Negative Interest Rates on Current Accounts: How They Work and How to Protect Yourself
- Lapo Zarina
- Sep 13
- 2 min read
The concept of "negative interest rates" might seem counterintuitive: it means that instead of earning money on your bank deposits, you have to pay to keep it there. This is not an anomaly, but a monetary policy tool that central banks, including the Swiss National Bank (SNB), have used to stimulate the economy in the past and may reintroduce in the future depending on market conditions.
If you want to prevent your money from losing value, compare current account offers in Switzerland now and discover more advantageous alternatives.
Why Do Banks Apply Negative Interest Rates?
Negative interest rates are not an autonomous decision of individual commercial banks but a consequence of the Swiss National Bank's policy. When the SNB sets a negative interest rate on the liquidity that commercial banks deposit with it, it creates an incentive for the banks themselves not to "park" money. The goal is twofold:
Stimulate the economy:Â Banks are encouraged to grant more loans to businesses and individuals, fostering investments and consumption, instead of hoarding liquidity that would cost them money.
Control the Swiss franc:Â A negative rate makes it less attractive for foreign investors to hold Swiss francs, helping the SNB to control the currency's appreciation and support exports.
For the record, negative interest rates on current accounts have not always been applied to all customers. Often, financial institutions have introduced thresholds (e.g., from 100,000 or 250,000 francs), applying the "fee" only to large deposits.
What are the Consequences of Negative Interest Rates for Individuals?
For account holders, negative interest rates can have a direct impact on the purchasing power of their savings. Instead of seeing their money grow, they witness a slow but constant erosion. However, it's not just the negative rate that threatens your capital. Even in the absence of nominal negative rates, your money can lose value due to inflation. If inflation is higher than the interest rate you receive, your "real interest rate" is negative, and your money loses purchasing power over time.
For this reason, leaving large sums of money sitting in a current account may not be the wisest choice. It's essential to evaluate alternatives that allow you to protect your capital from inflation and, if possible, to grow it.
How to Protect Your Savings from Negative Interest Rates
There are several strategies to defend your wealth:
Choose a fee-free online account: Many online banks have offered and still offer accounts with higher thresholds or that are completely exempt from negative interest rates, making them an excellent solution for day-to-day management. You can find out the best options by reading our article on the costs of a current account in Switzerland.
Diversify your investments:Â Instead of keeping all your savings in cash, you might consider investing a portion of them. Instruments such as savings accounts, but also funds, ETFs, and stocks, can offer a return that offsets or exceeds the loss in value due to inflation or negative rates.
Use pension pillars (3a and 3b): Funds deposited in Pillars 3a and 3b are generally exempt from negative interest rates and offer a long-term investment opportunity, with the advantage of tax deductions.