With a smorgasbord of banks, credit unions and building societies to choose from, casting your net wide can boost the returns on your savings. Chris Walker reports.
November 16, 2009
When it comes to savings accounts, Australians are spoilt for choice. There are around 24 banks, 11 building societies and over 100 credit unions to choose from in what can be a bewildering array of options.
The trouble is when we think of banks, the big four often spring to mind – Westpac, ANZ, National Australia Bank (NAB) and the Commonwealth Bank (CBA). But big isn't always best when it comes to interest rate returns on our spare cash.
One of the upsides of the global credit crunch is that institutions have re-embraced customer deposits as a stable source of funds. That's forced many companies to offer higher than normal rates on savings accounts, and the winners have been investors.
As a guide to how competitive the market is, within days of the latest Reserve Bank rate hike on November 3, Westpac lifted the rate on its Reward Saver account from 4.95 to 5.2 percent.
NAB also announced an increase in their savings account; the iSaver introductory rate was lifted from 4.65 to 4.90 percent. CBA followed suit with a 0.25 percent rise to its NetBank Saver account to 3.25 percent and ANZ made the highest rise out of the big four with a 0.35 percent increase to its Progress Saver Account to 3.00 percent. They were a rapid rise in a market where lending rates tend to be the fast movers.
Citibank's Head of Retail Banking, Ajay Kashyap says smaller financial institutions tend to be more aggressive in terms of rates offered on deposits. However he notes that, “Australians have tended to keep their cash with the bank they've had a long-standing relationship with – and that's often one of the four major banks.”
Along with smaller banks, the non-bank sector can deliver healthy returns on deposits if you're prepared to shop around. The trick is to look beyond the big end of town and check out what's on offer from institutions that may not be household names. Good things can come in small packages.