Absa Now Offering the Highest Interest Rate on Savings Among Commercial Banks

EDITOR'S NOTE: Between December 12, 2023 and March 2024, the Absa Digital Savings Account will be offering a 10% per annum interest rate. More details here.

Absa Kenya has raised the interest rate on its recently-launched Absa Digital Savings Account to 9% per annum up from 7% previously.

This makes the account, which can be fully opened and operated online without needing to visit a branch, the savings account with the highest interest rate in Kenya among all savings accounts offered by commercial banks in the country.

Prior to this, according to Money254 Market Insights, interest on KES savings accounts by commercial banks in Kenya ranged from as low as 1% p.a. to a high of 7% per annum. 

This change was in response to the growing need by consumers to consolidate their long-term and short-term savings under one roof.

Flexible

In addition to increasing the rate of return on digital savings, Absa has also revised the withdrawal limit on the Digital Savings Account. 

Check Out the Absa Digital Savings Account Interest Calculator Here

Previously, digital savers needed to keep their withdrawals from the account to a maximum of one every quarter to enjoy the 3.5% bonus interest rate that brought the total interest to 7%. Then, if an account holder were to withdraw more than once a quarter, they would have received the 3.5% base interest rate. 

Today, on the Absa Digital Savings Account you will not be penalised if an emergency occurs and you need to withdraw some of your savings from the account to deal with it. There are also no minimum balance requirements.

Typically, savings accounts offered by commercial banks come with restrictions such as a minimum opening balance, a minimum interest-earning balance which ranges from Ksh500 to as high as Ksh100,000 and withdrawal limits which range from once a month, to once a quarter and thrice per year. 

If a savings account has a minimum interest-earning balance, of say Ksh30,000, it means once your account balance falls below this, you earn no interest until when you top it up. The same may apply when you exceed the withdrawal limit per period.

With the Absa Digital Savings Account, you can withdraw whenever a pressing need arises without being penalised.

There are no withdrawal fees, account maintenance fees and you can access your account statements at any time for free.

Read Also: How to Open Absa Digital Savings Account: A Step by Step Guide

Frequent Compounding 

The new Absa Digital Savings Account also comes with monthly compounding which means higher returns for savers since the interest earned every month earns interest over the next month and so on every month after. 

This is possible because the interest on the balance you have in your account accrues daily (is calculated daily) and paid out every month as opposed to quarterly payout previously. 

Read Also: Daily, Monthly, Quarterly, or Annual Interest Accrual? What it Means & Why it Matters

In comparison, a majority of savings accounts in Kenya offer quarterly interest payout, some semi-annually, others annually. Less frequent compounding means lesser returns on your savings. 

The more frequent the compounding frequency is, the higher the returns - it means you can keep your savings for months without topping up your account and your balance will still continue to grow. 

According to Money254 Market Insights, other commercial bank savings accounts in Kenya that have monthly compounding offer interest rates ranging from 3.5% to a high of 6% per annum. 

Read Also: The Life-changing Magic of Compound Interest

Perfect for Your Emergency Fund? 

With an annual rate of return of 9%, no withdrawal restrictions, daily interest accrual and monthly compounding, the Absa Digital Savings Account becomes a strong candidate to keep one’s emergency savings.

Read Also: “I Tried Out the 50/30/20 Budget Rule on My Ksh80k Salary for 5 Months”

And the reason is simple. During an emergency, say, a medical one, emergency travel, when important bills come due and you are illiquid etc., you want immediate access to money. Yours or borrowed money. 

Emergency funds exist to reduce reliance on debt during emergencies. But an emergency fund stashed somewhere where you need to give a 48-hour notice (MMF) or a two-month notice to withdraw your money doesn't seem very useful in this regard.

Read Also: All You Need to Know Before Opening the Absa Digital Savings Account

Even if you can access your money instantly but have to forfeit the interest earned is not that exciting either - that is in the case of savings accounts that have withdrawal restrictions. 

With the Absa Digital Savings Account, you can have instant access to your savings whenever you have an emergency, enjoy a fairly high interest rate of 9% when you are not in need of your money and even when you have to withdraw, your interest that accrues every day based on the balance in the account will still be paid out. 

Alternative to Money Market Funds

There are very few savings accounts in Kenya offering above-inflation interest rates that rival Money Market Funds (MMFs).

Money Market Funds are some of the most popular places to stash short-term savings and emergency cash in Kenya today. They are low risk, invest in highly liquid instruments and typically offer interest rates that hedge against inflation. 

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However, in most scenarios, you will need to wait for at least two working days to withdraw your cash from an MMF - which may not be really ideal during an emergency.

In 2022, according to a Cytton report, the highest yielding MMF offered an average annual return of 10.8% while the lowest offered a rate of return of just 7.7%. 

With the Absa Digital Savings Account offering an annual rate of return of 9% with no withdrawal restrictions and daily interest accrual, savers now have another option to MMFs they can consider. 

Read Also: Top Money Market Funds in Kenya and Their Average Annual Returns

WRAPPING UP

Opening the Absa Digital Savings Account not only gives you access to industry-leading returns on savings by a tier-one bank but also access to Absa’s suite of innovative banking products if you also opt in into the Absa One Current Account. 

Read Also: How to Set-Up Your Absa One Account to Make Sure You Always Pay Yourself First

With Absa One, which can be fully opened online without needing to visit a branch, you enjoy among other benefits;

• Access to motor, education or medical insurance at competitive rates
• Access to unsecured loans of up to Ksh6 million for personal customers and Ksh10 million for business customers 
• Discounted home loans and vehicle finance with insurance premium financing 

Read Also: Struggling With Your 2023 Savings Goal? Lessons From Failed & Successful Savers

For the financial year ended December 31, 2022, Absa recorded a Profit after Tax of Ksh14.6 billion, representing a 34% growth in comparison to 2021.

The lender has been scaling its innovation and digital transformation agenda with more than 92% of all transactions now taking place outside of the branch.

Time to open an Absa Digital Savings Account? Click here to proceed. 

Check Out the Absa Digital Savings Account Interest Calculator Here