Businesses-Who can you bank on?

Since the news of Nat West and RBS warning business customers they may be charged for their account being in credit if interest rates fall below 0% we have had lots of questions from business owners about what it actually means.

What are negative interest rates?

This is where you would pay a rate of interest just for having money in your account.

How likely is this?

Experts say it isn’t, because customers could simply withdraw all their money in an instant.

So why have Nat West and RBS informed so many of their business customers this could happen?

Because they have added the option into their business account terms and conditions in order to claw back higher costs. This is a big gamble though as their business customers could simply choose to bank elsewhere.

What are the higher costs?

The possibility of central banks cutting their base rates to below zero. Lenders keep their funds in central banks and use it as a way of transferring money between each other. They earn interest on that money, which at the moment is 0.5% from the Bank of England. If the base rate fell to below zero they would then have to start paying for the privilege.

RBS tried to reassure customers that it was not planning to implement negative interest rates and said they would consider any necessary action in the event of the Bank of England base rate falling below zero but would do their utmost to protect their customers from any impacts.