Low Interest Rates Due to Lack of Willingness to Change Banks

moneyland.ch analyzed the interest rates of savings accounts, retirement accounts, private accounts, fixed deposits, and medium-term notes dating back to early 2023.

The verdict: On average, the interest rates for Swiss savers went up this year, as expected, but they remain relatively low. The unweighted average interest rate across savings accounts for adults is currently just 0.8 percent per annum. What that means is that the interest earned is lost to inflation. The real interest rate, accounting for inflation, is actually a negative rate.

But while the average is low, there are already savings accounts for adults that pay 2 percent interest, while the worst pay 0 percent interest per annum. “Since the start of the year, the differences in interest paid by different banks have become bigger,” says moneyland.ch CEO Benjamin Manz. “That makes comparing offers even more important.”

Changing your savings account is simple. Alternatively, you can also easily open a new savings account, without having to close your old one. Unlike private accounts, most savings accounts do not have basic account fees.

Swiss banks are profiting off wide interest margins. The reason for this is that many banks only adjust their interest rates for customer account balances if they have to. More precisely, banks change rates when they have reason to worry that they will lose customers. “The continuously low readiness among Swiss bank customers to migrate to other banks leads to lower interest rates for savings,” says Manz. Smaller banks often have the most attractive yields, because they want to attract new customers.

Savings accounts for adults

At the start of 2023, the weighted average annual interest rate for adult savings accounts denominated in Swiss francs was 0.19 percent, with rates ranging between 0 and 0.8 percent, depending on the savings account.

At the end of 2023, the average annual interest rate of savings accounts for adults is 0.8 percent, with rates ranging between 0 and 2 percent.

So, the average interest rate for savings accounts has climbed by 0.6 percentage points over the course of the year. The highest available interest rate has gone up by 1.2 percentage points. That means that the difference between the lowest and highest rate has gotten larger. These developments make comparing offers even more important.

Euro-denominated savings accounts

At the beginning of 2023, Swiss euro-denominated savings accounts for adults had an average annual interest rate of 0.08 percent, with rates ranging between 0 and 0.75 percent. In the meantime, the average interest rate has climbed to 0.83 percent, with rates ranging between 0 and 2 percent.

Youth savings accounts

At the start of 2023, savings accounts for children and teenagers denominated in Swiss francs had an average annual interest of 0.52 percent. The lowest interest rate was 0.1 percent and the highest was 1 percent.

In the meantime, the average interest rate for youth accounts has climbed to 1.16 percent per annum, with actual rates ranging between 0.65 and 2 percent.

Retirement savings accounts

The annual interest rates of pillar 3a savings accounts at the start of 2023 averaged 0.26 percent, with the lowest rate being 0 percent and the highest rate being 1 percent. The average annual interest rate of vested benefits accounts was 0.1 percent, with actual rates ranging between 0 and 1 percent.  

In December 2023, the average annual interest rate for pillar 3a accounts is 0.98 percent, with a bandwidth of 0.25 to 1.6 percent. The average interest rate of vested benefits accounts is 0.54 percent, with rates ranging between 0 and 1.5 percent.

Private accounts

Private accounts are meant to be used for financial transactions, not for savings. In January 2023, the average annual interest rate across Swiss private accounts was 0 percent, with the lowest rate being -0.125 percent and the highest rate being 0.5 percent.

Changes in 2023 have been moderate. In December 2023, the average annual interest rate for adult private accounts was just 0.04 percent – practically no interest at all. But there are private accounts that stand out with interest rates similar to those of savings accounts. The highest-yield private account has an annual interest rate of 1 percent.

Savings account or medium-term notes?

Medium-term notes and fixed deposit accounts are alternative saving solutions that have attracted many Swiss savers this year. The interest rates offered to new customers fluctuate much more than those of savings accounts, but once you hold the account or notes, the interest rate is fixed for the duration of the contract term. Whether or not medium-term notes yield more interest than savings accounts depends on how interest rates develop in the future.

The average interest rate across medium-term notes denominated in Swiss francs is currently 1.34 for a one-year term, 1.26 percent for a two-year term, and 1.27 percent for a three-year term. Average interest rates are slightly higher for longer terms, reaching an average of 1.42 percent interest per year for a ten-year term. The best current offers are 1.66 percent for a one-year term, 2 percent for a two-year term, 2.05 percent for a three-year term, and 2.4 percent for a 10-year term.

So in December 2023, the average annual interest rate of medium-term notes is just slightly higher than that of savings accounts. What is more, differences in interest rates between short-term and long-term notes are very small. For very long terms, passive stock investments like ETFs are normally a better choice.

How will interest rates develop in the future?

Many economists believe that central banks may lower their key interest rates again in 2024. But Swiss interest rates for savings will not likely go down in the coming six months. On the contrary, the interest rates of some savings accounts may go up. The reason is that the average interest rates for savings are still relatively low compared to the key interest rate. Additionally, Swiss banks still have wide interest margins.

You can compare interest rates using the interactive Swiss savings account comparison.