Thought your bank's interest rate couldn't get any worse? Well, the possibility of it charging you to hold your cash has just moved a step closer.

Around 850,000 business banking customers with NatWest have started receiving letters warning the introduction of negative interest rates could happen in the near future.

In the letter, NatWest warned: 'Global interest rates remain at very low levels and in some markets are currently negative. Dependent on future market conditions, this could result in us charging interest on credit balances.'

Into hiding? NatWest has warned nearly 1m business customers of the prospect of negative interest

The warning went out only to business customers and the high street banking giant stressed that it had no plans to do this to personal banking customers – but it still paints a worrying picture for savings.

The threat arrives as a Bank of England rate cut down from 0.5 per cent is widely forecast following the Brexit vote and after a period a number of major central banks have set negative rates around the world.

So far banks in those countries have largely avoided passing on negative rates to customers, but there is a strong chance that a prolonged period of below zero rates could see them do this.

This is Money explains why negative rates could happen, whether our banks could follow suit – and why it may be 'very dangerous for ordinary savers.'

WHY IS NATWEST WARNING OF NEGATIVE INTEREST?

This letter from NatWest - part of the taxpayer backed Royal Bank of Scotland empire - isn't confirmation that interest rates are to become negative: it is a warning shot that it may have to impose these in the future thanks to market conditions.

It would mean to hold deposits, it would have to charge interest rather than offer any.

The switch could mean an account holder with £1,000 in a NatWest account could see that shrink to £999 or less within 12 months as the bank charges a negative rate of interest. This £1 a year on £1,000 fall would represent an annual rate of -0.1 per cent.

NatWest cites global interest rates, but closer to home lower rates remain a threat. The Bank of England chose to hold base rate at 0.5 per cent for now - but economists and money markets widely anticipate that the rate-setting Monetary Policy Committee will cut the rate to 0.25 per cent at the early-August meeting.

Questioned by MPs before Brexit in April, governor Mark Carney said: 'We think we could move base rate closer to zero but have not said we have an appetite for negative interest rates.'

Since then, the post EU referendum volatility and a set of dire economic figures last week that indicate a possible recession looming may have changed the Bank's mind.

A NatWest spokesman said: 'We will consider any necessary action in the event of the Bank of England base rate falling below zero, by will do our utmost to protect our customers from any impacts.'

Mike Cherry, National Chairman at the Federation of Small Businesses, said: 'The warning from Natwest and RBS will be deeply concerning to small firms.

'When the Monetary Policy Committee meets next week to decide on interest rates, we would call on them to do everything possible to consider the implications of changing interest rates for smaller firms and the self-employed looking to maintain or grow their business.'

Banking giant: NatWest says that global interest rate cuts may force its hand - but stressed it has no plans to offer negative rates to personal banking customers

WHAT IS NEGATIVE INTEREST?

When interest rates are cut below zero, they go into negative territory.

This would effectively mean a charge for holding cash. That could hit banks, businesses and people in different ways.

A bank that leaves money parked at the Bank of England would have to pay interest instead of being paid interest.

If the bank passes on the cost, a saver who deposits money in the bank would pay money to do so rather than earning money through interest.

A business holding money in its bank accounts could also be charged for the privilege, although account fees mean many business already have a bill for their banking.

The idea is to get banks to use excess cash to grow lending rather than holding onto funds and businesses and people to borrow and spend – therefore boosting economic growth. (Read this explanation of how banks create money by making loans.)

Central banks can impose negative rates, as financial institutions need to hold money on deposit. However, economists identify a problem with imposing such rates on individuals and businesses - as they would simply hoard money as cash.

That has delivered the concept of the zero lower bound, a point where cutting interest rates no longer stimulates the economy.

Economists have therefore suggested unorthodox monetary policy beyond this, such as quantitative easing to inject money into the financial system, or even 'helicopter drops' that give free money direct to people and businesses.

Negative: Banks in some countries, such as Switzerland, already charge customers for parking their cash

IT ALREADY HAPPENS ELSEWHERE IN EUROPE

Last November, This is Money reported on a tiny Swiss bank which is believed to have become the first to hit savers with negative interest rates – charging them for taking their money.

The Alternative Bank Schweiz wrote to customers telling them they would face a -0.125 per cent rate on their money – and a -0.75 per cent rate on deposits above 100,000 Swiss francs.

The move echoes the Swiss central bank's -0.75 per cent negative deposit rate imposed on financial institutions placing money with it.

This was ushered into place in January as Switzerland sought to halt the flood of money into its 'safe haven' currency, which was hurting its attempts to prevent the Swiss franc rising to too high levels.

And last week, ABN Amro, a major Dutch bank, told customers that because of 'exceptional market conditions', it may be necessary to charge negative interest rates in the future.

COULD OTHERS FOLLOW SUIT?

Often in the banking world, it takes a major announcement from one of the big boys for the others to follow suit in domino fashion.

Last September, the Bank of England's chief economist Andy Haldane delivered a speech discussing how Britain could have to consider negative interest rates as an extreme measure in a future crisis.

The risk is that if this happened individuals and businesses would simply hoard cash, so Mr Haldane suggested a move to digital money could help remedy that.

Ray Boulger, of mortgage broker John Charcol, said: 'It is going to make businesses much less keen to hold significant balances in their accounts.

'If NatWest start doing this, other banks are likely to follow. Eventually personal customers with large balances could be hit, but the banks may decide that is going too far and take the hit themselves.'

Other high street banks have said they had no plans, for now, to change contracts to allow them to impose negative rates - but a cut in base rate next month could mean a change of tune.

WHO'S AFFECTED SO FAR?

NatWest has written to 850,000 business customers, but does say it has no plans for negative interest rates for personal banking customers.

It has changed the terms and conditions for those bank with it, ranging from self-employed traders, charities and clubs to big corporations who choose to bank with the giant.

Last night one treasurer of a local community council, who received a letter but asked not to be named, told The Guardian: 'Can they do that, is it legal? The letter goes on to say that they "value our relationship with you", but I may need to review how much I can afford to have a relationship with them!'

Altmann warning: The former pensions minister says negative rates would be 'very dangerous for ordinary savers'

NEGATIVE INTEREST RATES WOULD BE 'DANGEROUS'

Baroness Altmann, the former pensions minister, said: 'Negative rates would be very dangerous, especially for ordinary savers – the danger is many people will just think, I'm going to put the money under the mattress.

'That could have security risks, especially for older people.'

In many This is Money articles on the topic of savings, some readers' comment it is better to now just put their 'cash under the mattress.'

For those who do want to just hold cash outside of a bank, they are wiser to invest in a decent safe and inform their insurer of just how much money is in held in it – or alternatively put it in safe offered by reputable firm.

WHAT ARE THE BEST RATES?

Millions of customers with savings accounts in Britain are already suffering from historically low returns, with many popular savings accounts paying close to zero.

Last week the Financial Conduct Authority named and shamed HSBC, First Direct and the Post Office as having easy access accounts that in some circumstances pay no interest.

Many banks have been criticised for so called 'teaser rates' which lure customers before slashing back the benefits once the cash has been deposited.

At present, savers in Britain looking for low-risk returns are best off searching for best interest rates offered by current accounts.

This include three per cent on balances up to £20,000 on the Santander 123 current account, which comes with a £5 a month fee, five per cent on balances up to £2,000 with TSB with no fee and five per cent from Nationwide on balances up to £2,500 for the first year.

Take a look at the best paying current accounts in our independent round-up.

Savings rates have crumbled for a number of reasons, including Funding for Lending, low base rate, rock-bottom mortgage rates and the battle for current account customers.

The top easy-access savings rate is 1.45 per cent from RCI Bank. On the high street, it is 1.26 per cent from Virgin Money.

Check our independent easy-access savings tables for the best rates.

In terms of fixed-rate accounts, savers can get two per cent for a year with Atom Bank and 2.2 per cent over two years with the same online challenger.

The top one year rate on high street is 1.5 per cent from Britannia and for two years it is just 1.25 per cent from TSB.