Banks battle for bigger slice of the savings cake

Banks battle for bigger slice of the savings cake

What lengths will Australia’s financial institutions go to secure our savings? Andrea Sophocleous investigates.

December 1, 2009

Among the many negative side effects of the global financial crisis, there was also a positive trend – since the GFC begun to bite, Australians have been saving more than they used to.

Recent data from the Australian Prudential Regulation Authority (APRA) reveals an increase in household deposits from over $300 billion in 2007 to over $440 billion in 2009. Despite this growth, however, per capita Australians remain among the world’s worst savers. We borrow a lot more from banks than we save – which leaves the banks at the mercy of the international markets, having to borrow money at an increasing cost since the global financial crisis.

“As a nation, Australia is in savings deficit,” says Commonwealth Bank (CBA) chief marketing officer Mark Buckman. “That means we lend more money than we have on deposit. This requires CBA and other banks to raise money from both domestic deposits and the offshore wholesale markets.

“Obviously it is preferable to raise as much as possible through domestic deposits rather than having to compete with other nations in the international markets.”

That makes savings the hot spot of banking, and Buckman agrees there is “enormous competition” among banks to grow their share of your savings. As a consequence, expect to be bombarded with special offers and promotions as the banks turn on the charm to attract you to their savings products.

CBA is by far the most popular option for savings accounts, with a 28.24 percent share of deposits, according to September figures from APRA. This is almost twice the share of Westpac (14.53 percent) and more than ANZ and National Australia Bank (NAB) combined, at 13.98 percent and 13.11 percent respectively.

NAB recently announced it will abolish monthly fees on 12 of its transaction and savings accounts, including the popular Classic and e-Banking accounts, in a bid to attract new customers to its savings accounts. In addition, NAB’s online banking arm, UBank, is hoping to gain more customers with the USaver rate assurance which guarantees that the interest rate on its USaver account will remain equal or higher than five other popular high interest savings accounts: ING Direct Savings Maximiser, Bankwest TeleNet Saver, Commonwealth Bank NetBank Saver, Westpac eSaver and ANZ Online Saver.

This is just a snapshot of what is on offer. To sort out a good deal from a slick promotion, you will have to research and carefully consider all your options. RateCity can help you identify the highest interest rates being offered, but you should also consider account features such as whether you have to maintain a minimum balance, make regular deposits or restrict your withdrawals among others.


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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.

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.

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.

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 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

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

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 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 can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

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.

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 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 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.