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How can a bonus saver account help me build my savings?

Jodie Humphries avatar
Jodie Humphries
- 3 min read
How can a bonus saver account help me build my savings?

We generally think about a savings account as one where we have access to our funds at any time and the flexibility to deposit or withdraw as we choose. But this convenience could cause you to dip into your account frequently and slow down the accumulation of your savings. You may find a savings account with restricted withdrawals, also called a bonus saver account, a convenient way to overcome this issue. 

With a bonus saver account, you could earn extra interest every month to increase your deposit but specific conditions of the account may differ depending on the bank. Bonus saver accounts are also known as incentive saver accounts as they incentivise you to make deposits and avoid withdrawals. If you really need the money, you still have access to it, but your interest rate will be lower for that month. A savings account with restricted withdrawals can help you improve your financial discipline, save regularly and curtail expenses. 

Bonus saver accounts offer an alternative to term deposits. The advantage of a term deposit is that your funds are locked away, and the interest rate is usually attractive. The disadvantage is that a term deposit doesn't offer flexibility and liquidity. With a bonus saver account, you do tend to build your savings because of the conditions attached to it, but you also have the flexibility to withdraw your money when you need to. 

Variable interest rates

With a bonus saver account, the total interest you can earn each month is variable and comprises a standard and a bonus rate. Let's say the bank offers you three per cent interest if you grow the balance in your bonus saver account each month. The month that you cannot meet this condition, your interest slips to the standard 0.2 per cent. This means that the bonus interest rate is 2.8 per cent.

Conditions to earn bonus interest

There are many different types of bonus saver accounts, and each has its own set of conditions. Some accounts may require you to make a regular deposit of $20, $100 or any other set amount each month. Then there are savings accounts you can't withdraw from during the month, or your interest is significantly reduced. Some banks may ask you to link another account that you use for regular expenses. 

The interest accrued is not counted towards the amount you need to deposit into the account. 

You can get the bonus interest rate for the month that you fulfill the requirements. If you miss a month, you can still meet the conditions the next month and earn the bonus interest for that month.

Will a savings account with restricted withdrawals work for me?

Before you set up a bonus saver account, consider the following questions: 

  • What is the effective interest rate you will get? Compare the rates offered by a few banks before you decide on one.
  • What are the deposit conditions, and how practical are they for you? You can benefit from the bonus interest rate only if you meet the requirements most months. Considering your income and expenses, is this practically possible?
  • What happens if you need to access your savings for something important? With some banks, if you don't earn the bonus interest, the interest in that particular month becomes almost negligible. Find out what you might lose if you ever have to withdraw your money. 

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Product database updated 20 Jun, 2024

This article was reviewed by Personal Finance Editor Peter Terlato before it was published as part of RateCity's Fact Check process.