Top rated savings accounts: What makes them stand out from the pack?

Top rated savings accounts What makes them stand out from the pack?

Lynne Blundell takes a look at what it is that makes the top online savings accounts stand out from the crowd.

Online savings accounts are rapidly growing in popularity. But with an increasing number on offer what should you look for when opening an account? RateCity lists the top five star rated online accounts to make the task easier.

At the time of writing (October 20, 2009) the top five online saving accounts rated by CANSTAR CANNEX were as below. T he list changes regularly so make sure you check it on RateCity.com.au.

  • ING Direct Savings Maximiser – 5.00%
  • Nab iSaver – 4.65%
  • Westpac eSaver – 4.55%
  • ANZ Online Saver – 4.25%
  • RaboPlus Savings Account – 4.00%

Another account to watch, which is too new to be rated as yet according to CANSTAR CANNEX, is UBank‘s USaver account. It has many of the same features as the top five.

Interest rates
The interest rate is obviously the key feature when selecting an online account. All the top accounts have attractive rates. Some of the top five also offer a bonus interest rate for an introductory period, boosting your savings during that time.

But be careful about offers of “bonus” interest rates – some accounts offer a bonus rate if you don’t make any monthly withdrawals. That means even a tiny amount withdrawn will lower the interest rate return for that month on your whole balance.

With others the interest rate varies depending on the account balance. The top five accounts offer the same interest rate regardless of the account balance.

Fees
Monthly account and transaction fees really add up and eat into your savings. Check the fees before signing up to an account. None of the top five star rated accounts have account keeping fees or transaction fees.

Flexibility
A top rated account has a high degree of flexibility. The last thing you want to worry about is how many transactions you’ve had or whether your balance has fallen below the minimum.

All of the top five allow unlimited deposits and withdrawals with no impact on the interest rate you earn. None of them has a minimum opening deposit – you can have as little as one dollar.

Easy access
Easy access to your money and the ability to transfer funds across to a regular savings account or transaction account whenever you need to is important. But remember it takes a couple of days for funds to be available unless your account is with the same bank.

It may be worth signing up for a regular savings account with the same bank so that you have immediate access. Some of the top five require you to have a regular savings account with the same bank, which gives you access to their ATM network and phone banking and immediate access to your money.

Online security
A high level of online security is vital. The top rated accounts offer a higher level of internet security through “secondary authentication”, so that to access the account you will need to remember your password and will also be shown a changing password that you have to key in. Check on the bank’s online security before you sign up.

 

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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.

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.

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.

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.

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.

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 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 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 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.

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 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 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 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.