Did you know that there are dozens of lenders in Australia offering several hundred different savings accounts between them?
Now that you do know, how confident are you that you have the best possible savings account in the market?
Do you have the best possible savings account in terms of interest rate? Fees? Features?
Moving from one savings account to another doesn’t require much effort, so why wouldn’t you switch if you could find a better option?
But don’t just switch today and then think you never have to compare savings accounts ever again. With dozens of lenders fighting for business, the market is in a state of constant flux. A product that is uncompetitive today might be competitive tomorrow, and vice versa. So just because you move to a savings account that is currently the best on the market, you can’t assume that it will always remain at the top of the pack.
That’s why it makes sense to research the market every year or two.
Knowledge is only a click away
If you want to compare savings accounts, RateCity’s comparison search engine (above) is a good place to start.
At a glance, you’ll be able to see each product’s base interest rate and maximum interest rate, as well as any applicable bonus conditions. If you click on the product, you’ll be able to see what fees (if any) it charges, and will also be able to get more information about its features.
It’s important to do your research, because even though interest rate is important, you can’t properly understand the value of a savings account unless you also know what fees it charges and what features it contains.
Not all interest rates are created equal
As part of your research, pay close attention if you notice a difference between a product’s base interest rate and maximum interest rate.
The base interest rate is what you’ll definitely get paid – but to qualify for the maximum interest rate, you’ll have to meet certain conditions each month. Typical conditions include depositing a certain amount of money (such as $500) or making no more than a certain number of withdrawals (such as one).
With some accounts, the gap between the base and maximum interest rates can be as high as two percentage points. Don’t sign up for any account with a gap unless you know exactly what you’d have to do to qualify for the maximum interest rate.
Explore different savings scenarios
As part of your research, you might also want to crunch some numbers with RateCity’s savings accounts calculator. To use the calculator, all you need to do is input your deposit amount, deposit term and interest rate. The great thing about the calculator is that you can quickly and easily research different scenarios by changing the numbers.
For example, if you invested $10,000 for five years, here’s what balance you would finish with under different interest rate scenarios:
- 1.00% = $10,512
- 1.50% = $10,778
- 2.00% = $11,050
- 2.50% = $11,330
- 3.00% = $11,616
If you invested $10,000 at 3.00 per cent, here’s what balance you would finish with under different loan term scenarios:
- 1 year = $10,304
- 2 years = $10,617
- 3 years = $10,940
- 4 years = $11,273
- 5 years = $11,616
If you invested for five years at 3.00 per cent, here’s what balance you would finish with under different deposit scenarios:
- $2,000 = $2,323
- $4,000 = $4,646
- $6,000 = $6,969
- $8,000 = $9,293
- $10,000 = $11,616