Savings Account Interest Rates Below 1%: Is Saving Still Attractive?

Currently, the interest rate on savings accounts offered by general banks to the public is less than 1%, while customers are also burdened with monthly administrative fees and Automated Teller Machine (ATM) service fees. In addition, inflation is also fluctuating, causing many customers to question the benefits of saving in banks.

Based on data from Bank Indonesia (BI), the average interest rate on savings accounts at general banks is very low, namely only 0.72% per year in July 2021. However, according to the Central Bureau of Statistics (BPS), the inflation rate in the same month was 1.52% (year on year/yoy). This means that the real profit from savings interest is eroded by the inflation rate.

In addition, savings account holders are also burdened with an average administrative fee of Rp 10,000 per month and an ATM service fee of Rp 5,000 per month. The total monthly cost is Rp 15,000 per month.

As an illustration, if someone saves Rp 1,000,000, they will receive 0.72% interest or Rp 7,200 over one year. Meanwhile, the total administrative fees amount to Rp 15,000 per month or Rp 180,000 in one year. Therefore, the account holder's savings will shrink to Rp 827,200 in one year, calculated as (Rp 1,000,000 + Rp 7,200) - Rp 180,000.

According to bank groups, Regional Development Banks (BPD) offer the highest savings interest rate, namely 1.07% per year or 35 basis points (bps) above the average interest rate of general banks. Foreign/mixed banks follow with an interest rate of 0.85% per year or 13 bps above the average savings interest rate of general banks. Then, state-owned banks (banks owned by the government) offer 0.74% per year or 2 bps above the average savings interest rate of general banks. Meanwhile, national private banks offer the lowest savings interest rate, namely only 0.63% per year or 9 bps below the average savings interest rate of general banks.

Compared to December 2020, the average interest rate on savings accounts at general banks has fallen by 10 bps (year-to-date). The biggest decrease was recorded by BPD banks (year-to-date), reaching 21 bps (year-to-date). This was followed by national private banks at 10 bps (year-to-date), and then state-owned banks at 8 bps (year-to-date). In contrast, the savings interest rate for foreign/mixed banks increased by 3 bps (year-to-date).