Afterpay to provide Westpac-powered savings accounts

Afterpay to provide Westpac-powered savings accounts

Afterpay’s millions of customers will be able to sign up for Westpac-powered savings and transactions accounts under a partnership between the two traditional rivals.

The agreement will allow Afterpay, considered the largest buy now, pay later provider with a market value of $27.7 billion, the ability to offer new products by using Westpac’s deposit taking licence. Meanwhile, Westpac gains access to Afterpay’s 3.3 million customers -- many of which belong to a younger demographic.

“The introduction of savings accounts and budgeting tools offers new customer benefits that continue to build on our core principle of encouraging responsible spending and enabling financial wellness,” Anthony Eisen said, chief executive of Afterpay.

“In deepening our relationship with our customers we will gather greater insights into how they prefer to manage their finances and better understand their savings goals. This will allow us to assist them to budget more effectively and avoid debt traps.”

The deal will also make Afterpay the first partner on Westpac’s banking platform, powered by cloud computing from 10x Future Technologies.

“Fintech innovation is changing banking in important ways and our new digital banking platform is part of our long-term strategy to support this trend and better respond to changing customer needs,” Peter King said, chief executive of Westpac.

“The platform allows us to combine our banking experience with the innovation of our partners to support new customer experiences.”

Afterpay will begin offering its branded savings accounts from the second quarter of 2021.

What is Afterpay?

Afterpay is a digital only service that makes it possible for people to buy an item and pay it off over four, fortnightly instalments.

If repayments are made on time, there’s no charge. But miss a repayment and there’s a $10 late fee, followed by a further $7 fee if it’s still not paid after seven days.

The payment option has proven popular with millennials who have widely embraced the platform.

A RateCity survey found Afterpay led to 16 per cent of people overspending, 14 per cent paying a late fee and 9 per cent going into overdraft on their bank account.

What would an Afterpay savings account look like?

News of the partnership came with little detail on what would fundamentally make an Afterpay savings account different to the options already available to customers, if anything, but this is not uncommon for products that are to be rolled out in several months.

The accounts could be used for typical things, such as paying bills, withdrawing cash and budgeting. The same “simplicity and transparency” that made the application popular would be baked in, Afterpay said.

The savings and transaction accounts could be linked to existing Afterpay accounts to help people budget their spending and reach financial goals. Afterpay said linking two accounts would help them understand “how customers prefer to manage their finances, what their savings goals are, and how responsible spending behaviour can be further encouraged and rewarded”.

More than 60 banks slash savings interest rates

News of an Afterpay branded savings account comes at a time when banks are slashing the interest that savings accounts can generate.

In the last two months, 67 banks cut interest rates on savings accounts by an average of 0.17 per cent, a RateCity analysis found.

The drop in savings rates generally correlates to the drop in mortgage interest rates, as both use the Reserve Bank’s cash rate as a guidepost.

The cash rate is currently at 0.25 per cent, the lowest it’s been in 30 years since records have been kept, and it’s possible it could be cut further at an upcoming board meeting on 3 November.

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Learn more about savings accounts

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

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 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.

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 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 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.

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 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 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)

Do banks run credit checks on savings accounts?

When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money. 

As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements. 

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.

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.

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. 

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.