Instant-access savings accounts have become indispensable today, almost completely replacing traditional savings accounts in daily life, although some savings books still linger in display cabinets or are used as collateral accounts. The advantage of instant-access savings accounts compared to savings accounts lies in the immediate availability of the entire investment amount without incurring penalty interest. Withdrawals of up to 2,000 euros per month are interest-free. For larger amounts, a three-month notice period is required, or advance interest charges apply. In this regard, instant-access savings accounts clearly hold the advantage. But how do they compare to fixed-term deposits with a manageable duration of twelve months?
Difference Between Instant-Access Savings Accounts and Fixed-Term Deposits
Instant-access savings accounts allow full access to funds at any time without penalty interest, similar to the balance on a checking account. In contrast, fixed-term deposits (or term deposits) involve an agreement between the bank and the customer to lock in a specific amount for a set period. The investment amount cannot be altered during this time. Depending on the institution, terms range from 30 days to ten years, with interest rates typically increasing with longer durations.
Money Potentially Locked Without Flexibility
For those who can afford to part with their funds temporarily, the slight interest advantage of a one-year fixed-term deposit can be appealing. However, even short terms carry risks for investors. Fixed-term deposits contractually prevent early access to funds. Some banks enforce this restriction so strictly that even financial emergencies do not permit early termination, even with penalty interest. In such cases, customer service may simply suggest taking out a loan instead. Investors seeking higher returns through fixed-term deposits should carefully review the fine print of their chosen institution.
Interest Rates Are Not the Only Deciding Factor
Looking at the development of instant-access savings and fixed-term deposit rates over one year from January 2017 to the end of 2023 reveals some insights. Aside from the relatively static average interest rate curves in the early years, fixed-term deposits offered slight advantages. Things changed when the European Central Bank (ECB) eased its restrictive interest rate policies, providing investors with long-forgotten returns. However, individual cases were less static than the data suggests. Banks occasionally launched campaigns offering temporary bonus rates to attract new customers.
Instant-Access Savings Accounts – A Playground for Rate Hunters
Compared to other investments, instant-access savings and fixed-term deposits might seem as exciting as reading a phone book. Yet for some savers, they spark an unexpected thrill—rate hunting fever. In Germany, approximately 19.1 million people hold instant-access or fixed-term deposit accounts (source: Allensbacher Markt- und Werbeträgeranalyse). For banks, this represents significant potential for attracting new customers and fresh capital.Closing one instant-access account and opening another is cost-free and hassle-free. Banks often offer new customers above-average interest rates for a limited time (e.g., six months) on a maximum deposit amount. Rate hunters constantly scour comparison tools for better offers to avoid missing out on even a tenth of a percent in returns on their savings. Once the promotional period ends and standard market rates apply, they move on to the next bank—these “interest nomads” are always on the move.Banks calculate that some customers will be too complacent to close their accounts afterward, leaving their funds in place and becoming long-term clients (good for statistics) while providing cheap refinancing resources.
Fixed-Term Deposits and Funds – A Tricky Combination
A major German bank once offered new customers an especially “attractive” investment option. The minimum investment amount (10,000 euros) was split equally between a fixed-term deposit with a six-month or one-year term at above-average rates (e.g., three or five percent) and an investment in a pre-selected fund, such as the “Vermögensbildungsfonds I.” Sounds appealing at first glance.Unfortunately, this only holds true if you ignore that the fund carries a five percent front-end load fee and an annual management fee of 1.45 percent—both costs that the bank does not waive even during promotional campaigns since earning these fees is the primary goal of such offers. For the fixed-term deposit to be worthwhile, the fund must achieve at least 6.45 percent performance in its first year; otherwise, investors may find themselves at a loss.