Deposit rates in Bulgaria continue to decline and this trend will continue until the end of the year. This is suggested by the statistics of the Central Bank. For those who find it difficult to navigate among the rows and columns full of numbers it is sufficient to read the conclusion in the report of the Institute of Economics, which says that compared to 2009 interest on deposits of individuals fell by 1 percentage point and at the end of 2013 their average was 3.5 percent. One will further add that for the first three months of 2014 the average interest rate on local currency savings fell further to 3.27 percent per annum. And by mid-year it is expected to go below 3 percent, because in May and June, many credit institutions will reduce interest rates on deposits in the range between 0.25 percent to 1 percent.
In other words, savers will continue to be in a disadvantagous position. Disadvantage is the right word, because citizens have many investment alternatives to bank deposits and savings accounts. Examples include corporate bonds. But the population does not have the habit of buying similar financial instruments, nor have enough information about them. Not to mention that the investments in bonds are not guaranteed as deposits and savingas accounts. That alone is enough repellent for humans.
Investment alternatives are, however, a very long story that deserves quite separate analysis. Here they are discussed just to clarify that despite continued reduction of interest rates on deposits, they will remain one of the most preferred banking services.
Special attention should be paid to
savings accounts
They became particularly popular from the beginning of 2013, when the introduced tax by ex FinMin Simeon Dyankov entered into force and the ruling majority of GERB supported the tax on income from interests on deposits of citizens. Current accounts were out of this levy because, unlike deposits, they are not for a fixed term and people may at any time withdraw money. Unlike the current accounts, the saving ones, however, carry a high yield. They also have important bonus and that is that amounts up to 200,000 levs in them are protected by the Deposit Guarantee Fund. Of course, as with deposits, this warranty applies only if the product meets the standard banking conditions. If it is designed specifically for a particular customer and brings him any preferences such as higher interest rate, the sum of the deposit is not guaranteed. But according to managers of commercial banks such cases are exception when it comes to accounts held in banks by the general population.
Savings deposits, however, have one
unfavorable customer feature
Under these, banks can raise or cut rates whenever they want. For fixed-time deposits this is impossible. The interest rate at which the contract is concluded with the client can not be touched until the term of the deposit expires, although over the same period the bank can change several times its interest levels. But this will only apply to deposits made after the change. In deposits any change in interest rates affects the very next month in profitability. And with already existing downward trend in interest rates that is less for customers who choose to opt for savings account or savings account as an alternative for their savings.
However, there are still savings accounts that carry
relatively high income
However, they are subject to a lot of conventions. Despite the reduction of interest rates, Unicredit Bulbank for example offers savings account „Poveche“ („More“) in which amounts up to 10 thousand levs carry an annual interest rate of 2.8 percent, and those of up to 50 thousand levs – 3.7 percent. It is important to note that these rates are paid only at the end of the period, and that if the citizen does not withdraw any amounts in the account. If this condition is not met, the interest that the bank pay is under a half a percent a year. In other words, the advantage of this product is only that, unlike with other deposits the interest on it is not taxed.
With DSK there are three types of savings accounts under the name „New impetus“. They bear interest of 0.5 percent per year, but that income is added as bonus that varies from 0.6 to 1.75 percent per annum, depending on availability of funds in the account. The highest bonus is for balances of over 100 thousand levs, and the lowest – for amounts between 800 and 1000 levs.
The payment of the bonus, however, is associated with limitations:
The website of DSK writes: if the daily balance of the the account is equal to or greater than the minimum required to open the account, the bank pays the holder a bonus that is in the form of a capitalizing four times a year – 31 March, 30 June, 30 September and 31 December (or at the end of each calendar quarter). Bonuses are paid out in case of a closing of an account.
When the balance on an account falls below the minimum required for its opening, including as a result of official charging fees, the holder loses the right to the bonus at the time of the first maturity of the bonus payment or at the closing the account.
Holders of such accounts must comply with many requirements if they want to really get the bank bonus.
Savings Account PostbankMega Plus also carries
a rate of 2.6 to 3 percent per year
The exact size depends on the amount in the account, and the highest is for balances over 5 thousand levs. The condition to obtain this interest is the client not to do more than two withdrawals per month. If more, the account shall bear interest as the normal current account – of 0.1 percent per year. Of course, this has its specifics that people should be fully aware of before deciding whether to opt for this financial product.
Interesting are the instruments of First Investment Bank in this regard, such as
„Free Checking Account“
There is be no minimum amount for opening. Clients can withdraw funds at any time, without leading to a decrease in income from interest. The determination of the rate itself, however, is a bit complicated and depends on the period that one keeps the money in this financial product. If it is for one year during the first three months the holder will receive a credit equal to one twelfth of 1.7 percent and in the fourth month one will receiveone-twelfth of 2 percent and so on. Each month the interest grows, the twelfth month caring one twelfth of 4.25 percent. The calculation for the entire year in which the citizen holds money in this „free checking account“, the interest rate will be around 3 percent.
United Bulgarian Bank
offers savings „Deposit +“
that for amounts of more than 5 thousand levs the interest rates reaches 3.5 percent.
As stated on the website of the bank, this deposit interest is calculated daily and paid at the end of each calendar year or upon an account closure. On this account people may deposit more money without restriction as well as withdraw amounts at any time but after the second withdrawal per month there is an additional surcharge of 10 levs.
The products of savings deposits are quite different and colorful and have many other conditions and opportunities. That is why citizens should be carefully introduced to them before they make their own choice.
The BANKER
