Australia's worst savings accounts

Australia's worst savings accounts

How do you know when your savings account is on the nose and what should you do about it? Jackie Pearson investigates.

September 30, 2009

What are the tell-tale signs that should make you think twice about hanging on to your current savings account? The answers to the following questions will help you to determine whether your existing savings account is worth keeping or sweeping.

1. Does it pay enough interest?
Some accounts currently don’t pay any interest at all. In fact, with some accounts you have to have a balance of at least $25,000 before you earn a cent of interest.

By comparison, most online savings accounts pay interest on small balances. Since March 2008 the average online savings rate has fallen from over 6 percent p.a. to the majority (over 93 percent) currently paying interest rates equal to or above the official cash rate of 3 percent p.a.

For example, the UBank USaver account currently offers the highest rate available at 5.11 percent p.a. and a bonus 0.10 percent p.a. if you deposit $100 or more per month. If you start with no balance and save $400 per month, with the U-Saver you could earn about $3,349 in interest in five years. Why would you stay in an account that pays no interest?

2. Does it have too many restrictions and penalties?
Accounts that penalise you for making withdrawals or only pay “bonus” interest if you maintain a certain balance or make regular deposits may be useful for people who lack the discipline to save. But online savings accounts are proving to be effective savings vehicles without such restrictions.

Although your money is ‘at call’ in an online account, the fact that you have to transfer it to another account before withdrawing can act as a ‘circuit breaker’ and give you time to think before you start to whittle away at your savings.

3. Are you charged fees on your savings?
Not only do some so-called savings accounts pay low or very little interest, but to add insult to injury, they charge you fees: fees for over-the-counter withdrawals, fees for ATM withdrawals from your own network (as much as $1.20 per withdrawal), fees for cheque books (up to $18.75 for 25 cheques) and fees for cheque withdrawals. And that can be in addition to a monthly account-keeping fee.

Every fee you pay erodes your ability to reach your savings goals. By contrast, many of the best savings accounts are completely fee-free.

4. Does the account tie up your money for too long?
For instance, if you’re currently using term deposits to save money you may be at a disadvantage when interest rates start to go up again. Online accounts, on the other hand, give you the flexibility to access your money whenever you want and take full advantage of interest rate increases.

Get a better deal
Don’t be embarrassed if your savings account has some of these negatives but don’t continue to put up with it either. Australians have a habit of staying loyal to their bank and not reviewing and comparing their accounts as often as we should.

Although interest rates available for savers are much lower than they were a year ago, competition between banks, building societies and credit unions is still fierce so don’t think you have to put up with an inferior savings product.

The type of savings account you need will also depend on your saving and banking habits. If you have a large amount of money that you simply want to park somewhere safe for a period of time in an account that still gives you branch and ATM access, a cash management account may be the best option.

If you have difficulty staying disciplined with your savings, the accounts that penalise you for withdrawals and/or pay bonus interest for making regular deposits may be your best bet. However, with rates set to start increasing sometime soon an online savings account with no fees and a competitive interest rate gives you the flexibility to stay ahead of the game.

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Today's top savings accounts products


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.

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

Should I open multiple savings accounts with UBank?

UBank offers customers an opportunity to make the most of their savings by opening multiple savings accounts. Having multiple savings accounts with UBank may be ideal for savers tracking different goals in separate accounts. 

It’s important to note that to earn bonus interest, you will still need to meet the conditions of the UBank savings account every month. If you don’t make these deposits, you will receive the standard interest rate, which is typically lower. 

Keep in mind that you won’t earn bonus interest on your UBank savings account in the month an account is opened and if you open multiple savings accounts with UBank, you'll start earning any bonus interest the following month. 

It's also not yet known how long the special interest rate will hang around for, so please check with your bank for more information. 

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

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

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.

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 are the two types of NAB locked savings accounts?

With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.

The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.

Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.

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.

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.

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

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.

What is a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

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.