Last updated on August 5th, 2023 at 09:40 pm
One of the cardinal motivating factors that can make an investor deposit a certain amount in his savings account and leave it there for a year or more is the interest rate his bank is ready to turn in.
In the past, the highest interest rate you could get on your savings from any Nigerian bank was 3% or less, but the story is changing as one of the financial institutions here has taken the bull by the horn to introduce 6% interest on your savings.
What does this mean?
It means you can make a profit of N600, 000 on your N10,000,000 deposit; make N1,200,000 on N20M; and on N30,000,000, you can make N1.8M as turnover.
Definitely, but don’t be too happy, because when you see sweet offers like this, it comes with stringent terms and conditions. It only works when you are ready to abide by the terms.
Financial institutions are legitimate institutions with the required certificate of operation by the regulatory government agencies and insured by the NDIC. As such, your funds are secured.
Interest rates on savings accounts are not always attractive because most of the owners of such accounts operate them to meet daily needs.
Unless the account is dormant, hardly can you find N500K seated in a savings account that has no withdrawal in a month, very rare. Such interest offered by banks on such accounts is always poor.
Besides, who exactly is ready to pack money into an account when he needs money to support their business?
Most people use saving accounts to meet exigencies. But the narrative might change if bank customers see financial institutions that can guaranty them at least 6% interest profit on their savings account.
You don’t just want to jump right in, it’s very important to know how this works and how you can perfectly enjoy the full benefits of such products.
We’ll tell you about the Nigerian bank that guarantees you 6% interest on your deposit. Outside the shores of Nigeria, specifically in far-away India, only three banks -Yes Bank, RBL Bank, Bandhan Bank- can turn in such high interest on savings.
Interest on savings in a simple term
In simple terms, interest in relation to savings is the amount a financial institution pays on a depositor’s savings account. The interest payments act as a form of income when you keep to terms of operating such an account.
The calculation is straightforward, you don’t need a mathematician. For instance, if you are guaranteed of making the interest of 10% on your investment per year and you committed N100M to such investment in the first year, it means you make a profit of N10M in a year.
If you want to fully explore the power of compound interest, you may reinvest your profit, where the interest is calculated in the subsequent year based on the principal and all of the accumulated interest, meaning you will earn in the following year.
For instance, if you put back the N10M to the principal, that will be N110M, and in the second year, your gain would have risen to N11M. That’s the power of compounding your investment.
The interest sounds sweet for a wealthy investor, it may not be so exciting for someone who wants to invest N100,000. He makes N10,000 in a year if it’s the same 10% rate
If you’re a bigger investor, you can use the concept of compound interest to build up wealth in the long run.
Which Nigerian bank gives 6% interest on a savings account?
For the first time, Polaris Bank becomes the pioneer operator of 6% interest on savings under a product called Polaris Wise.
How it operates
It combines the features of savings, current, and fixed deposit account, which operates on the basis of the more you save, the more you earn (compound interest)
- You must have a minimum opening and operating balance of N10,000, anything less means you’re not qualified.
- Non-clearing checkbook on request
- Free Priority Pass membership
- Access to Visa Signature Card (on invitation)
- Withdrawal limit not more than maximum of 3 times monthly
- You will forfeit your interest if your balance is below N100,000
Requirements for Polaris Wise
- 2 passport photographs
- You must have BVN
- You must have valid means of identification
- You must have proof of address which could be PHCN bill, Waste disposal bill etc
- For a non-Nigerian, you must have a resident permit
- Reference forms for those who might want to pay in other banks’ cheques
Are you wondering how a bank with such high interest on savings makes a profit?
Financially, the bank that promises a higher interest rate on savings uses the money for other business deals and transactions that will turn in more profit from which they pay part of the profit to their investor (depositor) an interest.
They do this by even charging their loan customers higher interest rates more than what they pay as an interest to their depositors.
For instance, a bank may promise you 3.5% interest on your savings for a year, but if you applied for a loan from the same bank, you may be asked to pay 7% interest on your loan within a month.
If you want to know more about how to calculate interest rates before you take a loan, you can check one of our guides.
To fully enjoy higher interest on your savings, budget a higher amount to make an impressive profit
Read the terms and conditions carefully, you will forfeit the interest if you violate any of the rules
Check the reputation of the bank involved, make sure you are not dealing with an institution that has no operating licence.