AMP increases savings rate: which savings account type is the most competitive?

AMP increases savings rate: which savings account type is the most competitive?

Savers across Australia may feel as if earning a decent interest rate on your savings account nest egg feels next to impossible. But a new offer from a leading Australian provider is a timely reminder that it pays to shop around and compare your savings account options.

AMP has today announced changes to its AMP Saver account, with a maximum interest rate of 1.25 per cent now on offer. To be eligible for this maximum rate, savers will need to deposit a minimum of $250 a month.

Previously, the AMP Saver account was offering customers a flat rate of 0.85 per cent. Savers may now enjoy a more competitive interest rate on an ongoing basis, considering they meet all conditions.

This bonus interest amount is now the second most competitive interest rate across all conditional savings accounts, as of April 1.

By increasing its rates, AMP has bucked the trend of savings providers slashing interest rates left, right and centre for the last few months. Since 1 January, 66 savings account providers have slashed interest rates, with the current average rate for adult savers now sitting at 0.34 per cent, according to RateCity research.

And for a provider like AMP, switching the eligibility criteria of earning its bonus rate to having to make a minimum deposit is one way it can encourage savers to grow their nest eggs.

Conditional savings accounts vs. standard savings accounts: which is better?

Due to the current record-low interest rate environment, it’s more important than ever to shop around for accounts with more competitive interest rates.

The latest change to the AMP Saver account comes as a reminder to everyday Aussies to be aware of not only which providers are offering the most competitive rates, but which savings account type may best suit your financial goals.

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

As the name suggests, conditional savings accounts usually come with a few conditions customers may need to meet to earn a bonus rate, including making minimum deposits or no withdrawals.

Standard savers will offer an ongoing interest rate without needing customers to meet conditions, and it may also come with a high introductory rate for the first few months of the account. After this introductory period, this typically reverts to a lower ongoing rate.

Across the RateCity database, there are more conditional savings accounts with interest rates still above 1 per cent than introductory accounts. For a balance of $50,000, 7 conditional savers offer rates above 1 per cent, compared to 4 introductory accounts.

This means that on average, if you’re looking to nab a higher interest rate, you may be better off considering a conditional savings account.

But, if you’re prone to dipping into your savings or set short-term savings goals and withdraw your nest egg a few times a year, a condition like ‘no withdrawals’ may not suit you. Further, if your income fluctuates it may be harder to meet deposit minimums each month.

Whichever savings account option you choose, it’s crucial that you weigh up the pros and cons of both types. Keep in mind that there’s also more to a savings account than its interest rate, and you may want to review any potential upfront or ongoing fees involved, such as foreign transaction fees.

And in a time when finding a competitive interest rate on a savings account can feel like searching for a needle in a haystack, doing the research and shopping around is more valuable than ever.

Highest conditional saver interest rates

Savings account Maximum Rate Conditions
ING Savings Maximiser

1.35%

Deposit at least $1,000 from an external source, make 5+ settled card purchases & grow the balance on the nominated Savings Maximiser account.
AMP Bank Saver

1.25%

Deposit $250+ each month.
86 400 Save Account

1.20%

Deposit $1,000+ each month.
MyState Bank Bonus Saver Account

1.10%

Make eligible deposit of $20 into the Bonus Saver account in the calendar month & make 5 eligible Visa card purchases on the linked Everyday or Glide account in the calendar month.
Ubank USave with USpend

1.10%

Deposit at least $200 a month into USpend transaction account or USave savings account from a non-UBank account to earn bonus rate. This offer is available on balances up to $250,000.

Source: RateCity.com.au. Data accurate as of 01.04.2021.

Highest standard saver interest rates

Savings Account Maximum rate Introductory term
Rabobank Australia High Interest Savings Account

1.50%

4 months

Citi Online Saver

1.10%

4 months

Macquarie Bank Savings Account

1.10%

4 months

Summerland Credit Union iSave Online Promotional Offer

1.00%

6 months

Heritage Bank Online Saver

0.95%

4 months

Source: RateCity.com.au. Data accurate as of 01.04.2021.

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Learn more about savings accounts

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.

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 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 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 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.

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.

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.

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. 

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.

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.

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.

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 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.