IB changes the minimum for negative interests

As the title says: Effective 1st september, if you have more than 50k chf/eur, you’ll pay negative interests. Right now that limit is 100k.

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Effective 1 September 2021, IBKR will reduce the size of deposited funds that are protected from negative rates (and have been 'floored’ at zero percent (0%) from 100K USD/EUR/CHF or approximate equivalent in other currencies) as follows:

Currency
New Credit
Interest Threshold
EUR 50,000
CHF 50,000
CZK 1,000,000
DKK 300,000
SEK 400,000
JPY 5,000,000

The negative interest rate is also a bit higher than what you would typically pay at a bank (this is not a change, though):

https://www.interactivebrokers.com/en/index.php?f=46385&p=i

Solution : concert in usd

And get the same negative return long term (per interest rate parity).

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Is there a cool down period before it starts to charge negative interest? For example if you send 60kCHF to your account to invest them, does it charge interests the second it hit the account until you buy stocks/etf or do you have a certain time to invest before it does?

Well do we realize that those are yearly interest rates ? 60k at, say, -1% for 2 days are about 3 CHF… would this really be a concern ?

You are on a Mustachian forum, everyone is chasing cents here but juggling between several bank accounts and credit card to save cents here and there.
At the end people will not pay it most of the time, but it will make thing more complicated for nothing, like you have to split your transfer, buy/sell, withdraw in several chunk if you reach these levels but most might never reach them.

Indeed. For most of the people it will never be a concern and run some real numbers helps to put things into perspective. If such transfers are a “one shot” as for most of the users the cost will be negligible and people in the position of doing this on a regular basis will have other “issues” (:blush:) to deal with.
Still, the threshold reduction might be a topic for people willing to remain on big cash but this is the way things are going these days…

Well, it turned out to be a minor issue for me when I transferred more than 100k to IB in April. I used it to buy VOO and VT within two days, after transferring al into USD.

Early May, I received an “Insufficient Funds” notification, and they exchanged some of my USD to CHF to pay the negative interests. So, I guess it might make sense to keep a couple of Swiss Mountain Dollars after making bigger transfers.

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Agree. In any case the 100k threshold above which a negative interest would have been applied was already in force. :wink:
I always keep a few hundred bucks in CHF also to prevent similar issues.

Is it per current or on the total of cash? What happens if I have 49K EUR and 49K CHF?

It’s per currency. There are different negative interest rates and threshold for EUR and CHF. If you keep less than 50K of each, you should be fine with the new rules.

You can also keep USD and get some interest instead of paying it (but then that opens other potential problems).

Other potential problems = believing that USD will keep the current conversion rate to CHF
But I think it has been discussed many times before in the forum

There’s a reason why you still get interest for USD, namely because most people think that CHF will be the stronger currency going forward

Yeah, I did keep lots of cash in USD lured by the 1.9% interest rate IB offered at some point. Too bad USD lost some 10% vs CHF in that period (I think it has recovered a bit though)

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That would be entirely true if the interest rate was the single contributing factor to the long-term exchange rate development. Inflation is kind of related to the interest rate, but currently we see many central banks maintaining low interest rate despite high inflation. Example:

Poland: 5% inflation, 0.1% interest rate

USA: 5.4% inflation, 0.2% interest rate

Switzerland: 0.7% inflation, -0.7% interest rate

I guess Switzerland is still the closest to reality of the lot :man_shrugging:

Yeah because inflation is this time linked to a real lack of commodities and not necesseraly about financial terms. Working in the chemical industry distribution, there is the following :

  • still suffering from logistics problem between Far East and Europe : not enough seashipping containers, not enough ships, not enough harbour capacity at times. In consequence the price has risen from around 2500 $ a 40’ container to nearly 15’000$. Don’t nail me on the absolute numbers, but this is the ballpark.
  • The snowstorm in Texas last spring has wrecked havock on the petro-chemical industry, lowering production output on everyday plastics. Containers of all sizes for chemicals have radically increased in price therefore
  • The flooding in Belgium and Germany does not add any relieve, as well as the explosion of the plant in Leverkusen, where basic solvents are recycled. Train lines are interrupted and traffic has to go onto road. However, not enough trucks are available. Same for rivers which might not be navigable (last summer on the other hand we had the problems of drought, so no shipment per river because of low water level)
  • Sulfuric acid is scarce because main source is the desulfuration of crude oil. Less flights and less road traffic meant shut downs in production.
  • Chinese companies are forced to shut down or reduce production output in preparation of the Winter Olympics and general environmental concern.

And the list could go on and on and on. Being in a company which is at the most top of a production line, we really feel how supply chains are disturbed as fuck because of the downfall of climate change (which my company aknowledges competely btw and goal is to go 100% renewable or compensated by 2025 in our operations), as well as logistical challenges. Every day we have some supplier declaring Force Majeure because production has to be interrupted.

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Personally, I consider this number rather scewed. It excludes for example health care costs (including insurance) and child care. Those are two costs that went up the most over the last couple of years. Whereas not everyone has children, every one pays the obligatory health insurance. So, it is only to cook the books that it is being kept out of the inflation number.

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I’m sure you can apply this to other countries, too. Polish inflation is in certain cases very high. For example, real estate has seen high increase in price.

Health care costs are included, just not over the insurance.

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