RateCity shows you why interest rates for online savings accounts are so hot right now and how you can get in on the action.
July 16, 2010
Saving for a holiday or a new car? If you have a savings goal in mind or just need to make some quick and easy cash, online savings accounts can be a great way to boost your savings and reach those goals sooner.
Recent research by RateCity shows that since the decline of the official cash rate in October 2008, when the global financial crisis was setting in, rates for online savings accounts were affected in the same way and also began to decline. When the cash rate started its incline in October 2009, online savings accounts followed suit and have been at unusually high levels ever since.
Online savings accounts: going up
While the Reserve Bank of Australia (RBA) announced on July 6 that the cash rate would remain steady for the second consecutive month, the rate for average online savings accounts increased.
When the cash rate hit 4.5 percent in May the average online savings account rate for a deposit of $5000 was 4.67 percent. In July the average online savings account rate was 4.85 percent, which is an increase of 18 basis points since May.
Give your savings a lift
Whether you have some savings tucked away or you are just starting a new savings plan, compare accounts online to find an online savings account that can earn you a higher rate of interest than your everyday transaction account and enhance your savings.
For instance, one of RateCity's current best-rate online savings accounts is 1.65 percent higher than the average online savings account: 6.51 percent with UBank (as at July 12, 2010). If you were to deposit $5000 into this account and then deposit $200 each month for one year you could save a total of more than $7800 and earn more than $400 in interest.
The great advantage with this type of account is that unlike other investment accounts, such as term deposits, your money is still accessible should you require it. You can still transfer money to your linked everyday account whenever you need it. And if you set up an automatic transfer from each pay, you won't even notice that the money is gone and your savings will grow before your very eyes.
If you are in the market for an online savings account, you should get them while they are hot because when the economy reaches stability these higher than normal rates are sure to cool down.