the mozo blog

It may surprise you to learn that all Australian savers are not born equal. That a veritable savings apartheid is being blithely practised by almost every bank in the country — and we’re virtually none the wiser.

Well, not any more.

When it comes to the interest rates and conditions offered on savings, there are two classes of client: personal and business. Personal savings accounts get the aristocratic treatment of high interest rates, no conditions, and bonus rates to sweeten the deal. Astonishingly, businesses are very much second-class savers, treated to lower rates and what can only be described as punitive and senseless conditions.

You don’t believe us. Why would the banks discriminate in this way? It’s just money in their pockets, generating cushy risk-free profits. What difference does it make if the savings belong to a person or a couple of people running a business?

The interest-rate reality, however, is clear cut. The top standard rate for a personal savings account currently belongs to the Ubank USaver, at 6.01%. The top business savings accounts offer a standard rate of just 5.6% (AMP Business eASYSAVER account and ME Bank Business Investment Account). Over five years, with an initial balance of $5,000, the difference is $137. It’s not exactly obscene, but where’s the justification?

Bonus rates continue the trend, with the top personal offer standing at 6.51% (Ubank USaver again), and the top business rate at 6.25% (ING Direct Business Optimiser). It’s also worth noting the top personal bonus rate is ongoing (with monthly deposits of $200), while the top business bonus expires after just 6 months, crashing back to 5.0%.

Now, $137 isn’t going to break the business (nor, ahem, the bank), but the conditions attached to some business savers go even further. It seems many business savings accounts require a minimum balance before they pay out any interest. Commonwealth Bank’s Business Online Saver, for example, only pays out its 4.75% interest when the account balance is over $10,000. In our previous example, the difference over five years with an initial balance of $5,000 (against the Ubank personal account) is $1,748. Now that’s starting to hurt.

Then there are other delightful tricks, such as NAB’s Business Cash Maximiser Account, which not only restricts interest to balances over $10,000, it also offers a lower interest of 4.05% (down from 4.75%) if you want the government guarantee. Remember, that banking surety your corporate taxes are paying for?

Stay tuned for Mind your own business accounts II – what the banks had to say when we asked: Why are businesses being treated as second-class savers?

If you haven’t seen the ads scattered all around town, the Commonwealth Bank has launched a new savings account. Initially dismissive due to the fact that ‘Big 4’ savings accounts rarely set the market alight, having to eyeball the ad at the bus shelter on my way to work every morning finally drove me to their website (don’t you hate it when the advertising wins?). A few clicks later and I was pleasantly surprised to find something worth writing about.

When it comes to savings accounts, there are two things that matter – rate and monthly fee. Commonwealth’s Goal Saver has managed to deliver on both fronts. For starters, there is no monthly service fee on the account. As for the interest rate, it’s an ongoing 6.0% – as long as you increase your balance by $200 a month and make no more than one withdrawal a month. Failure to meet the requirements and the rate drops down to a measly 3.0%.

The real headline here is the special rate conditions. Where before the market was focused on a ‘honeymoon rate’ that stayed high for the first few months then receded back to a lesser standard rate, over the past few months we’ve seen a trend emerging in favour of high ongoing rates with regular conditions. BankWest’s Regular Saver is currently at the head of the market with a rate of 7.0% as long as you make no withdrawals and deposit between $50 and $500 a month and UBank’s USaver offers 6.51% as long as you deposit $200 a month.

Whilst the Goal Saver rate does not quite hit the heights of BankWest and UBank, it certainly is a very good effort from a Big 4 bank and definitely warrants some consideration, particularly if you’re an existing Commonwealth customer who likes the convenience of all your banking in one place. As for the competition, the Goal Saver’s combination of rate and flexibility has really given Commonwealth the march on their rivals. Neither NAB or Westpac offer an ongoing rate anywhere near the 6% mark and whilst ANZ’s rewards saver does, it doesn’t have the flexibility of allowing any withdrawals.

It’s good to see banks starting to shift the goalposts towards rewarding their existing client base for an ongoing period as opposed to continuously luring new clients in with flashy headline rates then forgetting about them after four months. For so long banking advertisements have featured pledges to put the customer first only for the exact opposite to occur in practice. Perhaps this new offering from Commonwealth heralds the start of all that changing. And who knows? When all’s said and done, it might even stop me taking so long to notice those ads at the bus stop.

Got any more questions on savings accounts? Ask away on Mozo Answers!

Welcome to week 2 of the ‘Mozo Answers Question of the Week’. Our Answers forum has been bombarded by questions about deposits this week, mainly centering on what the best rates are for both savings and term deposit accounts as well as the respective benefits of choosing a term deposit over a savings account and vice versa.

Lets start with savings accounts, where there are a couple of standouts well worth looking at. First off, BankWest’s “Regular Saver” has no monthly fee and a market leading rate of 7.0%. It’s an amazing rate, however you can’t make any withdrawals and you can only deposit up to $500 a month. If you can’t stick to those parameters, UBank’s USaver is a great option. It’s got a fantastic interest rate of 6.51% as long as you set up an automatic savings plan of at least $200 a month, 6.01% if you don’t. There’s no monthly fee, you can withdraw and deposit as much as you like and there are no balance conditions either.

Turning our focus towards term deposits, as a result of some pretty fierce competition there are a lot of attractive rates out there at the moment. To get the best out of a term deposit you’re better off giving it some time – for example, to get a rate of 6.0% or over you’ll have to invest your money for a minimum of 6 months. Take a look at the table below to see some of the best rates out there on various terms:

As the clock ticks and the dust settles around Citibank’s Tuesday bombshell with the announcement of its Online Saver account, Friday looms as a landmark day in the escalating ‘Savings Account Price War’. Earlier last month, UBank issued a press release announcing a ‘rate assurance’ on its flagship USaver product, declaring that if the USaver base rate is lower than that of any of its competitors’ base or introductory rates, UBank will raise the USaver rate to match it. The assurance only lasts till the end of the year and is limited to the following products:

• ING Direct Savings Maximiser
• Bankwest TeleNet Saver
• Commonwealth Bank NetBank Saver
• Westpac eSaver
• ANZ Online Saver

Every Friday, UBank reviews the competition and makes changes as they see fit. The question is: will UBank take the bait and add the Citibank Online Saver to its list? If it does, it will be forced to match Citibank’s introductory rate of 5.5%. If it doesn’t, would UBank’s customers feel it is shirking its promise to lead the field? With the fickle high-interest savings account market largely driven by interest rates, can UBank afford to concede defeat over Citibank’s introductory period?

If Ubank fails to match the Citibank rate we could well see a raft of increasingly technologically and fiscally savvy consumers opening a Citibank Online Saver account for six months to take advantage of the higher rate and then transferring it back across to their USaver when the promotional period ends. With the ease of online money transferring and account application, this could pose a real and direct threat to the USaver.

As the adage goes, ‘you can’t win a war on a peacetime budget’, and the longer UBank fails to acknowledge the threat posed by Citibank, the greater chance it has of losing what market advantage it currently has.

So will battle lines be drawn? Keep your eye on the fireworks right here, as we bring you UBank’s response from the front lines tomorrow.

Compare savings accounts at mozo.com.au

Citibank has lobbed a savings grenade into the battle for the best high-interest account. But has it missed its target (Ubank) to land somewhere behind the Big Four’s line?

The answer lies in the little asterisk that sits next to Citibank’s brand new interest rate, making me a little bit uneasy – like sitting next to unexploded ordnance. First, let’s check out the big print numbers:

UBank USaver = 5.46%
Citibank Online Saver = 5.50%
UBank USaver = maximum amount of money you can have before you are subject to lower interest is $1,000,000.
Citibank Online Saver = maximum amount of money you can have before you are subject to lower interest is $2,000,000.

Pretty convincing, huh? But before you take that spare $1,999,999.99 and plunk it into the Online Saver, let’s dig a little deeper.

While Citibank does have the higher interest rate, it’s only for the first 6 months after opening the account. And then USaver has the option of setting up an automatic savings plan which gives you an extra 0.10% (for balances of up to $150,000) if you put away a minimum of $100 per month. So if you’re prepared to commit a small amount more to your savings (and $100 a month isn’t such a hard ask), you’re looking at a variable rate to 5.56% with no other strings attached.

The only real benefit that the Citibank account has over the USaver is that you can have up to $2,000,000 in your account before the interest rate drops back to their standard variable rate of 4.25%. Whereas the USaver rate stays at a minimum of 5.46% for balances up to $1,000,000.

Compare savings accounts at mozo.com.au