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Banks continue to slash savings account rates out of cycle

Banks continue to slash savings account rates out of cycle

Does your savings account seem a little lacklustre lately? You’re not alone, as RateCity research reports that 46 banks have cut savings account rates in the last month.

Australian savers continue to bear the brunt of low interest rates, with rate cuts continuing to come out-of-cycle to the Reserve Bank of Australia’s (RBA) cash rate. This includes cuts from banks big and small, such as CommBank, NAB, ING, St George, AMP and Suncorp.

Typically, banks and lenders will amend their non-fixed interest rates based on the cash rate, as set by the RBA. Put simply, when the RBA cuts the cash rate, interest rates typically follow downward. When it hikes the cash rate, banks increase rates. Low rates lead to happy borrowers with home loans, or those looking to take out a personal loan. But it also means low interest rates and lower returns on savings products, like term deposits and savings accounts.

The RBA have kept the cash rate on hold at 0.25 per cent since it made an emergency cut in mid-March, in response to the coronavirus pandemic and its immediate impacts on the Australian economy.

However, RateCity research has found that more than 90 savings accounts have had their rates cut in the last month alone.

How much have savings rates dropped in the last year?

RateCity Research has found that for big four bank customers, these savings account cuts have been significant.

A year ago, the average big four bank ongoing saving rate was 1.77 per cent. Now, it is just 0.81 per cent. This is a difference of 0.96 per cent in a year, however, the cash rate has only dropped by 0.75 per cent during this time.

Realistically, what this may mean for your nest egg is that you are potentially not getting as high of a return as you should.

Big four bank ongoing savings rates - then and now

BankAccountAug 2019 Max rateAug 2020 max rateDifference
NABReward Saver1.86%0.90%-0.96%
ANZProgress Saver1.95%0.85%-1.10%
Big four bank average1.77%0.81%-0.96%

Source: RateCity.com.au. Note: based on a balance of less than $50K. CBA has higher rates for higher balances. Data accurate as of 10.08.2020.

All hope is not lost however, as there are some competitive ongoing savings rates still sitting above 1.50 per cent available from competitor banks for those willing to make the switch.

Keep in mind that it’s important you do your research around what conditions you may need to meet on a new savings account before you switch. For example, ensure that your budget suits any minimum deposit criteria, or that you won’t be penalised for withdrawals if you’re the type of person who dips into their savings.

Highest ongoing savings rates

BankMax rateConditions for max rate
Australian Unity1.75%Deposit $250+ per month and make no withdrawals.
Bank of Queensland1.65%Deposit $250+ per month and make 5 purchases in linked account.
ING1.65%Deposit pay of $1,000+ and make 5+ card transactions per month
MyState Bank1.65%Deposit $20+ per month and make 5+ purchases in linked account.

Source: RateCity.com.au. Note: Excludes accounts with age restrictions. Data accurate as of 10.08.2020.

Some of the highest ongoing rates for young Australians

BankAccountMax rateConditions for max rate

(ages 18 to 29)

3.00%Balance needs to be higher every month, plus 5 purchases with linked account. For balances up to $30K
Bank of QueenslandFast Track Starter

(ages 14-25)

2.50%Deposit $200+ into your linked account and make 5+ purchases per month. For balances up to $10K

Source: RateCity. Note: Data accurate as of 10.08.2020.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.



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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

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 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.

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 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 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.

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). 


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.

What are the requirements for opening Commbank multiple savings accounts?

Existing Commbank account holders can open additional accounts online You can open multiple savings accounts with Commbank to meet various goals like a down payment for a home or buying a car. 

To open an account, you’ll need the following:

  • An Australian residential address
  • To be 14 years or older
  • A Tax File Number (TFN) or TFN exemption.
  • Tax residency details

If you’re not a current Commbank account holder, you’ll need an Australian driving licence, birth certificate or passport and Medicare card. You may also have to visit a branch if your identity cannot be confirmed online. 

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.

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.