One thing is certain – banks know how to make money. It seems every year their profits just get fatter and fatter.
It used to be known as the 3-6-3 Rule – an unofficial “rule” that bankers would pay you 3% on your deposits, charge 6% on your loans and be on the course playing golf by 3pm every day. In other words, they would make 100% profit on your money without doing much at all.
Of course, that changed when interest rates in the 80s got really high – they played even more golf and made even more profits 😉
But banks still used to make their money only one way – they’d pay you interest if you deposited money with them, and charge you interest if you borrowed money from them.
That all changed overnight with the European Central Bank becoming the first bank ever to charge interest to both depositors and borrowers.
Yep, for the first time in history, the bank charges you to lend them your money. It’s called “negative interest rates”.
Luckily, this hasn’t happened in Australia, yet. But knowing banks, if one bank can get away with it, well … you know how that’s going to end. Boom times for golf courses.