Breaking with savings apathy: How to pick the right savings account
The last few months haven’t been too friendly to savings accounts. Since the back-to-back RBA rate cuts of June and July, we’ve seen a flurry of activity on the deposits front, with the average ongoing special rate for savings accounts dropping from 2.25% p.a. all the way down to 1.82% p.a.
Right now, if you have your savings parked in an account with one of the big four banks, you might be feeling pretty anxious. Setting aside introductory and bonus rates, the major banks offer between 0.01% and 0.60% p.a. on their savings accounts. Include them and you’re looking at an average rate of 1.77% p.a.
And with many analysts forecasting another RBA rate cut by the end of the year, things are only set to get worse for savers. Rates are already edging towards zero; another reduction would leave many of us feeling hung out to dry.
What are the alternatives to the big banks?
If you’re looking for an alternative, online banks are a good place to start. They don’t have anywhere near the same amount of overhead costs as the major banks, freeing them up to offer much higher rates than their competitors. In fact, of the top ten best value savings accounts without age restrictions in our database, five were offered by online banks.
Many high interest savings accounts come with a set of conditions you’ll have to meet if you want to earn the full rate. More often than not this will take the form of a minimum monthly deposit or withdrawal limit, as with the following savings accounts:
- UBank’s USaver with Ultra Transaction Account, which offers rates of 2.41% p.a., requires a deposit of at least $200 each month.
- Move Bank’s Bonus Saver, which offers rates of 2.30% p.a., requires you to deposit at least $200 a month and make no withdrawals.
Others require you to make a minimum amount of purchases with your card each month to be eligible, as in the case of the following high rate savings accounts:
- The Up Bank Saver Account, which offers rates of 2.50%, requires you to make at least five purchases per month with your Up debit card and digital wallets.
- MyState Bank’s Bonus Saver, which offers rates of 2.50% p.a., requires a deposit of at least $20 and a minimum of five Visa Debit transactions using your linked Everyday or Glide accounts over the month.
- The ING Savings Maximiser, which offers savers 2.30% p.a., requires a deposit of at least $1,000 and a minimum of five purchases with an ING credit or debit card over the month.
Why should you make the switch?
There’s a world of difference between the lowest and highest savings account rates at the moment, but unfortunately it’s not something many people give much thought to. In fact, a recent report from AMP found that 43% of Australians don’t even know how much interest they’re earning.
“We can probably chalk this up to apathy in a lot of cases. Banking isn’t terribly exciting for most people, and it isn’t all that common for Australians to be proactive when it comes to their savings accounts,” said Mozo’s banking expert, Peter Marshall.
“That’s a shame, because interest earned on your savings is one of the easiest ways to make money, and by sticking with a subpar rate, you could be missing out on hundreds.”
That point bears illustrating. Let’s say the current interest rate on your savings account is 1.15% p.a. (the ongoing bonus rate currently offered by the Commonwealth Bank GoalSaver). If you have $50,000 in savings, and are able to commit to a $500 monthly deposit, you’ll be looking at $610 in interest earned over one year.
Now imagine you made the switch to a bank that offers a much more attractive rate - let’s put it at 2.44% p.a. (the average ongoing bonus rate among the ten highest earning savings accounts in our database without age restrictions). Your $50,000 in savings, along with that $500 monthly deposit, would score you $1,301 in interest over a year — $691 more than in the previous scenario.
How to find the perfect savings account
If those numbers have wrung the apathy out of you, we’re off to a good start. The next step is to find a high interest savings account that suits you and your goals. Head over to our savings account comparison page for a look at the kinds of rates currently on offer, or check out the list of Mozo Experts Choice Award winners to see the ones we’re big fans of. To help whittle down your choices, you’ll want to keep a few things in mind.
Pay attention to conditions
Along with the interest rate, you’ll also want to keep an eye out for any conditions. If there’s a minimum monthly deposit necessary to score that bonus rate, you’ll need to be confident you can meet it every time. If it seems a bit too steep, it’s probably best to look for a savings account with looser requirements.
Don’t get suckered in by intro rates
Keep your wits about you when it comes to introductory rates, too. There’s no point getting drawn in by a stellar intro rate only to find that once those first few months are up you’re stuck with something in the 0% to 1% range that’s giving you negligible returns.
Avoid those fees
Finally, you’ll want to make sure there aren’t any fees, which can seriously chip away at your savings over time. While it’s rare to encounter savings accounts that cost you money nowadays, many require you to link a transaction account, and sometimes this is where those fees will rear their ugly heads. Steer clear, and you’ll be on your way to savings account heaven.
Savings account comparisons on Mozo - page last updated October 24, 2020
- MyState BankMyState Bank
Bonus Saver Account
- Bank of QueenslandBank of Queensland
Fast Track Saver Account
^See information about the Mozo Experts Choice Savings Accounts Awards
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