(image from www.slatepropertiesnow.com. No copyright infringement intended.)
Because of the low interest rate environment, Metrobank welcomed the year with also lower interest rates for its depositors.
From 0.375% gross annual interest rate for regular savings accounts, this was lowered to the current 0.25% per annum starting January 1, 2013.
And now, BPI announced recently that it will also cut the rates of deposit accounts starting February 15.
Similar to Metrobank, rates for BPI regular saving products will be cut to a measly 0.25% from the current 0.375% per annum. BPI checking accounts will also earn less interest starting February 15.
BPI Family Savings Bank, which usually enjoys a relatively higher interest rate, will also slice some interest gains from its savers. From the current 0.625% to just 0.5% per annum. Incidentally, interest rates on BPI Family checking accounts are retained.
Meanwhile, despite the imminent rate cuts, BPI Direct Savings Bank will still give depositors the highest interest rates among all BPI banks. The 1% per annum earned by BPInoy Savings account will be reduced to 0.75%.
I won't be surprised if BDO, the last of the Big Three in domestic banking, will also cut rates soon.
But how much does the reduction from 0.375% to 0.25% really mean to my fellow multi-millionaire-to-be bank clients?
Let's say you have P100,000 in a regular bank account at the start of the year.
For an account that earns 0.375% per annum compounded quarterly, the interest earned at the end of the year will be P375.53.
However, for the reduced rate of 0.25% per annum, still compounded quarterly, the interest earned will just be P250.23.
AND THOSE ARE STILL GROSS OF 20% WITHHOLDING TAX.
If we would reduced the 20% withholding tax for every quarter, the annual interest earned will just be P300.34 and P200.15 respectively for 0.375% and 0.25% p. a. interest rates.
Two hundred bucks earned after a year with P100,000 "investment" is not much. But we have to always remember that we are parking our money in banks for short-term financial goals or for emergency. For our long-term goals, savings accounts are not enough.
Check the updated interest rates of other BPI products by clicking the folowing links:
For BPI Family Savings Bank
For BPI Direct Savings Bank
(I can't find the permalink of the deposit rates for Metrobank. It is a popup page from the bank's official website.)
Smart and Happy Saving and Investing!