Are save to win' accounts the best ticket to save?

Are 'save to win' accounts the best ticket to save?

October 22, 2010

When it comes to helping you save, more financial institutions are upping the ante as they implement new ways of attracting customers to “save and win”.

Save to win deposit accounts

For instance the Bank of Queensland (BOQ) announced that from November 15, customers can open a save to win deposit account, which gives customers the chance to win part of $30,000 in cash prizes each month with a major prize draw of $20,000.

To be eligible for the draws customers must maintain a balance of $250 in their account each month, then every dollar over $250 constitutes one entry to win.

At this stage it is unknown what the interest rate will be but BOQ managing director David Liddy says he is confident it will have a strong take-up in the savings account market.

“We expect the product to be extremely successful,” he said, “as similar products have seen significant success internationally, and the prize pool will continue to grow as more people open save to win accounts.”

Save to win accounts are designed as an incentive to help people save as they usually require a minimum balance each month in order to enter the draw. Some have argued this lottery-style of banking will encourage gambling.

“I cannot believe the Bank of Queensland is trying to turn itself into a casino,” Senator Nick Xenophon, an advocate for anti-gambling, told the Sydney Morning Herald. “These new accounts will make the Bank of Queensland wealthier, and investors poorer.”

These style of accounts are not new; they have been used abroad for many years. For instance, Westpac in New Zealand offers a save and win savings account with 0.25 percent interest, no monthly fees, free deposits and a chance to enter save and win draws. You must deposit at least $10 during the prize draw month to be eligible and have an average monthly balance of at least $100. Every $100 of your balance is another entry – a $700 balance means seven entries.

Earn more in interest with online accounts

Be aware, however, that while these types of accounts may seem attractive at first, their interest rates are usually much lower than other online savings accounts and there’s a good chance you won’t win the prize.

For instance, one of the best online savings accounts listed on RateCity offers an interest rate of 6.51 percent by UBank. If you deposited $500 into this account and continued depositing $200 each month through an automatic savings plan (a condition of the account) you would have saved more than $3000 by the end of one year.

And because many online savings accounts state that you must deposit a minimum account each month, you will still save but you will be able to earn more in interest at the same time – a much safer bet on your winnings!

UPDATE 21 January 2014: The Bank of Queensland no longer offer save and win savings accounts.

If you are interested in great savings accounts that reward you with high interest rates for regular repayments, instead of chance prizes, visit our savings accounts comparison page to compare some of Australia’s best accounts. Alternatively the table to the right is displaying some of the best high interest savings accounts available today.

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Learn more about savings accounts

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details