A not-so-dummy's guide to choosing an online savings account
Finding the right online savings account may look as easy as finding the brightest star in the galaxy. But watch out! The brightest star may not be the best for you.
ING Direct pioneered this market more than a decade ago with its famous Savings Maximiser. Now there's a truly competitive market for Australians who want to get high return on their savings, with limited accessibility. With over 70 online savings accounts in Australia, each with a variety of options, it pays to think carefully about what you need.
Two things to consider: Interest rates & transfer time
Interest rates without a doubt are the first thing that online savers need to look at. Knowing your average account balance is the first step in determining the right savings account for you. Some accounts offer relatively low interest if you have a low balance, while other accounts may offer a high interest rate with as little as $1 in the account. Watch out for a few accounts which offer "bonus" interest when you do not make any monthly withdrawal. You may lose all the potential interest on that month if you slip and make even a tiny withdrawal. If you're sure that won't happen, then the bonus rate is much more appealing.
One thing that many people forget to ask about is the transfer time between your transaction account and your online savings account. When these two accounts are from different institutions, the transfer time is likely to be at least one working day before the funds arrive. For starters, you lose interest that could have been earned during the transfer period. Another downside is that you have to plan well ahead, at least one or two working days before the funds becoming available when you need them. For people used to operating at netspeed this can be frustrating. If you have both accounts within one institution, you will be able to transfer in and out of the account instantly in most cases.
Questions to ask
Competitive markets tend to create complex products, and you should be aware that some online savings accounts come with specific restrictions. Below are some of the questions that you need to ask to the institutions before you open an online savings account:
- What is the minimum balance required to open the account?
- Some online savings accounts cannot be opened without opening another specific account. If so, how much is the account keeping fee that applies indirectly to the other account if you go ahead and open the online savings account?
- Some institutions offer a higher level of internet security through "secondary authentication", which means to access the account you will need to remember your password and also will need to access another changing password which is generated through a specific device. What are your bank's policies on internet security?
Here are some options that are currently paying the highest interest rates:
Highest Paying Online Savings Account
| Institution | Account name | Rate at $10k (%) |
|---|---|---|
| Citibank | Citibank Plus Link Svgs | 7 |
| Bankwest Direct | TeleNet Saver | 6.8 |
| RaboPlus | Savings Account | 6.6 |
| Railways Credit Union | Express Saver (S50) | 6.45 |
| Dnister Ukrainian Credit | iSaver Account | 6.4 |
| dragondirect | directsaver Account | 6.4 |
| HSBC | Serious Saver Account | 6.4 |
| Source: CANSTAR CANNEX 12/07/2007 | ||
RateCity is the best website to shop around on for all savings accounts. At RateCity, you can use expert comparative data from CANSTAR CANNEX, Australia's leading financial research and ratings firm. CANSTAR CANNEX has analysed and evaluated hundreds of savings accounts to award five stars to only the very best. The CANSTAR CANNEX star ratings go much further than just looking at interest rates. They also take into account important features so you can be confident you are getting the best product.
Use our easy search tools to compare savings accounts at RateCity.
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