Why should you make a savings account comparison?
Savings accounts offer one of the easiest and safest ways to earn interest on your money. Not all savings accounts are built the same, so it’s important to explore all options to find the best savings account to suit your financial needs.
Savings accounts differ from standard bank accounts as they can earn you a higher interest rate while keeping your money easily accessible. It is good to understand and be realistic about your finances when performing a savings account comparison so you can get the best interest rates available.
Some banks reward customers with high interest rates when they reach a monthly deposit threshold, while other banks apply penalties for withdrawing money too frequently. Be sure to consider this when opening a new account. Additionally, some banks offer their customers high introductory interest rates that lower after a few months.
Savings accounts can help with saving for a home loan deposit, a new car or a holiday. Additionally, a high-interest savings account can be a good place for your rainy-day fund. It is often best to know how long you intend to save for and choose the best interest rates that work for you.
What are the pros and cons of savings accounts?
- Easy to open an account
- Secure (the federal government will guarantee up to $250,000 for each account holder at an Authorised Deposit-taking Institution)
- Money can be withdrawn easily
- Earn higher interest than with a standard bank account
- Minimal fees
- Good for earning money while you save for future expenses such as a deposit on your first home
- High interest-rate savings accounts usually require a minimum monthly deposit
- Penalties may apply to customers who withdraw too frequently
- Not a good long-term investment for something such as retirement
How to compare savings accounts
There are many factors to consider before opening a high-interest savings account. Here are some of the factors to consider when making a savings account comparison:
- Investment goals – Consider what you want out of your savings account. Some accounts offer greater short-term gains while others offer better interest rates for long-term savings.
- Fees and penalties – It is best to find a high-interest savings account that earns you money, not one where you give money to the bank. Beware of products with monthly fees or penalties for withdrawing funds if you intend on withdrawing money frequently.
- Interest rates – It is recommended to find the highest interest rate available for your savings account. Be mindful though that some banks offer a high introductory rate that only lasts for a few months before dropping down to a lower rate.
- Bonus rates – Some banks offer bonus rates for monthly minimum deposits and minimal-to-no withdrawals. This could help you earn a higher interest rate on your savings.
You can use RateCity’s savings accounts comparison tool to compare these factors and find a savings account to suit your needs.
What are the best savings account interest rates in Australia?
There are around 150 Authorised Deposit-taking Institutions (ADIs) in Australia and interest rates are constantly changing. Any market-leading interest rate today could be considered substandard after some time.
Your savings account interest rate can be changed by the bank at any time, but interest rates typically fluctuate in response to changes to the Reserve Bank of Australia’s cash rate. It’s good practice to periodically perform a high-interest savings account rates comparison against your current rate to see if there’s a better deal out there.
What are the common features of savings accounts?
- Interest rates – This is how you achieve growth with your savings account, so you usually want to get the highest interest rate possible. Remember that even a variance of 0.05% could have a significant financial impact over time.
- Introductory rates – Some banks like to offer higher introductory interest rates to entice new customers. While this can be a good incentive, be mindful that these rates typically drop down after a few months. Be sure that you are happy with the standard interest rate before starting a new savings account.
- Linked accounts - Some banks require you to also have a second account for everyday purposes linked to your savings account in order to receive higher interest rates and bonuses.
- Bonus rates – There are banks that will offer bonus interest rates when certain criteria are met, such as the amount deposited within a month and the frequency of withdrawals. This could be a great incentive to join a bank, but be sure you will be able to meet these benchmarks before starting a new account.
- Minimum opening deposit – This is the initial amount needed to open up a savings account with a financial institution in Australia. Many banks offer $0 minimum opening deposits, so you should be able to find someone who can assist you with your first savings account.
- Joint accounts – This feature allows two or more people to use the same account. Make sure you only open an account with someone whom you trust.
- Account-keeping fees – An account keeping fee is applied by the bank to cover the cost of maintaining your savings account. However, you might be able to avoid this fee by depositing a certain amount each month, depending on the financial institution.
- Withdrawal frequency – Some banks set a maximum amount of monthly withdrawals or none at all in order for you to get the highest interest rate possible on your savings.
- Transaction fees – There are some institutions that will charge a fee for making transactions by internet, phone, EFTPOS or ATM.
- Branch access – Keep in mind that not all savings accounts can be accessed via a bank branch, as some institutions only offer online savings accounts.
What savings account fees could I be charged?
Some of the following fees could be associated with your savings account:
- Account keeping fees
- Internet/phone/EFTPOS transaction fees
- Withdrawal fees
It is advisable to find a high-interest savings account in Australia that offers little to no fees. Banks use your saved money to fund their financial activities, so make sure they are paying you to save your money with them and not the other way around.