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#1 April 30 2014

Ayman
Member

Bank savings account interest rates

Someone just mentioned in my office that Fransabank provides 6% monthly interest on any savings account that is LBP. This is too good to be true because for example lets say someone has 15,000,000 LBP he would be making 900,000 LBP per month, which is not logical for such a very low risk investment.

With such a rate everyone would become "rich" and we would suffer from even more inflation.

I tried looking online for any ads or campaigns about such loans didn't find any.

My question is, do such offers really exist ? And Whats the catch behind them ?

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#2 April 30 2014

rtp
Member

Re: Bank savings account interest rates

i think the interest is per year so its 6/12 = 0.5

Last edited by rtp (April 30 2014)

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#3 April 30 2014

reppinhighz
Member

Re: Bank savings account interest rates

whenever you see interest rates you always have to think yearly.

i get 5.25% maturing on a monthly basis. Means i dont freeze my money for a whole year i just keep rolling them over automatically month after month. Its a matter of liquidity and ease of access to my money for me. The only advantage is you get a higher rate if left to mature over a longer period of time but the difference is not felt unless dealing with large amounts of money.

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#4 April 30 2014

xerxes
Member

Re: Bank savings account interest rates

interest rates are always on yearly basis not monthly basis. so when they say 6% they mean 6% per year i,e 6/12 per month.

and its not true that they give you 6% for whatever amount you deposit. it's amount dependent.

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#5 April 30 2014

rolf
Member

Re: Bank savings account interest rates

Interesting thread. How does 6% (.5 per month) compare to inflation?

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#6 April 30 2014

NuclearVision
Member

Re: Bank savings account interest rates

Is it 6% on the first deposit or on the accumulated current sum? Let's say if you withdraw the interest every month.

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#7 April 30 2014

rolf
Member

Re: Bank savings account interest rates

From what I know, normally, it is accrued every year, but maybe in this case he meant it is compounded monthly, which makes it much more interesting.
But what is the inflation?? Without knowing the inflation we don't know if we're making any money at all!

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#8 April 30 2014

samer
Administrator

Re: Bank savings account interest rates

rolf wrote:

Interesting thread. How does 6% (.5 per month) compare to inflation?

Here's the data for inflation since 1994.

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#9 April 30 2014

rolf
Member

Re: Bank savings account interest rates

samer wrote:
rolf wrote:

Interesting thread. How does 6% (.5 per month) compare to inflation?

Here's the data for inflation since 1994.

Thanks samer!
It seems that inflation is around 3% (US inflation also seems to be around the same rate).
If my approximate and hasty calculations are correct, then you'd only be making 3% off your money in the bank, not 6% (as opposed to spending it). It does sound more interesting when you compound them, though, but that's another calculation.

Last edited by rolf (April 30 2014)

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#10 April 30 2014

Guitaret
Member

Re: Bank savings account interest rates

The way the bank calculates the interest is what matters, not how much interest percentage they promise to give. From my experience dealing with banks, this is where the devil lies: within this detail, so for anyone tempted to put his money in a time saving account, please be alarmed. I can write a paper about this subject and expose banks bad deeds but for now here's what I am sharing so bear with me. Simple interest is the best way to go, but banks only use that when lending money. Simple interest = Yearly interest / 12 = the net monthly profit the banks keeps in his pocket. But, on the other hand, when you open a saving account they calculate the interest using a method that suits them better: a compound interest but with a trick. Compound interest takes into account the calculated sum and not the initial balance and this should be taken into consideration when dealing with 1 month, 3 months or 6 months maturity. So where is the trick?

NuclearVision wrote:

Is it 6% on the first deposit or on the accumulated current sum? Let's say if you withdraw the interest every month.

It is on the accumulated current sum, but if you withdraw the interest every month you will not reach your yearly promised interest rate.

So how does the bank know how to calculate the interest rate on a monthly basis? Using Compound Interest Formula that can be tested using this calculator.

So for 5.25% interest => 5.25% compound annually is equivalent to 5.12775% compound monthly. (Monthly is better recommended than yearly when not wanting a long term investment)

For 15,000,000 you will get first month: 15000000 * 5.12775%/12 - 5% tax = 60,892 LL of which they will submit it to further deductions and fees.

So if you want to invest in banks, expect pennies and when you go there ask for monthly net profit on your balance, don't let them tempt you with meaningless interest rate number.

As for inflation, I use this cool calculator to simulate numbers for a retirement plan. But don't get caught with inflation too much, because the only way to beat it is by buying gold and silver and this is a different subject.

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#11 May 2 2014

nefe_lpmk
Member

Re: Bank savings account interest rates

@Guitaret I am sure a lot here are interested in knowing more about this subject, could you release this paper for educational purposes ?

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#12 May 6 2014

Guitaret
Member

Re: Bank savings account interest rates

nefe_lpmk wrote:

@Guitaret I am sure a lot here are interested in knowing more about this subject, could you release this paper for educational purposes ?

I appreciate your consideration but currently I don't have the time nor do I know a publisher to do so, & even if do, I don't want to invest an effort to start a minuscule tackle against banks. However, I am equally delighted in raising awareness in the matter whenever I could and in sharing what is needed in this subject to my fellow lebgeeks.

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#13 January 15 2018

Guitaret
Member

Re: Bank savings account interest rates

Instead of opening a new post, I though of pinging an old one:

Since the Hariri resignation issue, saving interests offered by banks has been going up for sure but I haven't got or heard a confirmed number  yet. Have you guys heard or got offered anything?

Thanks

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#14 January 15 2018

Johnaudi
Member

Re: Bank savings account interest rates

You can get up to 7% if you have a huge deposit as far as I’ve been told.

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#15 January 15 2018

random-username
Member

Re: Bank savings account interest rates

Depends on whether it is in LBP or USD. LBP pays higher interest rates. A great deal on USD would be around 4.5% if you have 100k+ $. LBP is about 6.5-7% for the same amount.

If you have a "wasta", you can pretty much get these rates regardless of the amount you're willing to deposit. But for the average Joe, you need a fair chunk.

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#16 January 16 2018

Guitaret
Member

Re: Bank savings account interest rates

I have heard numbers higher than this but anyway I appreciate your feedback guys.

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#17 January 16 2018

Xsever
Member

Re: Bank savings account interest rates

Currently getting 6.25% with Fransabank for an LBP account with monthly maturity and between 50m-100m. It can go to 6.5 with 3 months maturity.

I shopped around a lot and for the monthly maturity that suits me, Fransabank was the best.

Mind you when you factor the fees they charge and the taxes the government charges, the real return drops to 5.62% in my case.

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#18 January 17 2018

ironman
Member

Re: Bank savings account interest rates

Guitaret wrote:

I have heard numbers higher than this but anyway I appreciate your feedback guys.

The high numbers you heard about (>9%) are for
- Very high amounts (Milliard...)
- "Mjammadin" for a year or more

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#19 January 17 2018

Guitaret
Member

Re: Bank savings account interest rates

Xsever wrote:

Currently getting 6.25% with Fransabank for an LBP account with monthly maturity and between 50m-100m. It can go to 6.5 with 3 months maturity.

I shopped around a lot and for the monthly maturity that suits me, Fransabank was the best.

Mind you when you factor the fees they charge and the taxes the government charges, the real return drops to 5.62% in my case.

I have a 6% deal with BOB on monthly maturity account but the real end of year return is 5.66% (including tax and fees...). It all depends on how their internal system works, some banks exclude interest on public holidays for example.

All in all I think BOB is fine for now and I appreciate sharing your info.

Last edited by Guitaret (January 17 2018)

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#20 January 17 2018

Xsever
Member

Re: Bank savings account interest rates

Guitaret wrote:

I have a 6% deal with BOB on monthly maturity account but the real end of year return is 5.66% (including tax and fees...). It all depends on how their internal system works, some banks exclude interest on public holidays for example.

All in all I think BOB is fine for now and I appreciate sharing your info.

Yeah, that's true. I am not sure about the public holidays being included or not but Fransabank charges 7,500 at the end of maturity so with monthly maturity, one ends up paying 12x that amount which eats from the nominal rate. The rest is taxes which is 7% now of the nominal gain.

Of course as the total amount of savings increases, the smaller the 7,500 will be in terms of percentage as compared to the whole, but with 6% nominal and 5.66% real, that's pretty impressive.

I would appreciate if you can share the fees BoB charges for such an account. Another bank with lucrative returns is BLF. They always call offering great rates but for 6 months+ maturities.

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#21 January 17 2018

Guitaret
Member

Re: Bank savings account interest rates

Xsever wrote:

Yeah, that's true. I am not sure about the public holidays being included or not but Fransabank charges 7,500 at the end of maturity so with monthly maturity, one ends up paying 12x that amount which eats from the nominal rate. The rest is taxes which is 7% now of the nominal gain.

I would appreciate if you can share the fees BoB charges for such an account. Another bank with lucrative returns is BLF. They always call offering great rates but for 6 months+ maturities.

My bank charges 6,500 per month and regarding the discrepancy between you and me: 
In similar months (30 or 31), do you get same return percentage on maturity date? If not then the public holidays issue or such must be true because mine have similar returns in same months.

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#22 January 17 2018

Xsever
Member

Re: Bank savings account interest rates

Guitaret wrote:

My bank charges 6,500 per month and regarding the discrepancy between you and me: 
In similar months (30 or 31), do you get same return percentage on maturity date? If not then the public holidays issue or such must be true because mine have similar returns in same months.

When I changed the bank fees from 7,500 to 6,500 in my Excel investment simulator, the real return rose to 5.64% so that matches with yours. There's a slight difference in the amount saved as well between you and me, but yeah we're in the same boat.

I can't know accurately regarding 30 vs 31 because I always add money to the account sometime during the month so the percentage is always all over the place since the invested amount changes within the investment period (month).

To be honest, when I tell my friends in the US and Canada about the rates we get here, they're wowed and they ask me if they can send me money in USD so that I exchange it into LBP and invest it for them. I know the Lira is pegged and I know it carries some risk, but I still consider this investment to be low risk and for 5-6% return, it beats US bonds and eats it for breakfast. We're blessed by that when it comes to investments, but pay the price should we need a loan.

I recommend you read 1)The Millionaire Next Door and 2)Common Sense on Mutual Funds. These are the most important books I have read about personal finances and investment. The second book basically proves that trying to beat the market ends up failing most of the time. You're better off just investing in a low-cost index fund that tracks the entire US stock market.

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#23 January 18 2018

samer
Administrator

Re: Bank savings account interest rates

To be honest, when I tell my friends in the US and Canada about the rates we get here, they're wowed and they ask me if they can send me money in USD so that I exchange it into LBP and invest it for them. I know the Lira is pegged and I know it carries some risk, but I still consider this investment to be low risk and for 5-6% return, it beats US bonds and eats it for breakfast. We're blessed by that when it comes to investments, but pay the price should we need a loan.

If you live in Lebanon, you should not forget to adjust for inflation. In 2017, the inflation rate was around 4.5% so you did a real return of 0.5-1.5%. Naturally, this wouldn't apply to you if you're living abroad.

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#24 January 18 2018

Xsever
Member

Re: Bank savings account interest rates

samer wrote:

If you live in Lebanon, you should not forget to adjust for inflation. In 2017, the inflation rate was around 4.5% so you did a real return of 0.5-1.5%. Naturally, this wouldn't apply to you if you're living abroad.

Yes, that's true. Inflation does eat away from the gain achieved. I'm interested in the source of your data. Can you please share it?

I use the brite-blominvest site for all data related to Lebanon. Very information-rich.

https://brite.blominvestbank.com/series … onal-2908/

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#25 January 18 2018

samer
Administrator

Re: Bank savings account interest rates

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