What do banks offer to win Australian savers over?

What do banks offer to win Australian savers over?

Many of us were taught the value of saving money for a rainy day. Traditionally, depositing money in your savings account could not only build up your “rainy day” fund, but earn you interest to help grow your wealth further.

Unfortunately, with many banks and other Authorised Deposit-taking Institutions (ADIs) slashing savings account interest rates over the past year, it’s become much harder to earn enough interest on your savings to just keep up with inflation. And with the Reserve Bank of Australia (RBA) committed to keeping the national cash rate on hold until 2024, this could be the new normal for the next few years.

Australians are still saving money, with recent stats showing that we’ve squirrelled away an extra $124 billion in the bank since COVID. So what are ADIs offering to win the business of Australian savers? What incentives are being offered to encourage you to deposit your savings?

Bonus interest

While the interest rates on most savings accounts are quite low at present, there are a few ways to earn extra interest on your savings, though conditions will likely apply.

You may be offered a higher introductory interest rate on your savings account, to help maximise the interest you earn on your savings for the first few months.  

Alternatively, you may be offered a conditional interest rate, where you earn interest on your savings at a higher rate as long as you fulfil the ADI’s terms and conditions, such as making a minimum number of deposits per month, or making no withdrawals.

Before you choose a savings account, it’s important to consider how you plan to use it, and whether the bonus interest terms and conditions may help you to achieve your goals.

Reward points

While reward points are traditionally associated with credit cards, a few ADIs also offer bonus points as a signup offer when you open a savings account. You may also be offered extra reward points for your spending with a linked transaction account.

It may even be possible to earn bonus points on your savings, where the more you save and the longer you save it for, the more points you could potentially earn.

If you believe that the points you could earn from a savings account may offer value in your financial situation, this could become something worth considering when choosing a savings accounts.

No fees

While there are many savings accounts that let users earn interest while charging no fees, a few savings accounts do charge monthly or annual fees. You may also be charged fees for using certain features and benefits, such as accessing an ATM or making overseas transactions.

Like some other financial products, the more special features and benefits are offered by a savings account, the more likely it is to charge higher fees. Sometimes the value offered by a savings account can outweigh the cost of its fees, depending on your financial position.

Something for the kids

Some of the highest savings account interest rates can be found on kids saver accounts, which are designed to help to teach the next generation about saving money.

Of course, much like other savings accounts, there may be terms and conditions involved for your kids to receive this higher interest rate, such as making minimum deposits, minimising withdrawals, and being under maximum age limits.

Offset account

If you have a home loan, you may be just as interested in saving money on your mortgage than on earning interest on your savings.

A savings account that doubles as an offset account lets you include the money you deposit in the account when calculating home loan interest charges. For example, if you owed $300,000 on your mortgage, and had $10,000 in your savings account, you’d pay interest on your home loan as if you only had $290,000 owing.

Keep in mind that you may need to keep a significant balance saved in your offset account to meaningfully reduce your home loan’s interest charges. If you tend to dip into your savings, or are otherwise unsure of if you’ll be able to maintain a high enough balance to significantly discount your home loan interest, you may also want to consider other options.

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Learn more about savings accounts

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 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 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.

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). 

 

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. 

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.

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.

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.

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. 

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

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.

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.

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.