Since the global financial crisis, a lot of people have been stockpiling cash and are a bit hesitant to park their money in risky investments. However, while it was easy to get 4 per cent on deposit accounts only a few years ago, interest rates have become pitiful and savers today are faced with an erosion of potential earnings.

Banks in the UAE hardly pay less than one per cent on cash balances, while the average consumer continues to cope with the rising cost of living. “[Savings] options are sparingly few in UAE with interest rates down even more this year,” says Preeti Bhambri, managing director and founder of “Rates have dropped by almost 50 basis points in the last one year.”

As of last month, National Bank of Abu Dhabi’s savings deposit was paying 0.075 per cent, down from 0.1250 per cent a year ago. The 12-month fixed deposit rate for Dh1 million dropped from 0.74 per cent to 0.1460 per cent. Barclays’ savings deposit rate for a three-month term dropped from 1.27 per cent to 1 per cent.

Faced with lean pickings, savers are advised to review their options wisely. Here are a few ways to make your cash generate the best return:

Shop around

Not all bank deposit schemes are created equal. Rates may be generally low, but if you look hard, you might find the best-paying interest in the market today. Don’t leave your cash sitting idly in an account that pays peanuts. Some options worth exploring include e-saver accounts and certificates of deposits.

Emirates NBD’s FlexiDeposit offers up to 2 per cent interest rate. You can keep your money between three months and three years. Since there is no penalty for early withdrawal and you can draw funds from your account as much as you like, this option may be good for storing your emergency fund.

Bear in mind, though, that there’s a minimum balance requirement of Dh10,000, and the actual return will be dependent on the size of your savings.

The bank’s Smart Saver account offers an even higher interest, up to 2.25 per cent per annum on dirham balances maintained. It’s a purely online savings account, which is also available in US dollar, euro and GBP, with rates on US dollar up to 1 per cent per annum and up to 1.25 per cent on GBP and euro. However, to earn 2.25 per cent interest, the minimum balance should be Dh1 million.

Rakbank also offers an online account called Fast Saver, with interest rates up to 2 per cent per annum for dirham accounts and up to 1 per cent per annum for US dollar accounts. It does not require a minimum balance, although customers are allowed one withdrawal and five utility and/or credit card payments per month. The bank’s RAK Save Account offers up to 1.5 per cent interest.

You might get a higher return if you choose Rakbank’s certificate of deposit. The fixed interest rates will depend on the size of deposits, with the maximum rate pegged at 2.25 per cent. The term starts from one week and goes up to 12 months. The depositor is required to keep at least Dh25,000 in the account. However, no withdrawals are allowed, and if you choose to take back your money early, there will be a penalty charge.

Pay off your debts

The amount of money you’re spending on high interests will only outstrip the measly returns you make from your cash deposits. It’s always a good approach to settle all your debts first before you focus on building your nest egg.

“Where debt is concerned, it is much better to repay outstanding finance than to hold cash on deposit. Credit card debt should be repaid as soon as possible. You should never borrow on credit cards to invest elsewhere,” advises Gregory.

“As far as loans go though, there may be no interest saved by repaying a car loan, rent loan or personal loan off early. Banks are very good at insisting on all their repayment in full even when repaid early, and give little in refundable interest for early settlement.”

However, Rupert Connor, senior consultant at Acuma – Independent financial Advice, cautions that aiming to repay your creditors first means “you are not paying yourself but rather the institution that is servicing the debt.”

“I believe it is very important to strike a balance between paying of debt and paying yourself in some sort of savings or investment vehicle, otherwise, you could spend your life paying other people and not build up any significant retirement benefits, which we will all need,” says Connor.

Consider millionaire schemes

If you have to live with meager returns, why not keep your cash in savings options that offer prizes on top of the interest?

“Consider National Bonds from Dubai government, or any of the banks that offer prizes as rewards in addition to interest on your deposits. Make sure you know the terms and conditions though,” advised Gregory.

Abu Dhabi Commercial Bank has a special savings scheme called Millionaire Destiny Savings Account, which offers customers a chance to win Dh1 million monthly and earn profits at the same time. Besides the Dh1 million prize, 10 customers can win Dh10,000 each every month. You only need to keep at least Dh5,000 throughout the month in order to qualify for the raffle draw. If you increase your savings, you have multiple chances of winning a cash prize. *

Abu Dhabi Islamic Bank offers a similar programme called Ghina Savings. By depositing at least Dh20,000, you stand to win either Dh2 million every four months, Dh500,000 every four months or Dh10,000 every month. On top of that, you get to earn profit from your savings. Bear in mind that if you have to withdraw funds from the account, the balance should not go below Dh3,000, otherwise you will be charged Dh25 per month.*

Rakbank’s Islamic banking division offers a Sharia-compliant, Mudaraba-based savings account called Jood. It allows customers to increase their savings while earning chances to win Dh500,000 in its quarterly draw. Every month, two customers also stand to win Dh5,000 each and 100 others receive Dh500 each.

Look overseas

Although cash deposit rates in dirham and US dollar accounts are very low, some overseas banks offer interest rates as high as 9 per cent per year, so you might consider moving your funds to get better returns.

“For foreign currency deposits, Axis Bank, for example offer non-resident Indians 9 per cent on rupee deposit accounts. In Australia, cash deposits on AUS dollar earn up to 3.6 per cent. Usually, foreign currency deposits require a minimum of $10,000, though some banks offer lower amounts,” says Gregory.

Gregory, however, warns that currency risk and conversion charges could erode your earnings. “It’s useless to take 9 per cent interest from an Indian bank, for example, if the rupee falls 9 per cent or more in value each year while you are saving,” he says.

“And you need to be careful what the charges will be for currency conversion when buying and then when selling the currency. These reasons deter s avers from going for foreign currency investment,” he adds.

*Information provided by company website/phone banking executive