Explained: What are penalty interest rates - and when do they apply?

The effects of the key interest rate, which has been low for years, also affect private bank accounts. Recently, penalty interest rates have been increasingly discussed, and our guide explains what they are.

Paying instead of saving: Penalty interest is a custodial fee.

The financial world is traditionally built on interest and compound interest. Penalty interest also falls under this concept, but to the detriment of bank customers.

What is penalty interest and who has to pay it?

Penalty interest is the opposite of ordinary interest. They are credited to you based on the amount and duration of your deposit with the bank. However, because of the low prime rate, banks have little ability to grow the money they deposit; as a result, interest rates have slipped to virtually zero. In addition, the banks themselves have to pay a penalty interest rate of -0.4 percent to the ECB.

• With penalty interest on bank accounts, these costs are partly passed on to customers, as they pay a fee to the bank for the money in the account.
• Due to the connotation, no bank officially uses the term penalty interest. Widespread is about the term custody fee; equivalent to this also negative interest or minus interest describe the situation.
• In general, however, penalty interest accrue only for higher amounts. These are at most banks in the six-digit range, the exemption amount, however, was already lowered at many financial institutions, for example, from 250,000 euros to 100,000 euros.
• In business accounts for companies, minus interest has been common for some time.

Private bank customers with much smaller amounts on the account need therefore (still) no worries about the penalty interest, this development is nevertheless by no means positive.