Would you do banking where you buy meat?

Would you do banking where you buy meat?

Australians may soon be able to buy savings accounts along with their milk and bread, according to recent reports which suggest supermarket giant Coles may soon be stocking banking products.

According to reports, Coles is on track for an Authorised Deposit-taking Institution licence from the Australian Prudential Regulation Authority (APRA), which will enable it to offer banking products such as savings accounts in its own name rather than in partnership with a bank.

The move comes as supermarkets spread their reach into the financial services sector, offering products such as insurance and credit cards. Woolworths, for example, offers car, home and even pet insurance.

In September last year, Coles trademarked the brand “Coles Money” and the trademark was accepted in April. The lodgement said the classes of goods and services covered included financial monetary and banking services and insurance services.

In 2011 Coles bought NAB’s 50 percent share in Flybys loyalty scheme and relaunched the program in 2012.

Coles has neither confirmed nor denied the plan to beef up its banking offer, however Sky Business financial commentator, Lisa Montgomery, says the move is long mooted.

“Yet it remains to be seen whether people want to do their banking where they buy their meat,” says Montgomery.

To attract banking business, Montgomery says a supermarket chain will need to offer some robust incentives such as better interest rates, lower fees and discounts on groceries.

“The incentive offer must be enough to reduce living costs to entice a customer to move to banking products offered by a supermarket chain,” says Montgomery.

The move by the big grocers into banking services could also make it more difficult for consumers to compare products.

“It will be very difficult for consumers to make apples for apples comparisons if the supermarkets are offering discounts on groceries with their savings accounts,” argues Montgomery, who also raises concerns about the privacy issues associated with banking in a supermarket.

“People are there to shop and I’m not sure they’ll be there to make hard decisions about financial products.”

While the market waits for Coles, and its parent Wesfarmers, to make their next move, Alex Parsons, CEO of RateCity, urges consumers to chase the most suitable savings accounts currently available from the many financial institutions in the market.

“I’d urge consumers to shop around for a good rate. RateCity currently lists savings accounts with rates upwards of 4 percent,” he said.

He also offered these tips: “Look out for bonus rates awarded for certain behaviours, such as making a certain number of deposits every month or no withdrawals.”

“Keep an eye out for introductory rates too – but be prepared to switch banks every time the higher rates run out. It’s a good idea to set a reminder in advance and then do your homework by comparing the best available deals.”

“At the very least call your existing bank and negotiate – you have nothing to lose other than your savings income!”

 

 

 

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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.

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

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 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 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.

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.

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

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 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 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.

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.

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.

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.