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Aussies could be missing out on $3.6 billion in interest

Aussies could be missing out on $3.6 billion in interest

November 22, 2010

If you currently have money sitting in a savings account you could be one of the many people missing out on your share of $3.6 billion of unclaimed interest. But there is good news: all you need to do is switch accounts and find a better deal to get your share.

More people are earning less interest
According to the Australian Prudential Regulation Authority (APRA), Australian households had $477.8 billion sitting in bank accounts in September 2010. What a large portion of these people don’t realise is that they could be missing out on free money.

For instance, RateCity discovered that out of the 91 online savings accounts they currently monitor, almost half (46 percent) offer an interest rate of less than 5 percent at an average interest rate of 4.36 percent (as at November, 2010).

RateCity calculated that if these people switched their savings accounts to a higher rate of 6 percent, for instance, collectively they could earn themselves $3.6 billion more in interest with a higher interest account.

How to get in on the action
To claim your share of the $3.6 billion of free money available, all you need to do is look for a savings account offering a higher interest rate than what you are currently getting, by shopping around and comparing savings accounts online at financial comparison websites, such as RateCity.

For instance, RateCity discovered there are 21 savings accounts offering interest rates of 6 percent or more, with the highest online savings account by Virgin Money at 6.75 percent. If you were to deposit an initial amount of $2000 then deposit $100 each month, in one year you could earn yourself nearly $60 more in interest (compared to the average rate of 4.36 percent) just by transferring your money over.

When searching for the best account for you, make sure you read the product disclosure statement (PDS) so you are aware of the terms and conditions of the account. For instance some financial institutions offer higher rates for a limited time only, after which the interest rate reverts to a lower amount.

Don’t miss out on your share of the $3.6 billion pie. All it takes is around half an hour out of your day to shop around and find a savings account that will start earning you more. Once you make the switch it won’t be long before you start to see your money flourish.

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Learn more about savings accounts

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.

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.

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.

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