and fixed-term deposits, for example, your credit balance is retained and you still have the option of being able to access it again at relatively short notice. In addition to the flexible choice of maturities for these savings products, you also benefit from a positive interest rate and a related return. Collecting interest sounds better than paying interest, doesn’t it?

Do you have further questions?