Want to save $9000+ in three years?

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Options to invest your money seem to transform with each decade, as RateCity takes a peep into the world of Cash Management Trust accounts and looks at some of the best savings choices.

November 18, 2010

In 1980, Cash Management Trust Accounts (CMT) were born because of the insufficient amount of deposit accounts with high interest rates. Hill Samuel Australia - now known as Macquarie Bank - pioneered the savings accounts to better manage cash flows and enhance returns.

CMTs are basically a combination of a term deposit and an everyday transaction account. A minimum opening deposit is commonly a prerequisite but there are no set terms allowing you access to your funds whenever you choose.

Very popular during the 1980s and 1990s, CMTs still exist and are used by many Australians today. But it may be time these traditionalists compared their rates for the new alternatives which could earn you a lot more investment return.

CMT accounts V online savings accounts
Since the introduction of the Internet there are now some fantastic online savings accounts offering a more competitive interest rate than the old-fashioned CMT. For example you can earn up to 1.76 percent more with an online savings account per annum based on RateCity’s current top CMT account offering 4.75 percent from Macquarie Bank, while the highest online savings accounts at RateCity are at 6.51 percent from UBank.

If you were to invest $5000 (the minimum required for the Macquarie Bank CMT account) and deposit an additional $200 per month over three years, by the end of the three years you would have earned about $1288. But the online savings accounts at 6.5 percent could earn you almost $519 more in interest.

The differences
Apart from their higher interest rates, there are some other key differences between both accounts which you need to be aware of:

  • CMT accounts usually require an initial investment to open the account whereas no or a very low minimum deposit is typically required for an online savings account. Your money is available any time for both accounts though there could be a few days delay, however a CMT may have limitations on transactions such as cheque and credit card facilities.
  • An online saving account interest rate is generally variable which means it can fluctuate so accounts holders will benefit as interest rates rise but similarly affected when they decline.
  • CMT accounts may incur a management fee and ongoing fees and online savings accounts are usually fee free, so make sure you check the account details for a list of their fees and charges.

If you currently have funds tied up in a CMT or know someone who does, then it may be time to consider earning a higher interest rate with an online account to reach your savings goal sooner.


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