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?