You establish a deal with your banking partner when you open a Savings Account. As you start depositing money, you indirectly help the bank. They use your funds to entertain other customers by providing borrowing facilities temporarily. To appreciate this unsaid favour, they offer you interest rates.
But to benefit from them, knowing the factors that influence the Savings Account interest rates is necessary. Doing so gives you an idea of how much you can garner through your deposits. Moreover, it enhances your understanding of the facility. So, here is a list of a few of them:
- Closing balances
The closing balance refers to the amount left in your account by the end of every accounting year. It affects the interest rate significantly. For example, if your closing balance is low, it can decrease the interest rates. Likewise, you reap a better interest rate if you maintain a high balance. Therefore, it is wise to consider this aspect. Track your expenses and use funds wisely from the time of account opening.
- Bank’s policies
Every bank has its set of policies, which impacts the interest rate structure. While some banks offer high interest rates, others may not. Hence, you should be careful when selecting a banking partner. If you are yet to open a Savings Account, ensure you read through the concerned bank’s policies and terms.
- The country’s economic state
The economic conditions of the country highly influence the banks’ policies. As an indirect result, your Savings Account interest rates get affected. For instance, during inflation, you may enjoy high rates. Now, although this factor is not in your control, staying updated about them is recommended. It helps you gauge the interest rate structure better.
- Demand & supply
This determines the performance of almost every banking facility. For instance, changes in the demand or supply of Loans and credit affect interest rates. So, if the appeal for a Loan increases, the interest rates go higher. Likewise, if the supply of credit increases, you witness a decline in interest rates. This factor is slightly tricky to assess as it involves statistics and extensive research. However, knowing about it is advisable.
- General wages
A change in the general wage rates also affects the rates. Suppose there is a rise in wages, there will be a simultaneous rise in interest rates. This could be owing to the increase in disposable income. You maintain larger amounts in the account when you have more disposable income. As a result, your closing balance increases over time, making you the recipient of higher interest rates.