Competition heats up: Virgin launches new online savings account

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RateCity introduces you to new competition in online savings accounts and shows you how you can earn $440 more each year.

July 4, 2010

Over the past six months interest rates for online savings accounts have been on an upward slope, continuing to rise and many believed the days of unusually high interest rates were coming to an end. However a new player in the market could stir the competition to all new heights.

On July 27, 2010, Virgin Money launched its online savings account at an introductory rate of 6.75 percent, which is 0.24 percentage points higher than RateCity's current highest online savings account (UBank's Usaver at 6.51 percent current at August 2, 2010). The Virgin Saver is offering this high interest rate for the first four months, at which point it then reverts to 5.35 percent (variable).

"It's great to see new companies competing with Australia's major banks for market share, especially when they come in with aggressively priced products," says Damian Smith, RateCity's CEO.

"Institutions like UBank, ING Direct, and RaboDirect, which have consistently led the market for online savings accounts for the last year, are likely to respond to the new entrant, and there's a good chance savers will see even sharper rates in coming months."
Heat up your savings
RateCity found that 80 percent of households currently have money in deposit accounts with one of the major four banks, according to the Australian Prudential Regulation Authority (APRA) figures. RateCity calculated that if each of these households kept their money in one of the major banks' best savings accounts, earning an average rate of 5.68 percent, and switched to one of RateCity's top online savings accounts, at a average rate of 6.50 percent, they could potentially earn $440 more in interest each year. Collectively that is $2.97 billion more per year that households could earn from switching to a better performing account.

"More Australians need to compare online savings accounts at comparison websites like RateCity because there are significant savings you could be missing out on," says Smith.

But savers need to be aware of the catches that often come with online savings accounts. There could be restrictions as to how much money you need to deposit each month and how much you can withdraw to be eligible for the high interest rate.

To get more out of your savings compare savings accounts online to find a savings account with a higher rate of interest.


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