How to find a bank account that rewards you

How to find a bank account that rewards you

Following recent RBA cash rate cuts, many leading banks have slashed interest rates on their savings accounts, term deposits and other bank accounts, making it harder for everyday Aussies to grow their wealth.  

So if you want a simple way to earn a little money on your savings, what should you look for when choosing a bank account?

Interest rate – base rate vs maximum rate

The simplest way to be rewarded for your everyday banking is to choose an account that earns you interest on your savings. This usually means looking for a dedicated savings account, rather than an everyday transaction account.

To get an idea of how much interest you can earn with a savings account, look at both its base rate and its maximum rate. The base rate is the minimum interest you’ll earn on savings in your account, while the maximum rate is how much interest you could potentially earn, provided you fulfil the account’s terms and conditions.

Special offers

Some bank accounts and savings accounts offer additional features and benefits that can prove valuable to the right saver. 

These could include:  

  • discounts on the bank’s other financial products
  • cash back on your spending
  • access to other exclusive rewards

Example

HSBC recently added the Everyday Extras rewards program to its Everyday Global Account, allowing account holders to earn up to 2% cash back on eligible tap and pay purchases under $100. This could allow an account holder to earn up to $600 per year in cash back.

Plus, Everyday Global Account holders who also hold HSBC Serious Saver Accounts would receive an additional 0.40% bonus interest on top of that account’s ongoing variable rate, to further grow their wealth.

Terms and conditions 

To enjoy higher interest rates and other features and benefits, most banks will require you to fulfil certain terms and conditions, often designed to help encourage you to save.

These may include:

  • Making a minimum number of deposits per month
  • Depositing a minimum balance per month
  • Making no withdrawals, or keeping your withdrawals under a maximum number 

Several savings accounts offer higher introductory interest rates, where new customers can earn more interest for a limited time after opening a savings account. After the introductory period expires, these savings accounts will often revert to a standard interest rate, which is typically lower than the intro rate.  

Example

To receive the benefits of Everyday Extras described earlier, you’ll need to deposit a minimum of $2000 per month in your HSBC Everyday Global Account.

Also, the introductory rate on the HSBC Serious Saver Account applies for the first four months, before reverting to the ongoing variable rate, and interest is paid every month you don’t make a withdrawal.

Further terms and conditions apply to both accounts.

Fees and charges 

Like many other financial products, some savings accounts and bank accounts charge fees. These can include upfront fees when you open the account, or ongoing fees to help cover the account’s admin costs.

One quick way to estimate if a bank account will be worth it for you is to use a savings calculator to find how much interest you could earn from the account in a year, and to compare this to the annual cost of any fees.

If you’ll pay more in fees than you’ll make in interest, you may want to consider other options. But if you’ll enjoy more in value than you’ll pay in fees, then the bank account may be one to add to your shortlist.

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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.

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 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 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 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.

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 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.

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.

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)

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 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 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 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 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.