Who doesn’t have a high interest savings account? I’m guessing most of you do. The fact is, many high interest savings accounts offer awesome bonus intro rates up around 6%.
But what you might not be aware of is the stand-out 6% intro rate you have signed up for could change over the course of the 4-6 month intro period depending on your savings account. What you’re signing up for with many of the high interest savings accounts isn’t actually the advertised intro rate fixed for the entire intro rate period but a fixed “bonus interest” rate that gets added to the savings account’s ongoing variable interest rate.
It’s all in the wording used by the financial providers clever, or shall we say stealthy marketing team. The words “variable” or “up to” that are placed in tiny writing next to the large font of the advertised intro rate will generally mean, “yes, you could earn up to this amazing rate but it could change!”
For example, NAB markets its iSaver intro rate as a high 5.50% special variable rate for the first four months. But the fine print reveals, the 5.50% special intro rate is actually the 4.15% standard variable rate plus a bonus 4 month fixed interest rate of 1.35%.
So if the RBA decides to cut the official cash rate by 25 basis points, your financial provider could follow suit and drop the ongoing variable interest rate of your savings account. In the case of the iSaver account, this will mean that instead of receiving that amazing 5.50% intro rate for the first four months, you’ll now only receive a 5.25% bonus intro rate.
We should also point out that variable intro rates will work in your favour if rates go up but this hasn’t been the recent trend with savings accounts.
While bonus intro rates can be a great incentive to switch accounts, what you should really pay attention to is the ongoing standard variable rate because a savings account with a higher ongoing rate will pay more interest in the long term. For example, with a $5000 balance over one year, you will earn 20% more interest on the UBank USaver, which has a high ongoing standard variable rate of 5.41%, than the NAB iSaver which has a high intro rate of 5.50% but a much lower standard variable rate of 4.15%.
Here are 3 savings accounts with top-notch high ongoing interest rates, with some conditions to keep in mind:
|UBank USaver||6.01%||Must set up $200 automatic monthly payment|
|ANZ Progress Saver||5.76%||Deposit $10 or more a month and no withdrawals|
|Easy Street Bonus Saver.||5.61%||Deposit $50 or more a month and no withdrawals|
And here are 3 savings accounts with absolutely no ongoing interest rate conditions:
|Savings Account||Ongoing interest rate|
|RaboDirect High Interest Savings Account||5.40% (6.01% intro rate for 4 months)|
|Newcastle Permanent Online Savings Account.||5.36%|