The real interest rate on your ING account

If you're an ING customer like me, chances are that you were first drawn to the bank by their absurdly high savings account interest rates (upwards of 4%), but are now disappointed with the paltry 1.3% now being offered.

However, it's good to remember that in order to arrive at the true interest rate, you have to remember to subtract inflation. For example, if you are getting an interest rate of 4% but inflation is also at 4%, then you're really just breaking even--your pile of cash is maintaining the same value over time.

Currently, we're in a period of negative inflation, or deflation, which this month is in October was -0.18%, which means that the true returns on the ING savings account is was 1.3-(-.18)=1.48%. Indeed, if ING's rate were still up around 4%, you would be getting a ridiculous no-risk return of like 5.5%.

Of course, remember that inflation is a rough estimate: it's just an index that tracks a basket of consumer goods. So mileage will vary depending on what you spend your money on. But still, it's worth taking into account when frowning at ING's latest low savings account interest rate.