Some Countries Have Had Negative Interest Rates

We usually think of interest in a simple way: you earn it when you save and pay it when you borrow.

But what if interest rates went below zero?

Some countries have actually experimented with negative interest rates. Under this system, certain banks could effectively be charged for keeping money with their central bank rather than earning interest on those reserves.

Countries including Japan, Switzerland and several euro-area countries used negative policy rates at different points.

But why would a central bank do something that sounds so strange?

Negative rates were used when economies were facing very weak growth and extremely low inflation. The idea was to encourage banks to lend more money rather than keeping it parked. More lending could encourage businesses and consumers to borrow, spend and invest, helping stimulate economic activity.

It doesn't necessarily mean ordinary people were literally paying their bank every month just to keep money in a savings account. The way negative rates affected customers depended on the bank and the type of account.

Still, the idea shows just how unusual monetary policy can become when a central bank is trying to encourage an economy to grow.