02.12.2019 | Estimated 4 minutes reading time | Print this article

How to get the best rates on term deposits: the staircase strategy

As the low-interest phase that Europe is in persists, savers ask themselves: if I can’t even earn interest on my savings, what’s the point of deposits? The so-called “staircase strategy,” recommended by Germany’s leading consumer organization Stiftung Warentest, offers a way around low rates. The strategy strikes an ideal balance between flexibility and returns, despite the extended period of low interest rates.

Returns increase with maturity

When investing in fixed-term deposits, the general rule of thumb applies: the longer the term, the higher the return. With fixed-term deposits, however, your money is tied up for the entire period and you do not have access to your savings during this period. Even in the low-interest environment pervading Europe, there is a possibility that interest rates will rise again during the term — but you will not be able to make use of them. As most savers prefer to avoid this, they wait for higher interest rates. Through this reluctance, though, they miss out on valuable returns. But there’s a way around this dilemma!

Distribute money among several fixed-term deposit offers

Spread your preferred investment amount over multiple terms between one and five years, all of which are recommended. With a total investment amount of 25,000 euros and a term of 5 years, for instance, this is 5,000 euros per fixed-term deposit and year. If you have 25,000 euros saved, for instance, you can allocate 5,000 euros in five different term categories. While 5,000 may be tied up for the entire 5 years to begin with, you are free with the other 80% to move the money after the terms are finished to deposits with improved rates, or simply to roll them over.

Reinvest earnings

By reinvesting fixed-term deposits, you are able to leverage the compounding effect on the profits from your savings because the interest can be added to your principal. This then in turn increases the amount of interest you earn. Accordingly, if your first fixed-term deposit expires after one year, many banks will allow you to roll over the investment and in so doing, begin to benefit from compound interest.  secure the highest interest rate. At the same time, the strategy allows you to react fairly quickly and flexibly to any interest rate increases, shifting segments of 5,000 euros (as per our earlier example) into new accounts — not only after the whole five years, but multiple times within that time frame if needed to maximize your profits. And these new deposits don’t require foregoing any return on your money: with your range of terms, you can take advantage of good rates when they are available.

Advantages for Raisin customers

The staircase strategy recommends committing to between three and five different fixed-term deposit products with competitive interest rates. In this case, it should be noted that direct banks often offer lower interest rates, and each individual bank only offers a small range of products. Raisin solves just this issue by providing access to 23 high-interest deposits from 186 banks, all from one platform. Using such a platform, you can select your entire range of deposits without leaving home. Create a Raisin account and nearly the whole process can be completed online. Try it out!


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Offers recommended by Stiftung Warentest

The current issue of the highly respected consumer finance magazine Finanztest (09/2019) lists multiple offers for fixed-term deposits from Raisin’s partner banks and greatly simplifies the implementation of the staircase strategy. For German speakers, this analysis and its recommendations can provide an advantage in making your choice.

Secure time deposits

In accordance with EU law, investments for fixed-term deposits on Raisin are legally protected 100 % by each country’s National Deposit Protection Fund. This protection applies up to 100,000 euros per customer, per bank. Please note that if the Deposit Protection Fund is in a foreign currency, the protection limit depends on the current exchange rate. Read more here, about how secure deposits are across the European Union .