This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Negative Bank Rates Have Begun in Europe

NEW YORK (TheStreet) -- Are U.S. bank savers heading for the once unthinkable -- negative rates on their bank savings accounts?

Media reports say a "negative bank rate trend" is already underway in Europe, where the European Union has implemented a negative rate policy for all 18 Euro nations.

Economists say the so-called NIRP is a radical departure from the policy engineered by the U.S. Federal Reserve that puts federal fund rates at or near zero, keeping bank savings rates low and eating into the returns on bank certificate of deposit accounts, money market accounts and bank checking and savings rates.

Consider the current rate of return on bank CDs. According to the BankingMyWay Weekly Rate Tracker , a one-year CD pays out, on average, 0.193%. While that's in positive territory, it doesn't come close to keeping pace with the rate of inflation, which stands at 2%.

Bank savings and checking account rates of return are even weaker, at 0.065% and 0.046% respectively.

With rates that close to zero, it's not so far-fetched to believe negative interest rates are coming across the Atlantic to the U.S. With negative bank interest rates, you could wind up paying 1% or so for the privilege of parking your money in a safe place, just as European bank savers will be doing per the European Union's new policy.

One safety net for U.S. bank savers is the relatively strong inflation rate. In Europe, the inflation rate -- a huge benchmark for economic policymakers -- is at 0.5% as of May down from 1.6% in July.

A weak interest rate reflects a lousy economy, complete with a lousy jobs picture and a downbeat economy. Thats what is happening in Europe, and that's driving policymakers to lower interest rates from the EU's current policy of zero interest rates to rev up the continent's economic engine.

When rates are at zero, and you have to slash them to create economic growth, there is nowhere to go but to negative rate territory.

The U.S. isn't there yet, but its next backward step would be in the same downward rate direction as the E.U. Bank savers are hoping that won't be the case, even as it's apparently too late for their European counterparts.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs