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What is a high interest savings account?

A high interest savings account is similar to an everyday bank account. The main difference is that it’s designed to help you save money by offering a higher interest rate than standard transaction accounts. 

As high interest rates are intended to help you save, not spend, they may incentivise you to make regular deposits. They also tend to limit the number of withdrawals you can make and may require you to maintain a minimum balance.

A high interest savings account is generally linked to another bank account, within the same bank or to another bank. Your linked account should help facilitate easy fund transfers between the two.

How does a savings account earn interest?

High interest savings accounts work by adding compound interest to the money you deposit. Compound interest is interest paid by the lender on the initial amount deposited as well as the accumulated interest on the money in the high interest savings account. 

Compound interest can help accelerate your savings because you earn interest on the money you initially deposit, as well as the interest you’ve already earned. In essence, you’re earning interest on interest. Compound interest on high interest savings accounts is calculated daily and paid monthly.

What types of high interest savings accounts are available?

There are two main types of savings accounts: conditional savings accounts and standard savings accounts. 

  • Conditional savings accounts - these involve having to meet a certain number of conditions, such as maintaining a minimum balance, making monthly deposits, making no withdrawals and more in a calendar month.
  • Standard savings accounts - these typically have a high introductory rate for a period of a few months, and then the account reverts to a (typically lower) standard variable rate. 

When comparing high interest savings accounts, you might notice that some of the options listed are online savings accounts. These online savers are a type of account based on the internet via online banking platforms or mobile apps, and can be applied for and managed all online. 

Unlike accounts from traditional banks, online accounts generally have fewer monthly fees, such as account keeping fees, and may come with higher interest rates. This is because online account providers have lower overheads, so they can keep costs down for the customer. The other bonus is that because the account lives online, you can access your money 24/7 using internet banking.

In most cases, an online savings account will need to be linked to another transaction account, which can be either an external bank or the same bank. Be sure to check whether these accounts have any additional fees or charges.

RateCity tip for savers

Remember that any interest you earn from your high interest savings account will need to be declared on your tax return. At the end of the financial year, you should get a statement or be able to access the amount through your internet banking. In Australia, if you've linked your Tax File Number (TFN) to your MyGov account, the calculation of tax needing to be paid on your interest earned should happen automatically. 

What are the benefits of a high interest savings account?

High interest savings accounts are designed to help you save. Here are some of the main benefits of opening a high interest savings account:

  1. Low risk. The main benefit of a high interest savings account is that they offer customers an extremely low-risk way of earning a return on their money. Compared to other investment options, such as stocks, or even term deposit accounts, savings accounts may earn you a high return on your deposit, and still let you dip into your funds when needed. Keep in mind that some conditional savers do penalise you for withdrawing funds. 
  2. Fast track your goals. If you’ve got a goal in mind, savings account rates can help you reach it faster than storing your cash in your everyday transaction account. Depending on the high interest savings account you opt for, some offer bonus interest rates if you meet specific criteria like not making any withdrawals. As an added incentive to open a new account, some banks may offer an introductory bonus rate for an initial period, sometimes called bonus savers.
  3. Ease of opening and closing account. The other advantage of high interest savings accounts is that opening and closing the accounts is usually very quick and straightforward. As you’re not locked into the account for any period, you can switch accounts at any time and potentially get a more significant return on your investment.
  4. Linked accounts. By linking your savings account to your everyday account it is generally much easier to save. Transferring funds between the accounts becomes instant. You can also set up direct debits so an allocated percentage of your income goes into your savings each month. Some account providers also offer helpful round-up tools, that allows savers to transfer all the spare cash to the nearest $1 or more between their earnings and expenses to their savings account. 
  • Keep in mind, most banks and other regulated financial institutions that hold an Australian Credit Licence are backed by the Australian government guarantee. This means that the Australian government guarantee protects your deposit account for balances up to $250,000 into an account, in the event that the financial institution collapses.

What to look for when comparing high interest savings accounts

Like any bank account, there are certain things you will want to look out for before you make a decision.

  • Interest rates. High interest savings accounts may offer an introductory or promotional interest rate, which is usually higher than the standard interest rate. While this can be a great way to earn more interest, it’s often only for a limited period. Otherwise you can opt for a conditional saver, that allows you to earn its highest bonus rate if you meet all conditions. If you’re looking to earn high interest over a short term, a promotional rate from a standard savings account might work for you. If you’re looking for an account that grows your balance consistently over time, then look for a conditional saver.
  • Fees. Most savings accounts don't charge fees nowadays, but some may still sting customers with account keeping fees. Keep an eye on any ongoing costs that may limit the amount of money you can earn. 
  • Cash rate. High interest savings accounts have variable interest rates which means they’re vulnerable to changes in the market. These changes are determined by the provider, and influenced by the Reserve Bank of Australia's cash rate. If you’re looking for a fixed return on your deposit, you may want to consider a high interest term deposit.
  • Features and facilities. If you opt for an online savings account, you may get a higher interest rate, but you won't have branch access, and will have limited ATM access. If you choose a traditional bank, your account may have more features, but in all likelihood it will also have a lower interest rate.
  • Withdrawing funds. You’ll also want to consider how often you’ll need to access the funds. Some high interest savings accounts have certain conditions around how often you can withdraw funds. In some cases, you may forfeit bonus interest if you make a withdrawal. If you know you're prone to dipping into your savings, you may be better suited to a standard savings account. 
  • Joint account. Most savings accounts will let you bring additional savers on to the new account through a joint application. It's still worth looking at the saver account's product disclosure statement or terms and conditions to be sure. Just keep in mind that you may both receive a debit card linked to the savings account, and may be subject to the same conditions.  

How to get the highest returns on your savings account

When shopping around for the best interest rates that will earn you the highest yield, you'll want to keep in mind a few things:

  • Is the interest rate ongoing, or does it revert to a lower standard interest rate?
  • Are there any fees, such as account keeping fees or transaction fees?
  • How easily can you transfer money to your saver to grow your nest egg?
  • Are there conditions you need to meet each calendar month to earn the highest interest rate?

New customers to standard saver accounts may be offered some of the highest intro rates and highest returns on the market, but these generally will revert to lower ongoing rates. 

Keep in mind that often banks will offer different interest rates depending on your minimum deposit amount. For example, a bank may offer a higher rate for customers with balances of $25,000, than customers with balances of $1 million. This is because the bonus interest paid on a balance of $1 million is a lot for an account provider to fund on an ongoing basis. 

Today's top savings accounts


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.

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.

Should I open multiple savings accounts with UBank?

UBank offers customers an opportunity to make the most of their savings by opening multiple savings accounts. Having multiple savings accounts with UBank may be ideal for savers tracking different goals in separate accounts. 

It’s important to note that to earn bonus interest, you will still need to meet the conditions of the UBank savings account every month. If you don’t make these deposits, you will receive the standard interest rate, which is typically lower. 

Keep in mind that you won’t earn bonus interest on your UBank savings account in the month an account is opened and if you open multiple savings accounts with UBank, you'll start earning any bonus interest the following month. 

It's also not yet known how long the special interest rate will hang around for, so please check with your bank for more information. 

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.

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 are the two types of NAB locked savings accounts?

With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.

The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.

Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.

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.

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

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.

What is a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

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.

Do I have to claim interest on my savings account?

When you lodge your income tax returns, you must include in the documentation all your sources of income, including bank interest. Your bank will report any interest you earn on the funds in your savings account to the Australian Tax Office (ATO). When the ATO then compares this information with your tax returns,  you also need to have mentioned the interest earned. If there is any discrepancy, you’ll receive a letter from the ATO. 

Avoid this situation by ensuring you receive your bank statement with interest noted. Then declare the interest in your tax returns and pay the tax that’s applicable based on the income tax rate.

You only need to claim your share of the interest earned for joint accounts. If you manage an account for your child and receive or spend money via this account, you will also need to report any interest earned from said account.

What are the requirements of an ING Bank locked savings account?

An ING bank locked savings account - also called a term deposit - offers you interest in exchange for holding your money for a period of time.

The terms offered include as little as 90 days or as long as two years. Generally, the longer you lock your money away, the higher the rate of interest. 

The minimum deposit amount for an ING locked savings account is $10,000. 

To be eligible to apply, you must: 

  • Be an Australian resident for tax purposes
  • Be aged 13 years or older
  • Hold the account for personal use (ING offers business term deposits as a separate product). 


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.

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.

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)