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Learn more about savings accounts

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  • Money can be withdrawn easily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

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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.

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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.

Frequently asked questions

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.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

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.

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 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.

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 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 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 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. 

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.

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.

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 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)