Where should you put your savings?: What are fixed-term deposits good for as an alternative to a savings account?

Unlike savings interest rates, fixed-term deposits react quickly to the market environment. When interest rates rise, there is more interest and vice versa. The rules of the game are clear: you give the bank a fixed amount for a certain period of time and receive a fixed interest rate in return.

It sounds good, but you need a lot of money for fixed term deposits. At most banks the minimum deposit is 100,000 francs, while at some, such as UBS, it is only 25,000 francs. You can choose the maturity; Depending on the bank, it varies from one week to 24 months. Withdrawals are only possible during the penalty period.

A look beyond the border

There is much more interest in the Eurozone than in Switzerland. According to Stiftung Warentest, the best offer in Germany was almost 5 percent interest at the end of 2023. However, Swiss investors prefer to stay away from this. There is exchange rate risk there. And that’s not even close: You would have lost 6 percent with German fixed-term deposits (calculated in francs) last year.

But weak interest rates in Switzerland are not actually a problem. More precisely, it is the lack of transparency: you cannot predict whether you will receive a relatively high or low amount of interest. “The bank will be happy to provide valid interest rates upon request,” writes Zürcher Kantonalbank (ZKB), citing a conversation with the customer advisor. But compare like in Germany? Not possible in Switzerland.

Transparency is possible

Publishing the data would not be rocket science. Example Postfinance: You purchased a fixed-term deposit in a few clicks in the app. Upon request, the bank wrote that “it was deemed necessary to publish the interest rates” because this was possible. Migrosbank can do this because it “wants to make accessing information as easy as possible for everyone.” Small bank Avera proves that size is not a criterion for transparency. “Transparent pricing is appreciated by our customers and makes recommendations easier,” says spokeswoman Claudia Spörri.

It seems people in the Zurich banking hub don’t think much of this kind of transparency. From where? “Interest rates in the money market may change several times during the day” (ZKB), the exact conditions are “determined at the time of transaction” (UBS). That’s why we don’t publish it. Another possible reason: Some customers are more equal. “Any individual offer can be used in the asset management business, for example,” says ZKB.

Comparisons will be important for those interested, as they show the big differences between the offers of Bank Avera, Migrosbank and Postfinance. On the reporting date, Avera bank gave 1.22 percent interest and Postfinance gave 0.53 percent interest for a one-year maturity. Migrosbank remained in between with 0.9 percent. For other terms the differences are similarly large.

0.07 percent return

But even the best offer won’t make you rich. If you subtract inflation – UBS expects 1.6 percent inflation for 2024 – the result is a loss of purchasing power. You don’t get as much value for your money as you do now. Recently the “Handelszeitung” showed that this is not an unusual situation. After deducting inflation, savings deposits have earned an average return of 0.07 percent over the last 90 years; slightly more for fixed term deposits. At least there are no bank fees like there are with savings accounts.