Does the “race” for Savings Certificates make sense?

Of course! If there is a “good” time to subscribe to Savings Certificates and now. In recent months, thousands of Portuguese people have rediscovered Savings Certificates as a way of making the most of their savings after spending years with their money in the bank yielding nothing or almost nothing.

Banks are getting scared with the flight of millions and millions of euros from time and demand deposits to Savings Certificates and are starting to raise the interest rates on their savings products, but they remain a very long way from the 3 .5% of the state product.

In January, the average interest rate on new time deposits from individuals increased to 0.56% (from 0.35% in December), the highest increase in 11 years, says the Bank of Portugal.

I have nothing against banks (I even like them), but if I’m better off why would I leave my money there? When their proposition is the best one for me, I come back to them. It’s simple. Stop being lazy about doing nothing! Don’t forget that you are the owner of your money and not the bank, OK?

Forget term deposits

If you have money sitting in the bank, on demand or in a term deposit, you are currently missing out on an extraordinary opportunity. Savings Certificates are yielding more, much more, than what banks in Portugal are offering. This has not happened for almost 20 years.

It is the first time that the Savings Certificates, in the current series (series E), reach the maximum possible amount provided for by law: 3.5% gross.

But, incredible as it may seem, there are still many thousands of Portuguese people who do not know what Savings Certificates are and how they work.

In a very simple way, it is lending money to the Ministry of Finance and the State pays us interest for it. And with guaranteed income and capital. In other words, you always win and you don’t run the risk of losing a single euro. The only situation where your money is at risk is if the country goes completely bankrupt. The Troika was here recently and that didn’t happen. This possibility theoretically exists, but it is negligible.

Savings certificates: how is interest calculated?

The interest formula is also simple to understand. It is the 3-month Euribor + 1%, whatever the value is every 3 months.

And this is where we come to the good news. As in February the Euribor exceeded 2.5%, adding another 1% gives 3.5%. From here, the Euribor can even reach 5% and the rate will not rise anymore.

If you already have Savings Certificates for a few months or years, you don’t have to do anything, the interest rate is updated every 3 months. You don’t have to redeem them and make new ones to benefit from these maximum interest rates. In fact, they even earn more because of seniority.
Like this, Whoever subscribes to Savings Certificates in March and in the following months will have the best savings product available in Portugal.

This conclusion is already having an impact on bank deposits. According to the Bank of Portugal, in January 2.5 billion euros left the banks, almost the same amount that entered the Savings Certificates.

It is the biggest reduction (leakage) of deposits in banks since there are records, in this case, since 1979. And the subscription of Savings Certificates does not stop growing. It is the highest value since 1998.

How to subscribe to Savings Certificates?

Subscribing to Savings Certificates is very simple. Just go to a post office (be careful, it’s not the CTT bank), it really is a post office. Remove the password from “Financial products”.

Bring your Citizen Card, proof of IBAN, proof of address, and proof of profession and employer (it can be a salary receipt, pension or unemployment benefit, etc.) and that’s it.

This is to open the “account”. It is not a bank account, nor does it have commissions or ATM cards. None of that. After opening the “Savings Account” you can put the money you want in several ways:

• In “live” cash;
• By ATM;
• By check;
• By bank transfer (they give the IBAN to transfer). In this option, you can do this at home or at any ATM on the street. It’s very practical.

You just have to go to the Post Office this first time. After this bureaucratic part, you can go to aforronet.igcp.ptopen a digital account with the same data you were given at the post office and you can subscribe to more Savings Certificates at any time of the day or night, any day you want and you can also redeem the ones you have.

The minimum is 100 euros and the maximum 250,000 euros. After 3 months and 1 day, you can withdraw the amount you want without any justification, all or just part of it (the rest continues to earn). And interest accrues every 3 months.

As you can see, with these conditions, the banks will have to raise interest rates on time deposits much more to keep up with the State’s alternative.

Interest on Savings Certificates is not eternal

But pay attention to one detail, this account will only remain as long as the Euribor is equal to or above 2.5%. This is happening now and is forecast to continue rising for several months to come.

When you realize that the Euribor is already falling below 2.5%, it will be time to see if you are better elsewhere and change again, if you want. When you do the math, don’t forget about the permanence premiums. You are not penalized in any way, nor do you lose any of the money you’ve accumulated so far.

A little warning before I finish: Savings Certificates have a disadvantage that you should consider. Can only have one owner. Only that person can handle the money, redeem or subscribe. In case of death, you can only raise this money with the authorization of heirs.

In summary, money is fleeing the banks and is being channeled largely into Savings Certificates. And until banks offer interest equal to or greater than 3.5% to their customers, the most likely is that this flight will continue. It’s a question of mathematical logic. Just make the account. Don’t let your money stand still.