You could be missing out on thousands of dollars in interest by sticking with the same old savings account , writes Jackie Pearson.
How many years is it since you had a long, hard look at the performance of your savings account? Misguided loyalty to your bank or just plain laziness could be holding you back from achieving your savings goals faster.
Let's say you currently have $5,000 sitting in an account that earns you no interest but still charges a $5 monthly account-keeping fee. If you were to deposit $100 per week for the next five years, the account balance would grow to $29,700. That's the $31,000 you've saved less $1,300 in account fees. And you haven't earned one cent of interest.
What would happen if you switched to a high-interest earning account, such as the UBank USaver? You would potentially earn about $4,833 in interest alone if you followed the above savings plan, and pay no account keeping fees.
Why stay trusted to your bank?
Choice spokesperson, Christopher Zinn, says it is definitely worthwhile reviewing your savings account and shopping around for a better deal regularly.
However, he's not surprised by recent UK research by Saga Personal Finance that states consumers tend to hold on to the same savings account for an average of 10 years. The report also found that 61 percent of people don't know what interest rate their current savings account is paying.
"Generally we are inclined to hold on to our accounts in Australia; we tend to be rusted on to the big four banks in general," says Zinn.
"But the point is products and offers change and if you can move you can get a better deal," he says.
For example, out of the 370 savings accounts currently listed on RateCity (which includes pensioner deeming accounts, childrens' accounts, community and Christmas club accounts) the vast majority pay a base interest rate of 2 percent of less. Twenty currently pay no interest whatsoever, and the bottom 100 accounts pay a base rate of 0.1 percent or less.
All the major banks have savings accounts which most pay a comparatively low interest rate so chances are, says Zinn, if you have been with the same bank for years and haven't checked your account lately, you could be doing better elsewhere.
In your interest
Switching savings accounts is much easier than changing your everyday transaction account if your transaction account is linked to your mortgage or credit card, according to Zinn. And if you have an unnecessary high balance in your transaction account, you should consider moving some of the money to a high-interest earning online savings account.
"Choice recommends online savings accounts because the interest is calculated daily and paid monthly, there are no account keeping fees, they are easy to open and you don't always have to complete the 100 point ID check," he says.
Beyond the honeymoon
Zinn cautions that some savings accounts are currently advertising a high "headline" interest rate but it is for a limited time only. He says it's important to check what the rate reverts to at the end of the special offer.
"Honeymoons, whether in real life or in banking need to be gone into with your eyes open.
"Unlike in real life where there can be some romance attached, banking is a business, but unlike real life you're not bound by a ring or vows so you can always make a better return by looking elsewhere," Says Zinn.