The best bank accounts to park your money in for June 2020

The best bank accounts to park your money in for June 2020

With Australia in recession, interest rates at record lows, and the new financial year right around the corner, you may be wondering if it’s time to start hiding your cash under the mattress.

Thankfully, there are still a range of helpful and competitive transaction and savings accounts on the market – you just need to do a little research.

If you’ve been with the same bank since you were a child, it’s never been a better time to shop around and search for more competitive accounts to park your cash in.

Sneaky costs in your bank account

Perhaps your parents signed you up to a bank account when you were still in school and you’ve never taken the time to think about it. You may be losing money each month on avoidable fees just by missing the fine print.

Of the big four banks, Westpac and ANZ charge account keeping fees of $5, and Commonwealth Bank charges $4, if you don’t deposit $2,000 each month in their transaction accounts.  

This is easily avoidable if you’re depositing a regular salary into your bank account. But, say you’ve lost your job due to the impacts of the COVID-19 pandemic and/or recession, or you have two transaction accounts and don’t juggle between the two, you may be charged a fee just for the privilege of keeping your cash in that account.

There are a range of transaction accounts that don’t charge pesky fees like these, proving that doing your research in these uncertain times is more invaluable than ever.

Here is a list of Gold Award-winning bank accounts that are RateCity approved.

RateCity Gold Award-winning bank accounts

Where savers can boost their nest eggs

The Reserve bank of Australia has kept the cash rate on hold at 0.25 per cent since March this year.

However, that hasn’t stopped almost 40 banks cutting at least one savings account rate since May 1st, according to RateCity research.

Of all the savings accounts on the RateCity database, 76 per cent now have maximum rates under 1 per cent.

During a time when savings accounts are unable to keep ahead of inflation (currently at 2.2 per cent), it’s never been more important to consider ditching the bank loyalty and shopping around for more competitive savings accounts.

There are a few things to consider when shopping around for savings accounts, including:

  • No monthly fees;
  • Accessibility (online banking); and
  • Rates above or near inflation.

This is why many Australians are turning away from traditional brick-and-mortar banks and looking towards online or neo-banks, like ING or 86 400, for their savings accounts. Not only do they offer convenient access through tech-savvy apps and online banking, but by eliminating the need for branches, they can reduce overheads and offer more competitive interest rates.

To help you compare, RateCity has compiled a list of the best savings accounts for June 2020.

RateCity Gold Award-winning conditional savings accounts

RateCity Gold Award-winning standard savings accounts

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Learn more about 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 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

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. 

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 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 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.

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 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.

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 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 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 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.

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.