Nine of the UAE's best bank accounts to boost your pandemic savings

With interest rates at all-time lows, savers should avoid locking their money away in term deposits

Despite the low interest rates, UAE savers should stay updated with the terms and conditions of their savings accounts to ensure better returns.. Victor Besa / The National

As the world prepares to mark World Savings Day on October 31, it may seem ironic that just as people are renewing their focus on building up their nest eggs thanks to spending less during the Covid-19 pandemic, interest rates are at all-time lows.

Take, for instance, the three-month Emirates Interbank Offered Rate (Eibor), which at the beginning of 2020 stood at 2.15 per cent. Today, it stands at 0.40 per cent, a massive 80 per cent drop, says Ambareen Musa, founder and chief executive of Souqalmal.com.

“This sharp decline in interest rates may be good news for borrowers, but it definitely spells bad news for savers, especially those who rely on savings accounts and term deposits to keep their dirhams growing.”

Even term deposits, which traditionally have offered better returns for those willing to lock in their funds for varying lengths of time, have exceptionally low rates at the moment, with many banks offering about 0.4 per cent to 0.5 per cent on a 12-month fixed deposit.

“With interest rates on term deposits touching new lows, it wouldn’t make sense to lock in your money in such a product for long tenures. Alternatives like offshore savings, debt funds, or even prize-linked savings accounts may be worth considering for those looking to retain a low-risk portfolio,” Ms Musa says.

Don’t expect any respite in the near term – the US Federal Reserve has said it expects to keep rates near zero until 2023. Meanwhile, subdued lending activity by many UAE banks also means there’s less pressure for them to attract additional deposits, and some banks have continued to reprice their savings products down in recent months and weeks.

Still, some deals in the market are still better than others, making it worthwhile for savers to see if they can get a better rate. In the worst-case scenario a savings account could even be costing you more money in fees than you earn in interest if you can’t maintain the required minimum balance or are making frequent withdrawals.

Saif Al Alkeem, head of wealth management and priority banking at Abu Dhabi Islamic Bank, says that as a result of the gradual rate reductions over the past few years, many customers are exploring options such as investment plans or mutual funds to make their money work. “Meanwhile, other customers have chosen to manage their exposure to volatile markets and kept their cash in a savings account.”

Despite the low-rate environment, experts agree that it’s important for savers not to lose track of the importance that savings have – whether it’s peace of mind, or providing much-needed funds for unforeseen circumstances. While many may be drawn to the prospect of higher returns, the old adage – the higher the returns, the greater the risk – still holds true.

“With everything that has taken place this year, people who had savings have obviously fared far better than the ones who did not,” says Tooran Asif, head of consumer banking at Mashreq Bank. “For the future, there are always options available to save, it’s up to a discipline of an individual to keep a tab on their expenses.”

Mohammed Qasim Al Ali, chief executive at National Bonds, says it’s important that people distinguish between saving and investing. Investing in asset classes like equities, which are highly volatile, risks a loss of funds, he says.

“For those who are looking to build up their savings to a stage where they can begin investing, saving accounts or term deposits are usually the best approach, where you have access to your money as and when you need it, and it’s protected through the regulator and the institutions involved," Mr Ali says.

That’s a message many savers seem to have already taken to heart, with data from the UAE Central Bank showing that the volume of deposits held by banks from individuals has grown steadily across the year.

What’s on offer

First Abu Dhabi Bank iSave Account

Annual return: up to 1.68 per cent

First Abu Dhabi Bank’s main saving account, iSave, offers up to 1.3 per cent on balances below Dh500,000, 1.3 per cent to 1.68 per cent on balances between Dh500,000 and Dh5 million, and 1.68 per cent and less on balances above Dh5m. It has no monthly fee or minimum balance requirement, and no restrictions on the number of withdrawals. Interest is earned on the average monthly balance.

Al Hilal Bank Islamic Savings Account

Annual profit rate: 0.33 per cent

In addition to the profit rate, Al Hilal Bank savings products offer prizes to customers, with a chance to win Dh1m every month, as well as an additional 20 winners of Dh1,000.

The Sharia-compliant savings account features monthly profit distribution and no "fall below" fee. Customers need to maintain an average balance of Dh5,000 to be eligible for the Million-a-Month Draw. Every additional deposit of Dh5,000 gives customers one more entry into the draw.

HSBC eSaver

Annual return: up to 0.20 per cent

HSBC’s eSaver features an interest rate of up to 0.20 per cent applicable on the entire balance and is paid monthly into the account. There is no minimum balance requirement or monthly account fees. Withdrawals are allowed on the eSaver account, although more than one debit transaction per month results in a loss of interest for the month to encourage customers to save.

The bank also offers a range of term deposits with interest rates up to 0.50 per cent per annum, available in a number of currencies such as the UAE dirham, US dollar and British pound, and tenures starting from one month and up to 36 months.

Emirates NBD Smart S@ver Account

Annual return: up to 1.25 per cent

The Smart S@ver account offers no interest on balances below Dh25,000, but offers 1.25 per cent per annum on balances from Dh25,000 to less than Dh100,000, 0.75 per cent on balances from Dh100,000 to less than Dh2m, and 0.50 per cent on balances above this amount. Another saving option is the Fitness Account, which offers an interest rate based on the number of steps a customer walks each day and is measured by linking a wearable device to the Fitness App. It offers a maximum interest rate of 4 per cent per year for customers managing more than 15,000 daily steps, and lower rates, from 0.25 per cent  to 2 per cent  per year, for customers who manage fewer daily steps. It also provides complimentary life insurance cover of Dh50,000 for loss of life for customers who average 5,000 steps a day.

Mashreq Bank Max Saver

Annual return: up to 1.25 per cent

The Max Saver account has an annual rate of up to 1.25 per cent, which is offered on account balances from Dh1 to Dh199,000. It offers an interest rate of 1 per cent per year on balances between Dh200,000 and Dh999,999, and lower rates on higher balances. It also offers USD accounts with up to 1.25 per cent interest. Interest is credited to accounts on a monthly basis, with no minimum balance or monthly fees. The Money Multiplier account offers a rate of up to 1.6 per cent, depending on the amount saved and how much is spent each month.

RAKBank Emirates Skywards Savings Account

Annual return: 0 per cent

If racking up air miles is your priority rather than an annual interest rate, then perhaps the RAKBank Emirates Skywards Savings Account is an option. It allows customers to earn Skywards Miles and Skywards Loyalty tier status, including earning Skywards Miles on account balances over Dh500,000 and spends on the RAKBank Emirates Skywards World Elite Mastercard Credit Card.

Standard Chartered XtraSaver Account

Annual return: Up to 1.5 per cent

The XtraSaver account has a maximum return of 1.5 per cent per year, depending on the number of debit transactions per month. Accounts with more than three debit transactions during a month receive no interest, while accounts with less than three debit transactions receive 0.5 per cent a year. After three consecutive months with three debit transactions or less, the interest rate climbs to1.5 per cent a year. The minimum opening balance is Dh3,000 and there is no service charge or fall below fee. This account is available in dirham and USD, and the dirham account includes a contactless debit card.

National Bank of Fujairah Max Saver

Annual return: up to 1.5 per cent

The Max Saver account is available in dirhams and USD. For savers in dirhams, it offers 1.5 per cent on deposits up to Dh2m, 1.25 per cent on deposits between Dh2m and Dh5m, and 0.25 per cent above Dh5m. The top rate on its USD denominated Max Saver account is 0.75 per cent on deposits up to $2m, 0.50 per cent on deposits between $2m and $5m, and 0.25 per cent on deposits above $5m. Up to one withdrawal per month is permitted without affecting the interest paid.

National Bonds Booster 10

Annual return: up to 3.33 per cent

The Booster 10 is a three-year plan with a minimum investment of Dh10,000, with quarterly payouts. The expected profit rate starts from 1.75 per cent per year in the first quarter of the first year and rises to 5.25 per cent in the last quarter of year three, resulting in an expected 3.33 per cent average per annum profit rate on completion of three years. It has no subscription or redemption fee, and investments can be redeemed at any time after the 30-day lock-in period. It also provides entry into eight millionaire draws and 16 luxury car draws yearly. National Bonds also offers term deposits with up to 3 per cent annual profit rate.