Many Australians have savings accounts, yet surprisingly few people are aware how much interest they earn or how much they get charged in fees or whether there are any better alternatives out there.
First, the good news: there are almost certainly better alternatives out there. That’s because Australia has dozens of lenders offering hundreds of different savings account options. So even if you currently have a competitive account run by a trusted lender, the odds are that at least one of the several hundred options out there will be superior.
How to research savings accounts
Here’s another piece of good news: by using RateCity’s online comparison tool (above), you can quickly and easily research and compare hundreds of different savings accounts throughout Australia.
Having so much choice can seem overwhelming. But by comparing savings accounts online you can narrow your search to include only the options that best suit your needs, which makes selecting a savings account so much simpler.
When you compare savings accounts in Australia using the RateCity comparison tool, all you have to do is enter your deposit amount, savings term and account type.
To narrow your search, you can choose certain criteria to help you find a specific savings account in Australia. For instance, if you insist on having BPAY access, you can filter out all those lenders that don’t offer BPAY access. Or if you’d prefer to view results on savings accounts with ATM access or branch access, it’s possible to drill down your search in this way too.
Base rate v maximum rate
Once you’ve done your filtering, the next step is to decide how to view your search results. You can either group the results based on the base interest rate (either highest to lowest or lowest to highest) or the maximum interest rate (highest to lowest or vice versa).
Some people are surprised to discover that there are two different types of interest rate, and are unsure what the differences are and why these differences exist.
The base interest rate is the minimum interest rate you will be paid; the maximum interest rate is how much you can earn if you meet certain conditions.
These conditions might include:
Minimum balance – you have to keep a certain amount of money in your account
Minimum deposit – you have to add a certain amount of money to your account each month
Maximum withdrawals – you can make only so many withdrawals per month
Linked products – you have to use another of the lender’s products, such as a transaction account or credit card
As a general rule, you’ll earn the maximum interest rate in those months where you meet all the conditions – otherwise, you’ll be paid the base rate.
Of course, conditions vary from lender to lender.
Why, though, do lenders have two different types of interest rate? Lenders sometimes argue that it’s to encourage good behaviour, such as saving more and spending less. Cynics sometimes argue that it gives lenders a chance to advertise higher interest rates but to pay lower interest rates.
Whatever the reason, don’t sign up for a savings account unless you understand how much interest you’ll be paid and what conditions apply.