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Learn more about savings accounts

A savings account with a bonus interest rate can be a great way to take advantage of a higher interest rate and get a greater return on your savings. To incentivise you to upsize your saving, the bank will set certain conditions on the savings account. If you meet the minimum deposit and withdrawal conditions, you’ll be rewarded with a better interest rate. The added bonus is that the interest compounds over time, which means you’re earning more for doing less.

How do savings accounts with bonus interest rates work?

A savings account with a bonus interest rate works like a regular high-interest savings account, except that there are generally a few conditions attached to the account. In exchange for meeting the conditions, the account may have an additional bonus interest rate that can help you reach your savings goal sooner.

It’s worth noting that bonus rates are generally temporary, which means that after a period, the bonus rate will revert to a normal base rate. When you’re comparing base rate accounts, always look for what happens when the honeymoon period ends.

Depending on the bonus and the account, bonus interest savings accounts help you grow your nest egg by adding compound interest to the money you deposit. In most cases, compound interest is calculated daily and paid monthly into your account. The amount of compound interest you earn depends on your account balance, and more importantly on your interest rate. If the savings account offers you a bonus interest rate, on top of the base rate, you’ll earn more interest on your savings. Because the interest compounds, you’re essentially earning interest on the interest you’ve already earnt, and over time, this can snowball.

Because the bonus rate is mostly conditional, if you haven't met the conditions for one month, you’ll forfeit the bonus for that month only. Assuming you make no or few withdrawals, savings accounts that offer bonus interest rates can help you grow your savings faster than regular savings accounts.

How to compare savings accounts with bonus interest rates

There’s no one-size-fits-all bonus rate savings account. Every bank and account type have their own conditions and version of bonus.

An introductory bonus rate is a promotional interest rate that’s valid for a short, fixed period. After the intro rate expires, the account will revert to the regular base rate. This type of introductory bonus is best suited to those looking for a short-term savings boost.

For savers looking for a longer-term solution, accounts offering conditional bonus rates tend to have higher rates over a longer period. Conditions may include making minimum monthly deposits or not making a withdrawal in the monthly period.

There are also some savings accounts that offer bonus rates for children’s accounts. If you’re looking to give your child a head start on their savings, these accounts usually have lower monthly deposit requirements.

Features of a savings accounts with bonus rates

When comparing savings accounts with bonus rates, pay attention to the base rate as well as the bonus rate. At the end of the day, you’re looking for an account that gives you the best return on your investment, during and after the bonus period.

Other aspects to consider are account fees and length of bonus period. You’ll also want to check what your options are for accessing the account and withdrawing funds if and when you need to.

Once you’ve compared the different savings accounts with bonus rates, applying is relatively simple. In most cases, you’ll be able to apply for a savings accounts with bonus rate online, without needing to go into a branch. To apply for a savings account with bonus rates, you need to be an Australian citizen, provide proof of ID and your tax file number.

Frequently asked questions

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.

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.

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.

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.

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.

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

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 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. 

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.

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.

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)